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planning matters
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BUSINESS continuity; RECOVERING FROM covid-19 Working with clients through the COVID-19 crisis has been one of life’s most stressful career periods. Initial calls dealt with layoffs. The second round of calls involved business closings. The third round of calls involved helping clients who were trying to figure out the federal relief packages and how to get help. COVID-19 has brought business continuity issues to the forefront for many businesses. In any business, it is important to address what the business can do to survive not only in the event of a pandemic, but in a variety of situations that may have a significant impact on the business’s ability to operate. Massive flooding, fires, earthquakes, hurricanes, and other natural disasters may not only interfere with operations but may halt them indefinitely. Businesses should be prepared to address a myriad of technology issues that could arise: cyberattacks, ransomware, and power grid interruptions or failures, to name a few. Have a plan If your business doesn’t already have a disaster plan to deal with potential interruption scenarios, it is time to put one in place. You should consider: How will your employees will be able to work? What redundancies do you have in place off-site to allow work to continue? Who are essential employees? What are the main objectives of your business during the crisis and how do you prioritize them? What are the most significant risks to your business? Where are you most vulnerable? Brainstorm about how to address your most significant risks and vulnerabilities; who is in charge and what happens if the individual in charge is unable to perform because they get ill, are quarantined or otherwise unable to perform work. How will you communicate the plan and keep your workforce on track? Be creative with your workforce Your workforce may be unable to physically be at a business location for a variety of reasons. Be flexible and creative in dealing with workforce issues. Evaluate which employees are able to perform their duties from a remote location and which are essential to be physically at the business. Instead of eliminating a position, explore the possibility of reduced hours or part-time status until the crisis subsides. Also be prepared for what to do when the crisis ends. Innovate It might seem like the time to focus on pure survival but consider using a crisis as the time for new ideas. Consider how you deliver your products and services: Can you do it differently? Are there are products or services you can provide? Are there alternative methods for you to obtain raw materials or supplies that can be used to offset any struggles caused by the crisis? A crisis will reveal the weaknesses and vulnerabilities in your operations. If you are able to innovate and develop alternatives, those weaknesses and vulnerabilities can be minimized now and for the next crisis. This may be the time to hire an innovation officer! Evaluate When things are going well, it is easy to let marginal product lines or services stay in place. Crisis can drive us to re-evaluate. Focus on your core competencies and do what you can to protect those. Renegotiate A crisis will test the agreements you have in place with your vendors and suppliers. Now is the time to evaluate how your suppliers and vendors have 34
performed. Like your business, they are facing many challenges. Have they been able to meet and fulfill your needs and demands? What back-up mary e. vandenack and michael j. weaver plans and redundancies have they had in place in order to keep your supply chain intact? All your arrangements with vendors and suppliers should be reviewed with an eye toward who your business can rely on as it moves forward. Agreements with those chosen should be negotiated to better contemplate the business risks that can emerge when things get rocky and that can provide some assurances on what might happen in times of crisis. Restructure In a time of crisis, as in most other times, cash is king. It may be time to look at the capital structure of your business and make some decisions about how you can restructure in order to obtain cash that may be needed if the crisis continues. If they have the ability, you may consider a cash injection from the current owners of the business. Those injections could take the form of permanent capital contributions, or they could take the form of debt that can be repaid once the crisis subsides. You may also consider seeking cash from new, outside investors. These cash sources can also take the form of contributions through equity raises or debt with third-party investors. When analyzing these transactions, it is important to keep in mind the impact new, third-party investors can have on your business and to structure them in ways that satisfy the objectives of all parties but also protect the business. You may also consider traditional debt, be it through your existing lender relationships, new lending sources or the various government programs that may emerge to assist businesses as they navigate the crisis. While debt may not be a first choice, it can provide the cash you may need to weather the storm. Communicate Communication is key in uncertain times. Communicate with your staff and employees and be as transparent as you can about plans moving forward. Communicate with your customers and be realistic about what your business is experiencing and what are realistic deliverables. Let them know what steps you are taking to mitigate the risk to them and how you are trying to maintain operations as normal as possible. When they do not have any knowledge about what you are doing, they do not value all that you are doing. Business succession planning COVID-19 brought many businesses face to face with the reality of the possibility that key owners and managers could be very ill and/or die at the same time. For many business owners, the business ownership interest is a good portion of the assets that will be available to their families in the event of death or permanent disability of the owner. Business succession plans are important when things are going well but critical in the face of a crisis such as a pandemic. A good business succession plan considers all possibilities related to succession. Is the business structured legally in a manner that simplifies succession? Have tax costs been considered? Is the business positioned for both the possibility of internal succession and a sale to third party? Does the business have a financial structure (life insurance, investment assets) in place to support the business succession plan? mmagazine • aPRiL 2020