New Zealand businesses are already feeling the ripples from the spread of Coronavirus – is your organisation braced for impact?
Coronavirus is bringing the global economy to the brink of chaos and New Zealand businesses are already being affected. 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 potentially global pandemic.
Our small position in a giant economic sea means that any major economic wave sends ripples through our financial systems and businesses. Those ripples have so far been relatively small compared to other nations. But if Coronavirus begins to spread rapidly throughout the country, ‘business as usual’ could rapidly become ‘business unusual’.
The 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 If you think your contracts have incorrect or out of date clauses, this might also be a good time to review future contracts, speak to your lawyer, and potentially change the wording.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 put containment measures in place after the Wuhan outbreak. When containers are sitting on wharves in China, it has a knock-on effect which causes the shipping system around the world to slowly to clog up. There has been a dramatic slump in the movement of global shipping vessels leading to product shortages including medicines, medical equipment, hand sanitiser and toilet paper. The supply chains of particular concern for New Zealand and other nations include electronics and pharmaceuticals.
Shanghai is a bottleneck, Singapore less so, and the USA can’t get empty containers. It’s likely to take at least a month to clear backlogs when everything starts functioning properly again.
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 of the importance of expanding 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 manufacturing 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. 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.
Are you keeping a cool head?
It’s easy to panic – but try to keep the risk in perspective. Have a plan (our COVID-19 business checklist is a useful resource [ 1615 kb ]) and adjust it according to accurate information from reliable sources. Try not to be swayed by your mum’s dire warnings or photos of people in hazmat suits on the front page of the paper.
Keep it in perspective and understand the real risk level, otherwise you have people sitting on stockpiles and other people shut down, which just serves to make the whole situation worse. You shouldn’t go out and place a double or triple order – your suppliers will probably reject it anyway.
By maintaining your cool, working to your business continuity plan and communicating clearly, you can give your team confidence and help ensure the organisation’s ongoing success.
Business continuity plan
You do have a business continuity plan… Right?
Business continuity planning is one of those activities that doesn’t feel important or urgent until it is. If you don’t have a plan, you’re going to be in a much worse position when disaster strikes. You should know what key components of your business are most likely to be affected; think about what could go wrong and have plans for it.
Is your building ready for Coronavirus?
Consider the possibility that your building needs to be closed – whether it’s because someone in your business has Coronavirus, or another tenant in the building is affected. If that happens, do you know how to manage building security so you can lock it down?
Your business continuity plan should have you prepared to take these actions at any time, because you never know when you’ll be denied access to your building.
This could be the time to step up your cleaning regimen, remind people about handwashing, and supply hand sanitiser or face masks to your staff.
Can everyone work from home?
If your premises needed to stay closed for some time, how could your people still work? This is a vital part of modern business continuity: trying to ensure that some work can continue even in a crisis. Each individual should be able to connect remotely and work collaboratively with colleagues from disparate locations.
A lot of businesses won’t ever have tested this. If your applications are tied to a server in the office, or not all of your people have laptops, this should be a good reminder that you need to make that tech change.
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.
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.
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 is doing a good job of providing level-headed updates at regular intervals 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 may be disrupted.