Five actions you can take to mitigate the economic impact of COVID-19 on your business

Five actions that enterprises can take to ensure your business is in the best possible shape during and after COVID-19

News | 06 April 2020
© ILO 2020
Within only a few months, the Covid-19 virus has spread globally, leading to an economic and social crisis in many countries. At this stage, it is difficult to predict how long the crisis will last and how it will impact the private sector. Based on survey data from the Wood Industry Association of Ho Chi Minh City (HAWA), here are five actions that you can take to ensure your business is in the best possible shape to withstand what’s ahead.

1. Prioritize safety of your staff

By prioritizing safety of your workforce, you are prioritizing your business’ continuity. A single infected worker can lead to a shutdown of a business facility. To ensure safety of your workforce, you should conduct a thorough risk assessment of your business operation, apply appropriate combinations of engineering and administrative controls, safe work practices, and personal protective equipment (PPE) to protect workers from getting infected. Use guidance provided by the health authorities to raise awareness of your workforce, regularly adjust your existing safety operating procedures and train workers on infection prevention including the proper use of PPE.

2. Communicate clearly and consult with your workforce

In the survey conducted by HAWA, 61% of enterprises reported that only 60 to 80% of workers returned to their workplaces after the Tet holiday. Many workers are afraid of getting infected while others stay home to look after their families due to school closures. Consistent and accurate messaging is key to regain and keep the trust of your workforce - your workforce will need to know that their welfare is paramount. Regularly consult your workers to understand their fears and be open for their ideas which can help you to put in place the necessary measures to protect your workforce and your business.

3. Manage your cash flow

Survey data from HAWA show that 59% of businesses have reduced orders after Tet. 96% of enterprises have bank loans and are under pressure on loan interest and repayment period. Revenues are likely to take a hit this year. Some of your customers will pay you late or perhaps not at all. What can you do to improve your cash flow?

Revisit your fixed and variable costs and estimate how long you can survive on your cash reserves and convert fixed into variable costs where possible. Revisit your capital investment plans and prioritize your investments so that you can start cutting investments as necessary. Focus on inventory management – while you probably need to hold more inventory currently due to supply chain disruptions, you do not want to have too much capital tied up. Discuss with your suppliers alternative payment schedules and financing options.

4. Assess your supply chain risks

The survey data from HAWA showed that 73% of enterprises faced disruptions and delays of their supply chain, in form of delays in importing primary and secondary input materials, unavailability of goods and increased prices. While the situation in countries like China is improving, there could be a reemergence of the outbreak while enterprises sourcing from Europe and the US might soon face supply chain disruptions. A clear understanding of your supply chain will help to expose any potential vulnerabilities. This means beginning with the most critical products and looking beyond first- and second-tier suppliers. Diversifying your suppliers can help you to spread the risk of running out of input materials.

5. Revisit your crisis and continuity plans

Every well-run business has a crisis or continuity plan. You might already be using it, though now it is important to constantly adjust it and prepare for a potential further escalation of the situation. Scenario-planning can help with thinking through different developments and the actions enterprises can take to address them. Having a plan on how information should flow in emergencies should be part of the business continuity plan. Be clear about who will communicate what and how to whom during the crisis.