Newsletter March 2020 (Part II)
Coronavirus: Impact on the Contracting Business (Part II)
COVID-19 has migrated all over from China to Europe and the USA. The stockmarket has crashed 30+% and all asset classes, including gold, have declined (as at 16 Mar 2020). Many European cities are shutting down as fear overshoot due to the uncertainty going forward.
In the last mailshot, we listed some key impact on the contracting business. How are we to respond?
We take lessons from our 2003 SARs (Severe Acute Respiratory Syndrome-related coronavirus) survival kit…
1. Staff Safety
First and foremost, staff needs to be safe and protected. Apart from the usual sanitisation and hygiene factors, Innovare has activated our contingency planning procedure. At this point, we have divided our operations into two groups of equal functional capabilities, whereby one group will work from home and the other from the office. This avoids cross infection in the unlikely event should one group be affected. Our IT systems and other infrastructure are robust and capable of working remotely, so we can activate our “work from home” policy whenever deemed necessary or to adhere to local government regulations.
2. Think Long Term
Whilst we still as yet to know how long this is going to last, most viruses take 6-12 months to tip over. Countries are already putting together their defences by shutting borders and conducting tests and enforcing quarantine measures. Hence, our business decisions should also be tilted towards the longer term sustainability. For example, one would not want, if possible, to begin retrenching manpower significantly… so that when the pickup happens, the company is ready.
3. Proactively Close all Potential Deals
For the moment, it would not be a pure margin play but to secure contracting deals. This is because such deals typically last 3-12 months. On the other hand, the virus might peak in 3 months (even not, it should be stabilising in some countries by then). This would potentially cushion the business against the quiet moments as the impact of the virus peaks.
4. Cash is King… Extend Credit with Caution
It goes without saying that cash should be conserved via re-examining of overheads, salaries, bonuss etc...
At the same time, funding or credit type of businesses should be accepted with caution. Innovare has taken the approach of remaining operationally debt free so that in times like these, we maintain the stability… being not dependent on financial institutions which might call in loans.
5. Not All Countries are Alike
Some countries have seemingly brought it under control. For example, Singapore has reported that the outbreak is by and large contained. At this point, it has confirmed 631 cases with 160 discharged and 2 deaths (@ 25 March 2020). This is due to the quick and decisive response of the Ministry of Health. What it means is that we should identify these destinations as amongst the first to return to normalcy and channel the business development and capability efforts in these countries. These are countries where projects will recommence first and contractors will be willing to go.
6. Build Country Capabilities
Once potential recovery spots are identified, we can focus on the building of capabilities. For example, through a series of restructuring, Innovare is able to enhance our quota for certain countries like Singapore, Malaysia, Indonesia and the Philippines, where we deem to be hotspots in 2020.
7. Quality Speaks
There is usually a flight to quality offerings during these times. We continue to build a track record of reliability since year 2000, through SARs and the great financial crisis (2008) amongst challenges to emerge stronger. This begets customer confidence during difficult times.
In closing, we hope you, your staff and business stay safe and tight in these times.
Should you need assistance in Asia Pacific, we would be pleased to hear from you.
Click here to view the original newsletter.