COVID-19 has created a universal imperative for governments and businesses to take immediate actions with significant financial ramifications.
According to our latest study, market capitalisation for the biggest 2,000 companies worldwide has declined by 24% since the beginning of the outbreak, losing more than $12.4 trillion.
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Market conditions correlate more closely to the global financial crisis than any of the previous epidemics (Ebola, H1N1 and MERS). The industry as a whole – including goldminers – has seen strong devaluation of their stocks. Indicators for commodities pricing and demand projections exacerbated the situation.
What needs to happen next? In the current climate, your decisions will determine how your organisation fares in the near term – which is critical. But they will also have a significant impact on how well you operate in the future.
This means that smart leaders will seize this opportunity to take swift action to avoid business disruption and potential revenue loss – and at the same time, forge new levels of trust with their workforce and position their businesses for greater resiliency and productivity in the future.
Each company, industry and region will have different needs and requirements for managing people, the workplace, customer service, data and business continuity. But there are six major foundations that all organizations should consider as they move forward:
- Empower people, operate with purpose
How you protect and empower your people, adapt workplace approaches and expand connections to partners and local communities not only determines how you operate in the near term, but also how you will operate in the future.
For its part, BHP announced COVID-19 response measures that are expected to accelerate the delivery of about $100 million to its small business partners, many of whom are struggling with the pandemic.
Through it all, let’s not forget that this is first and foremost a health crisis, and that our primary responsibility is to safeguard the health of our families, our colleagues and, indeed, ourselves.
- Assess liquidity
Mining and metals companies should conduct scenario modelling, looking at controllable uncertainties for demand and supply and the triggers affecting revenue and cost.
They can then formulate action plans to respond – while considering the capital expenditures that would be required from a supply, labour, resource perspective, and whether they can execute those projects.
Many companies should consider deploying a mechanism that lets them dynamically adjust production capacity in line with market conditions in real-time.
They should determine the financial impact of changing production – looking at current cash and future expected cashflows – and then reforecast for the year and incorporate those insights into future expectations.
- Assure supply and delivery
Companies can reforecast their demand plans for the remainder of the production year by working collaboratively with their largest end customers, and those with long-term supply contracts.
Understanding their needs through the crisis and beyond can help you identify the correct production profile for your situation and avoid the excess use of working capital. It may be useful to look to China to see how its economy continues to react.
- Secure operational continuity
Companies should consider rebalancing production. On a tactical level, that means operating at a predictable production output capacity to match re-forecasted demand, and to avoid work in progress inventory stockpiling and re-handling costs.
Barrick Gold recognised such issues and limited all non-essential projects in response to the pandemic. The company has also identified alternative suppliers and shipping routes and put contingency plans into place for other parts of its operations.
On a strategic level, rebalancing production means reviewing your footprint and assessing the flexibility of your workforce, the depth and capacity of your suppliers and broadening your customer base to diversify demand.
Altogether, we should consider this crisis as a wake-up call and recognize that the way we have operated up to this point may not be the way we operate moving forward.
- Uncover opportunities
As companies rethink operations and rebalance production capacity, they should be alert to opportunities where necessity opens the door for strategic improvements that can support future growth.
For example, a plant shutdown could provide a window for asset upgrades and modernisation.
Remote training or applied technologies could be used to upskill an idled workforce that is staying home. And in a changing landscape, it might make sense to integrate a key supplier into your operations, or a competitor might be a target for acquisition—or for a strategic partnership.
- Re-platform for a digital world
Assessing how digital technologies and analytics can be used to increase resilience and efficiency is paramount: remote operations, data science-based optimisation, automation, robotics and more.
First, understanding the tangible business applications is crucial. Second, re-platforming core technologies to support a digital future does not require a wholesale change.
Many existing systems are critical to daily operations, and re-platforming all at once introduces an unacceptable level of operational risk.
What is required is not only a replacement of the technology, but also the interwoven business processes and policies. And a pivot of skill sets across the workforce to be adept at using new technologies, platforms, and services.
Additionally, more remote working requires a shift in information security focus from enterprise infrastructure to cloud and virtualised infrastructure as employees rely on home Wi-Fi routers and VPN connections.
AUTHOR: Eric Croeser, Industry X MD for Accenture in Africa