IN any economic downturn, businesses, big and small, domestic or regional are often hit the hardest. Budget constraints, reduced spending power and inadequate preparedness for an upheaval can make it impossible for businesses to survive. In many cases, this can cause companies without adequate planning to tumble.
I am currently doing the rounds in the Association of Southeast Asian Nations to assess the impact the novel coronavirus has done to companies. Industries where I am currently engaged as a strategic advisor like manufacturing, retail and hospitality have been hard hit more than others. The novel coronavirus has already killed over 1,700 people—more fatalities in two months than the severe acute respiratory syndrome outbreak of 2002 caused in seven months—and it’s accelerating.
One frantic client I met this week remarked that typically the start of the year is usually a busy time. His team would always hop from one trade show to another, and sign new business deals. They would then rush to manufacture and ship out goods from China. This year, barely a month and a half in operation, everything stopped and a cloud of uncertainty hangs. Their biggest fear is whether they will be able to fulfill orders because the Chinese factories they have contracted have stopped operating.
Business operations in China have been drastically curtailed as authorities try to limit opportunities for human-to-human transmission of the novel coronavirus. With reports of infections and deaths continuing, business owners are worried. “If they don’t return to work in the factories soon, business will free fall.”
With the virus spreading without letup, we should really brace ourselves for impact. Recession is not far behind and the volatile, uncertain, complex and ambiguous (Vuca) world I have been sharing in my columns and speaking engagements is now a clear and present danger. It is here.
For my client engaged in manufacturing, we spent the whole day assessing the worst case scenario of the factory output. The doomsday scenario of not being able to keep up with demand and missing out on revenue targets by 40 percent plus managing operating expenses each month. These issues were laid out on the table and the verdict was naturally to mitigate the impact and of course correct operations to other less affected manufacturing sites in China.,“Clearly it’s all wait and see and there’s nothing much we can do except to initiate immediate change and brace for impact,” he said.
Across the region, fears of trade and supply-chain disruptions are rising. If China’s economy slowed and it will, businesses must be ready to deal with it.
Resistance to change
To family-owned businesses, initiating change is a sensitive issue and a major challenge as it affects the very core foundations of how founders and business leaders do things. What is so difficult with change? The dignity of each member of the family is on the line. With the change, tightening of belts follows and resistance to change surfaces.
I have listed some recommendations and initiatives to help family owning businesses transition:
1. Family members must clearly articulate and describe the current status of the business vis-à-vis the Vuca event that will soon compromise the business and the key business leader must embrace the need to manage the impact and prepare for a contingency.
2. It is important to specify the areas of intervention needed by showing facts and figures and explaining the options for changing and why the recommendations are necessary. Transparency is key in having family members buy into the importance of change.
To be continued...