Practical questions for companies impacted by Coronavirus
The economic consequences of the coronavirus (COVID-19) on future trading assumptions, and the direct impact on many companies in the leisure, travel and consumer sectors already, will place some companies under liquidity pressures and potential covenant breaches from their debt facilities.
The Grant Thornton Resilience Wheel is a framework designed to help you have ‘initial’ high level ‘supportive’ conversations within your boardroom as a result of stressed/distressed operating conditions.
Set out below are some further, more granular, considerations you might want to consider, with specific reference to issues heightened by the Coronavirus:
1. Review the critical points in the business and develop contingency plans for interruptions or disruption:
- Supply chain – where are the critical points? Consider stock piling essential supplies (try to create and hold an emergency reserve of critical supplies), ensure alternative sources are identified;
- Who are the essential staff? Establish staff support plans to allow them to continue working (childcare, flexible working, remote working); and
- What reliance does the business have on external support for any business processes/interaction with other businesses (including the supply/delivery chain)? Review for alternate sources of support to allow for loss of business support functions and identify alternate delivery mechanisms, including storage, deferred delivery/production agreements.
2. Set up a crisis management team with representation from key departments or groups:
- meet frequently to discuss and prioritise problems;
- wherever possible, try to anticipate the next problem;
- if you have spare resource, allocate some of it to a ‘hot planning’ group who can react and find solutions to individual problems as they emerge without tying up the whole management team; and
- communicate early, often and frankly with your team – establish a communication system which can reach staff at home or otherwise isolated. Lack of news breeds uncertainty and concern.
3. Set clear policy for staff absence:
- voluntarily absence; or
- if quarantined or unwell.
Consider whether part (or all) of the business should be suspended, and the implications in terms of deactivating equipment, dealing with projects or work in progress, and prepare any necessary steps, announcements or resources necessary to implement the plan if called on at short notice.