COVID-19 EFFECTS - BUSINESS REOPENING AND RECOVERY
The effects of the COVID-19 pandemic are felt across all economies and no country or sector has been spared. ICPAU undertook a survey of its members in order to understand how businesses have been impacted particularly, how and when they envision reopening, and what they might need to aid their recovery. We are pleased to publish ‘COVID-19 Effects - Business reopening and recovery’, a report based on the survey.
The report examines the impacts of the COVID-19 pandemic on businesses, implementation of responses and adoption to the ‘new normal’ by businesses.
What do the responses reveal?
The survey responses reveal changing sentiments and priorities among members as businesses start to reopen and recover after the COVID-19 (coronavirus) disruptions. The responses indicate that many challenges are common across sectors and consequently, businesses can learn from each other as they implement responses and adapt to the ‘new normal’.
COVID-19 Impacts
The challenges reflected a wide variety of contexts including operation issues, reduction in consumer demand, revenue losses and consequently cash flow concerns, client credit defaults/credit quality deterioration, supply chain disruptions and increasing costs of operation.
The biggest impact has been on operations. This was reflective of the limited access to resources - people, finances or technology. The lockdown and other containment measures have created a lot of uncertainty for many businesses, and organizations had to quickly adapt or they sink.
Majority organizations have experienced a reduction in demand for their products/ services, which reflects a decrease in aggregate demand due to the lockdown measures. This has in turn increased the difficulty of financing business operations. Many of the responding organizations (about 26%) actually did not anticipate demand for their products/services to increase again until 2021 or beyond, others (about 25%) were not sure what post COVID-19 would be like. Only about 19% of the organizations indicated that their products/services’ demand was unaffected by the COVID-19 disruptions.
The expectation of loss is uniform across businesses in all sectors. Business revenues are expected to decrease. 20 percent of the responding organizations expect their 2020 revenues and/or profits to drop by more than 50 percent, over 30 percent expect the drop to be more than 25 percent. Only about 1 percent of businesses anticipate an increase in their revenues.
Organizations’ revenue projections are also expected to drop further. Majority of the respondents (over 40%) agreed that their organizations’ revenue outlook for 2021 was a strong decrease (more than 10% reduction) and only 3% indicated there would be no effect on their revenues.
Responding to Immediate Challenges
Survey responses revealed the impacts were presenting more severe hardships, and the struggle to address immediate needs was more evident. Obviously, the story has just started and many uncertainties still prevail. The steps forward are therefore cautious, with business leaders acknowledging the need to chart a path to a ‘new normal’ and what this means for organizations in a world with, and post, COVID-19.
There is commonality in the challenges faced by organizations. Leveraging on learnings and best practices from other organizations, including more recent innovations such as virtual meetings, online business transacting, etc., could provide a basis to better manage and respond to the business-specific challenges faced. As each situation and sector will be different, responses will often be unique and may not be suitable for each and every organization. Members are advised to consider the responses, and apply and adopt as suited for their respective circumstances.
Some of the financial actions that organizations were considering as a result of COVID-19 included: implementing cost containment measures (82.5 percent); changing financial strategy (48.3 percent); and deferring or cancelling planned investments (46.6 percent) during this period. The most common investment types that organizations were looking at deferring or completely cancelling were investments in general capital expenditures (63.3 percent; workforce (39 percent); and operations (29 percent).
Other responses include: providing timely guidance and advice to clients; engaging and dialoguing with stakeholders; innovating and adjusting communication strategies to keep connected (e.g. use of social media); implementing flexible work arrangements and safety protocols; revising operational structures and encouraging use of digital communication and collaboration tools to stay connected and maintain productivity.
How do organizations envision Reopening?
Almost 40 percent of the responding organizations do not expect their businesses to fully reopen until it is safe. Only about 12 percent expect to fully open at the end of the month of July.
Members indicated some of the measures their organizations had been taking to prepare for reopening, including: developing policies and procedures to prevent the virus spread in the workplace (83.3 percent); procuring masks and other protective equipment (73.3 percent); and procuring necessary supplies/services to ensure effective workplace sanitation (73.3 percent), among others. Nearly all the responding organizations (over 90 percent) were confident about their organization’s ability to meet customers’ safety expectations and provide a safe working environment for employees.
Employee attendance has dropped significantly on account of containment measures such as restrictions on travel. Organizations missed a big percentage of their employees who were unable to travel to work due to the lockdown. Over 50 percent of the responding organizations indicated that their employees commute to office using public transport, and given the need to ensure social distancing in a reopened office setting, not all their staff could be safe in office on any given day.
Organizations have adapted or will have to adapt new innovations, adjust their business models and use more technology innovations to aid operations going forward.
The most popular adaptation measures include; the use of digital and communication technologies as well as online channels to reach out to customers, to receive orders and payments, to aide remote work arrangements, etc.
Prospects for Recovery
The concerns of many organizations are reflected in their expectations about how long it will take their businesses to recover assuming an end to the restriction measures associated with COVID-19.
The kind of recovery expected for most responding organizations (over 35 percent) is that of continued business volatility with renewed COVID-19 infections or re-infections. Some sectors including leisure and hospitality, tourism-related businesses and education, do not expect to fully recover until over a year from now, bringing full recovery to sometime next year.
Some organizations though, have indicated that the current COVID-19 situation will make their businesses better in the long run. In light of lessons learnt, organizations are adjusting business models as necessary to make them better in terms of resilience and agility (62 percent), work flexibility (71 percent) and finding new ways of serving their clients (nearly 66 percent).
As they implement return-to-work strategies, organizations should generally consider the following to aide their businesses on the road to recovery post COVID-19;
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Review of strategies and plans - Strategies and plans will have to be reviewed and adjusted in light of the impact of the crisis to provide for uncertainties. Business models will need to be adapted or changed to operate in the new normal; most businesses were of the opinion that there is a need to rethink strategies for the future. Organizations must adapt and adjust their business models to enable use of online and digital solutions to carry out operations. Such technologies should be able to support remote working, provide online support to clients, and enable carrying out of other business transactions to ease business with existing and potential clients.
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Re-thinking operations - Organizations will have to reimagine their businesses and consider what the new ‘business as usual’ looks like. This would involve for example up-skilling or reskilling of workforce to support new business operating models, finding optimal solutions to deliver products/ services to clients (such as online delivery), accelerating adoption of digital solutions to deliver products and services. This will help them to try and recover lost revenue streams or diversify and develop new revenue sources while managing both strategic spending and operational costs.
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Conducting research and surveys - Organizations will need to undertake research (e.g. surveys) of stakeholders to gain insights of their needs and challenges, leverage information and the right data signals available both locally and globally, consider opportunities and tailor products and services accordingly. It will only be those organizations that understand their changing customers' needs during this period that will be at a clear advantage.
Opportunities Ahead
Over 61% of the responding organizations expected new opportunities for business due to the Covid-19 pandemic. COVID-19 has provided businesses opportunity to;
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Embrace new ways of working, businesses are more willing to experiment with new ideas and new ways of doing things. Consumer behaviors are likely to change due to their experiences during the crisis. For example, some may want to continue to receive deliveries at their doorsteps, even beyond the lockdown. Such changes provide opportunity for businesses that are keenly paying attention to expand their options and create more efficient business models.
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Accelerate the use of digital technology and tools - Organizations also have the opportunity to embrace digitalization for efficiency and cost reductions. Organizations are trying new innovations and investments to encourage and embrace digital platforms in their daily operations for growth and sustainability. The crisis provided organizations opportunity to implement remote working arrangements and flexi-hours, stage board and committee meetings and AGMs on virtual platforms, webinars and online trainings, e.t.c.
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Build stronger relationships and partnerships – the crisis has provided a good opportunity for businesses to build stronger relationships with their stakeholders (current and prospective clients, staff, suppliers, lenders, e.t.c). It is an appropriate time for organizations to demonstrate care by providing any support possible within their means. Telecoms for example have scrapped costs of smaller mobile money transactions for some time, ICPAU has provided her members free online CPD since March 2020, Education Institutions are reaching out to their students online and through TV, Enterprise Uganda is providing advice to small and medium enterprises through sharing experiences on TV, etc.
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Test Business Continuity Plans - Business Continuity Plans are systems, processes, policies created to enable a business continue to operate through a disaster and to come out successful. The current situation gives opportunity for businesses to test the robustness of their plans and explore ways to improve them even further. Businesses that did not document or have any continuity plans in place have had the opportunity to develop them to enable them survive through this period.
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Utilize available moratoria/other measures- put in place by Financial Institutions, Uganda Revenue Authority and the National Social Security Fund (NSSF) to ease the cash flow burden of affected employers/ businesses in the private sector. In its notice, NSSF for example indicated that with effect from 31st March 2020, it would allow Ugandan businesses facing economic distress to reschedule their NSSF contributions for three (3) months without accumulating penalty.
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Increase revenues – COVID-19 for some business has led to increased revenues through the expansion of market opportunities (for masks and other health-related supplies for example), the creation of new products or modification of the existing ones (masks and sanitizers, e.t.c). Such businesses have managed to maintain their current revenue levels during the lockdown, and anticipate increased revenue during the recovery season.
ICPAU Support required by Members during their Organizations’ Recovery Period
The top findings are set out below;
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Online CPD Support – Members requested that ICPAU continues to provide online CPD support throughout this period.
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Provide Regular Updates – Members requested for regular updates and sharing of information on emerging issues (updates on both the local and global business environment and also provide a platform to discuss current and emerging issues.
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International Standards implementation support–Provide regular updates and implementation support on new and/or changes in international accounting, auditing and ethics standards as they happen.
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Advocacy - By advising government on appropriate economic stimuli measures that can help businesses survive and continue to lobby for more favorable policy changes that will benefit employers and employing organizations during this period.
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Regulatory support–for both members and students;
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Members requested support in:
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Negotiating for affordable audit software for SMPs as a matter of urgency;
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automation of all members services;
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Consider option of electronic seals or security identification for each partner as opposed to the current physical seals for practicing accountants;
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Adopt profitable online delivery of CPDs for knowledge sharing and updates; Online CPDs can easily be carried on remotely and even at off peak hours to maximize attendance e.g. 16h00 to 19h00 on Fridays; and
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Providing flexible payment options for services.
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Students requested support with regard to:
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Rescheduling Exam Dates;
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Automation of all services provided to students; and
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Availing flexible payment options for services.
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Advisory - on accountancy related matters.
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Research/ Surveys – that ICPAU conducts similar surveys and research assessments and share results. Publish comprehensive business recovery options as experts and provide a platform that provides research and simulation of strategy actions that affect the profession.
