Where do we go from here?
There is still much we do not know about COVID-19 and how it will shape the future lives of people in the UK and around the world. However, there are still some things that we do know and businesses can use this knowledge to build base plans, that can become a living breathing part of their strategy to take them forward and rebuild.
So, what have we learned since March that’s directly relevant to business and to future planning?
Financial model
You probably already have a budget forecast for the current year and maybe even for another two to five years. It’s likely for many businesses that those numbers are no longer achievable in the way that was originally planned, if at all.
Now is a good time to assess if that budget, and the tool that it’s built with (whether proprietary, off the shelf or a bespoke spreadsheet), is up to the job. Questions to ask yourself:
The right answers to those questions should hopefully be obvious. It is, however, possible to build a forecast with an almost infinite number of variables and to lose focus. Identifying and focusing on those areas that would feature as the main components of a SWOT analysis and those directly tied to business performance will allow for a functioning and manageable model.
You will need a business plan that assesses the current position, the likely changes in behaviour by organisations and consumers and the impacts of what has already occurred. Like the financial model it needs to be capable of rapid and wide-reaching updates.
This is an ideal time to go back to the drawing board. In the current uncertainty there will be few stakeholders who will not look sympathetically on the re-drawing of an established plan that reflects your view of the future of your business and the sector it operates in.
By way of example, if you operate in the bricks and mortar retail space, whether that is on the high street, out of town or even something like vehicle sales, this crisis has driven more people online for more products. Your plan needs to:
The Government has offered a great deal of support from bounce back loan schemes to tax deferments and the Coronavirus Job Retention Scheme. These funds are in most circumstances expected to have been consumed during the lockdown/restricted trading.
With the emergence from lockdown and re-opening it would be wise to plan ahead and assess what additional cash you may need to raise to cover:
These requirements will require a functioning and updated financial model (see point 1).
For businesses that have had their trade restricted during lockdown whether by direct Government requirements or indirectly through lack of other business and consumer activity trading results and balance sheets will look very different.
For those subject to audit there is a higher probability of an Emphasis of Matter or Fundamental Uncertainty appearing in your audit report.
The consequences of the above may be a covenant breach on your finance facility and/or a downgrade in your credit rating with one or more credit insurers. Automated ratings’ systems and credit assessment processes will not all have been updated in the same way or at all.
You will need to be prepared for a dialogue with your lenders and with insurers to make sure that you are not at risk of enforcement or of losing trade credit at a time where both will be business critical. As with many other discussions, being armed with a credible and focussed business plan and matching projections with sensitivity analysis will greatly assist that process.
While not essential, many businesses have already established a COVID-19 task force with a lead from each of their key business functions. If you don’t already have a team it is not too late to put together a group of energetic people with a knowledge of the business, and a track record of strategic thinking Give them a brief to monitor changes in the COVID-19 situation and to assist with identifying and implementing change where needed.
This shouldn’t bypass the chain of command for decision making but it should have a degree of autonomy in generating ideas and plans, as well as an agreed route to present those to the board at an organisational level.
The concept of social distancing is going to make our customer interactions more challenging and potentially more technologically focussed, at least in the short term. In the longer term the impact of those different ways of interacting may also impact on how your customers want to be dealt with.
Going back to basics and looking at how your pre lock-down contact took place is an excellent place to start. For businesses that relied on face to face interactions to make sales or deliver good service (motor retailers, professional services, commercial product sales) you need an in depth understanding of how you used to do it. From there you can analyse which elements need to change and seek a customer focussed solution. You will also need to consider the revenue, pricing and cost implications.
You may find that risk mitigation is not the only reason to make changes in delivery. The acceptance of different ways of meeting, compared to face to face, may see more customers preferring this approach.
Retail, entertainment venues, bars and restaurants, and leisure in general, will potentially be some of the most affected by social distancing and cleaning requirements, but also by other changes that have happened during lockdown: more home cooking, greater delivery usage (food and other) and economic impacts of income reductions, redundancy and future uncertainty. Scenario modelling and alternative routes to market need to be on the agenda for all businesses, but these trading areas will be amongst the most disrupted.
Working during lockdown has seen the introduction of some excellent communication using video meetings from people’s homes. This has offered a more relaxed style, access for many who can’t travel, and in some respects an approach that has become more personal not less.
Lockdown measures around the world have impacted supply chains and stock levels. The time to consider the impact is before your own requirements become urgent. Some questions to ask yourself now:
If COVID-19 is to remain in the environment in the longer term then employers will need to make sure that there are arrangements and processes in place for dealing with extended periods of self-isolation, COVID-19 related sickness absence and medically vulnerable employees. It is important to also be wary of discrimination issues that may arise from not adjusting performance targets for those impacted.
Support for the mental health of staff who face long periods working alone or remotely as a result may also be a feature that needs to be reviewed.
Flexible and remote working
By the time there is a widespread return to work many office workers will have managed to work remotely in really quite challenging conditions for several months.
In some cases, households will have successfully juggled two full-time desk jobs, the home schooling of children and the additional domestic disruption that lockdown rules brought. Parents, carers and others will have worked more flexibly, and employers have had little choice but to accommodate that in view of Government guidance and the closure of many other services.
Clearly, for some businesses this will have caused a real problem that’s only manageable in the short-term. However, for many others there will be strong evidence that a remote and flexible working approach has caused no detriment to businesses and, in some cases, there will have been increased productivity, reduced costs or other less tangible benefits.
Premises can be expensive, commuting time is often ‘dead time’ for the employee and technology has conquered many problems.
Assessing how this flexibility can be retained, at least in part, should be incorporated into your thinking. While many will be keen to return to the office for the social and team aspects, it does not follow that they will not want to retain some of the flexibility that they have experienced in recent weeks.
If your staff have been furloughed or you are recruiting from a pool of those who have been, it’s time to think about whether they may be rusty. Depending on your sector, you will need to review the impact of down-time on performance:
If your business doesn’t have the skills required to deliver the functionality, goods and services that your new business model dictates, and training existing staff is not an option, then you need to identify your requirements sooner rather than later. If you are looking for experts in remote IT systems, online marketing or multi-drop delivery drivers then there is a high probability that others will be doing the same.
With the possibility of a recession and changing business models some organisations will inevitably have roles that become redundant.
Where there are skills shortages due to a role change, re-training and re-deployment may be one way to reduce the impact and reduce the cost of otherwise required new hires.
The costs of redundancy can be considerable for longer serving staff and at present there is no government support for those costs other than the safety net offered by the Redundancy Payments Service, which only applies in formal insolvency (liquidation and administration).
If you are in the unfortunate position of having to plan for redundancies don’t forget to bring the effects – both financial and the impact on management and wider morale - into your business plan and forecasts. Where possible think about how you can help those affected by supporting them and treating them with compassion throughout the process.
Where redundancies and compromise agreements are planned, legal advice is often of great benefit.
For many organisations bricks and mortar has been a mainstay of their operations, a significant part of their overheads, as well as a long-term commitment.
The motor, sub-sets of retail and leisure sectors have continued to embrace large, impressively presented sites in prime locations. An experience led leisure and retail environment, or a hybrid clicks and mortar strategy, has been one of the tools being used to try and manage the decline in retail footfall as Internet shopping has continued to grow and take market share.
Many professional practices have been diversifying their office and property models for some time, moving to a more flexible, shared space approach, while others continue to maintain traditional office space.
Your strategic plan needs to review your property portfolio and assess what is right for you, your business and your expected future operating model. Some of the questions you need to ask include:
If you are a landlord this changing market dynamic is probably already occupying much of your planning time. The current situation may lead to very dramatic changes in the future.
Don’t wait. Take action and do the thinking now. If you need help, then consult a professional as soon as possible and don’t risk an escalation of problems by leaving them too long.
DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Smith & Williamson is a leading financial and professional services firm providing a comprehensive range of investment management, tax, financial advisory and accountancy services to private clients and their business interests. The firm’s c1,800 people operate from a network of 11 offices: London, Belfast, Birmingham, Bristol, Dublin (City and Sandyford), Glasgow, Guildford, Jersey, Salisbury and Southampton. Smith & Williamson is part of the Tilney Smith & Williamson group.
Ref: 99620eb
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.
Some of our Financial Services calls are recorded for regulatory and other purposes. Find out more about how we use your personal information in our privacy notice.
Please complete this form and let us know in ‘Your Comments’ below, which areas are of primary interest. One of our experts will then call you at a convenient time.
*Your personal data will be processed by Evelyn Partners to send you emails with News Events and services in accordance with our Privacy Policy. You can unsubscribe at any time.
Your form has been successfully submitted a member of our team will get back to you as soon as possible.
Ireland 
USA 