thought leadership

How to minimise the Coronavirus impact on your business

Coronavirus is bringing the global economy to the brink of chaos. This is a ‘black swan’ event: a rare, severe issue that comes out of nowhere and wreaks havoc.

Although we know that black swan events will definitely occur, each individual event is unpredictable; but that doesn’t mean you can’t make your business better prepared, and more able to handle the impact of this global pandemic.

Our small position in a giant economic sea means that any major economic wave sends ripples through our financial systems and businesses.

Two areas of concern for Kiwi companies are supply chain and business continuity. Business owners should be asking some vital questions about both these aspects of their operations.

Do you know what your contracts say about unexpected events?
Your supplier and customer contracts may well include clauses about force majeure events. You and your leadership team need to understand what you can and can’t do if one of these events occurs – what are your obligations, rights and responsibilities?

If you think your contracts have incorrect or out of date clauses, this might also be a good time to review future contracts, speak to your lawyer, and potentially change the wording. A big event like this can be an improvement lesson that helps strengthen your systems.


Do you have a diversified supply chain?
Global supply chains were thrown into disarray by coronavirus when the Chinese government, followed by the US and various governments in Europe put containment measures in place after the COVID-19 outbreak. As China - an important source for New Zealand - reduces the labour constraints that restricted manufacturing and logistics, we are seeing supply restarting. This will be experienced differently depending on how closely your supply sources were to an epicenter. The supply chains of particular concern for New Zealand and other nations include electronics and pharmaceuticals. Medical supplies such as PPE are a great example of the backlog created when the world suddenly ups its orders before the plants are fully back on-line. We also need to be mindful that secondary effects might occur if infection rates start to re-emerge, and the Chinese authorities clamp down again. Even if all goes well, it is likely to take some time to clear bottlenecks.

New Zealand businesses can expect shortages of components of products, so if you’ve been sourcing items purely from one place in China, this could be a sharp reminder about the importance of expanding COVID-19 your sources. After the Fukushima earthquake, once the initial shock to some of the supply chains had occurred, savvy suppliers were able to source from their diversified manufacturers and to work with their competitors to a certain extent to balance allocations; this was a major factor in re-establishing supply volumes quite quickly.

You should be having conversations with your vendors about their supply line and monitor that regularly. You can also talk to people in your industry and share information. Beware of customers’ tendency to over order. Identify your critical items and optimise production and sales to these constraints. Refresh your demand and supply matching more frequently.

At times like this, it’s about keeping the whole economy stable. You and your suppliers should be working together to make sure everyone gets just enough to keep going.


What do you need to do and how will you communicate?
When a black swan event occurs, you need to know: Are you prepared? Do you know what to do?

Can you communicate with your people, your suppliers and your customers? Your senior leaders need to know their responsibilities and what processes they need to follow. Your business continuity plan should set this out, along with how managers will get hold of people (including back-up plans; what if the internet or the phone network is down?) and what they should be communicating to their teams. The responsibility to your teams doesn’t end with everyone being able to work from home; it is just as important to monitor your team’s wellbeing and ensure they are coping. You want your business and your people to be in the best shape possible when the event ends.

Your team should also know how to prioritise their work if they have limited hours to operate – when they only have time to do a few jobs, they need to know what to choose and why.

When the end of a black swan event is in sight, you need to think about how to mobilise the business and get your teams engaged in the process; involving in them in the planning now can make them feel empowered. Understanding all of the projects that have been put on hold that will need to be reactivated is essential, so create your checklists of these tasks and who should be working on them so the business can hit the ground running.

Finally, take confidence in New Zealand’s position
We can see from other black swan events that it’s possible for the economy to bounce back surprisingly quickly. Our Government has provided a substantial economic stimulus package for Kiwi businesses and our Reserve Bank, unlike many others, still has the potential to provide some economic stimulus. While some nations reacted slowly to the threat, New Zealand seems to have reacted as quickly as possible. There’s plenty of cause for optimism.

Compared to many other nations our economy is in good shape, we have a strong health and welfare system, stable government and given our geographic isolation, a controllable border. We do not need to panic but do need to recognise that as an island nation, dependent upon export and import, our ability to continue business as usual will be disrupted.