Steps towards business continuity as "the show must go on"

Business are challenged by the balancing act of maintaining the value-added process as far as possible while at the same time safeguarding the health of employees, customers, suppliers, and their families. In managing the ongoing COVID-19 crisis, there are a number of key issues that business leaders should be thinking about right now. Uncertainty is high and immediate action is required, which can be broken down into the following key areas for action:

Safety for employees / crisis management for reassurance

Ensuring the safety and well-being of employees at their workplaces is currently a top priority. In particular in the current situation, people need orientation and leadership from their employer. Addressing their concerns openly and transparently is a means to involve them to a high degree and hence ensure the continuity of the company. Another adjustment that companies need to make is to introduce or extend flexible working hours arrangements and other measures that enable their employees to work externally and therefore safely. Our experts will be happy to answer any specific questions you may have regarding employment law.

Ensuring remote control of the business

So as to be able to control business processes from home, an appropriate infrastructure is indispensable. For workplaces to also function properly at home, a direct connection of the work laptops to the company network via a VPN connection or via a centrally controlled cloud landscape with virtual workplaces can be used. Additionally, the implementation of suitable instruments for collaborative working is absolutely necessary in order to maintain continuous communication both internally and externally. Tools such as Skype or MS Teams are particularly suitable for this purpose. This can help to improve collaboration within the company as well as with business partners and customers since information and access can be shared faster and more directly. Warth & Klein Grant Thornton gladly advises its clients on the technical design of the required infrastructure.

Ensuring liquidity

Short-term liquidity planning and control instruments are of enormous importance in the current times of crisis. In terms of planning, the difficulties seem insurmountable even with a short-term forecast, as a reliable assessment of the impact and consequences of the coronavirus is probably not possible in any industry. Many companies therefore concentrate specifically on the development and implementation of short-term control measures in order to quickly ensure and create liquidity. It is to be hoped that the relief programmes adopted by the government or the states will help to secure loans to bridge liquidity bottlenecks by means of public guarantees. Nevertheless, the relatively low, but still necessary, share of the (main) banks' own funds (read our article on liquidity in times of COVID-19) will probably contribute towards the currently extremely high level of uncertainty slowing down the decision-making process and bottlenecks occurring at the very short-term being bridged by the company's own funds for the moment. Self-optimisation of customers, support requirements of suppliers, or lack of purchases should also quickly lead to higher financing requirements via higher working capital.

In addition to a firm and objective analysis of the cost base, the company's own working capital offers a good starting point for releasing liquidity potential quickly, independently and efficiently.

You should therefore check your own inventory for unnecessary deadweight or "old treasures". Track inventory quantities closely to avoid unnecessary orders or production quantities. Coordinate purchasing, planning, and sales to a higher degree and ensure a higher crisis awareness in the company. On the supplier side, advance payments and early payments should be critically double-checked in accounts payable management and assessed in relation to the importance of individual suppliers. Apart from issuing invoices in time and as early as permissible, it is almost impossible to anticipate which internal measures can help to bridge liquidity bottlenecks. In view of the crisis, which occurred unexpectedly and through no fault of the parties involved, constructive cooperation based on partnership and with a view to the future is certainly much more relevant here. In our opinion, however, it is important in tactical business management despite all these measures not to lose sight of emergency plans or interruptions to the business or supply chains.

One thing is certain: the shutdown will result in considerable financial bottlenecks and therefore requires quick action. In addition to the support offered by politicians and banks, a large number of instruments for short-term working capital financing (current account, factoring, reverse factoring, borrowing base loans and others) are imaginable as building blocks to meet the company's structural financing needs. Since access to these external solutions is likely to be difficult in the short term, you should make use of leeway within the company. We will be glad to support you in this and not only point out short-term quick wins. If in the process of ensuring your liquidity you also need to deal with matters such as crisis management funds, short-time work, tax deferrals or legal questions relating to contractual relationships: We have the experts to advise you comprehensively and from all perspectives. In the medium term, it is certainly exciting to find out whether the coronavirus crisis results in a reorganisation of supply chains in terms of more localisation and whether a critical look is made at linear business models.

Coordination and communication with suppliers and customers

Communication must be clear, transparent and timely in order to overcome liquidation bottlenecks and, above all, to maintain production. This should ensure the continuous support of customers, employees, suppliers, creditors, investors, and supervisory authorities in the current crisis.

Long-term automation of operations by technology

The current situation shows how important functioning (standard) processes are in a company. Using (software) robots, back-office functions that are essential for survival, such as payroll accounting, dunning, purchasing or accounts payable, are carried out autonomously at all times. Your employees can check the results of the robots from home and, above all, have the time to respond to the current situation flexibly. Furthermore, these solutions can be implemented quickly and do not tie up major project management capacities on your part.

We would be pleased to introduce our solutions to you virtually and to advise you and develop them also via remote connection.

Contact

Rainer Wilts
Partner / Head of Advisory
T: +49 211 9524 8123
E: rainer.wilts@wkgt.com

Dr. Dominique Hoffmann
Partner Digital Advisory
T: +49 211 9524 8622
E: dominique.hoffmann@wkgt.com