Establishing the Covid recovery blueprint

Throughout history, specific events have tested the solidity and sustainability of business operating models. Covid-19 has significantly tested these models. For those companies who have survived Covid, the focus will now shift towards recovery.

I recently read a PwC study which points out that private businesses that are customer-cantered, people-focused, tech-enabled and flexible have coped better, are more future-focused, and are getting ready to transform the businesses and gain competitive advantage. Put simply, agility has enhanced their resilience, so they are better able to cope with unprecedented external challenges.

Strong commitment to ESG
PwC points out that it has once again seen that the next generation of leaders bring with them a strong commitment to environmental and social issues. This level of awareness isn’t unique to the NextGen though. Agility champions don’t intend to transform their organisations at the expense of the environment or their community – they ranked sustainable business practices higher than any other consideration as a must for future success, with 81% seeing these as critical. That puts sustainability above even technology as a prerequisite for building a strong foundation. With job losses at an all-time high, the focus on social issues is higher than ever.

Agility champions are leading the way when it comes to keeping the focus on the capabilities that differentiate a company. For example, while it may be tempting to slash technology investments as a quick way to cut costs, the majority of agility champions (79% in Africa compared to 65% of global respondents) are increasing their use of new technologies. Some of these solutions likely support the shift to an increase in remote working and ensuring business continuity, while others may provide the technical backbone needed for other types of cost reduction, such as automation, or for new ways to interact with customers.

This has been commented on in various editorials lately. Companies need to pay attention to ESG as it is becoming a funding issue. Particularly in the mining industry. Transnet has regressed to the stage that they have the capacity to deliver the same amount of coal to the Richards Bay Coal Terminal than it did in 1996 (26 years ago). This is a significant blow for mining companies who are looking to increase their cash flow through increased exports. These companies will need funding to foot the bill of a restructuring effort and creditors/lenders will be reticent to commit any capital to companies that do not take ESG seriously. As Genesis Corporate Solutions recently pointed out, companies need to become more attractive to investors.

A strong appetite for change
The PwC survey points out that while businesses in Africa might be lacking somewhat more when it comes to technology than their global counterparts, the appetite for change is stronger than ever. But to achieve long-term advantages from the current shift to remote work, it won’t be enough just to implement home office options. Companies will need to pair enabling remote work, with an equal commitment to ensure staff have the skills they need to manage virtual working environments.

Agility champions understand this; 77% say they are training and upskilling staff, compared to 67% of global respondents. In our view, humanising remote work will be one of the biggest challenges private businesses face in the years to come, and training will be the driving success factor.

This can be seen in many African countries who are embracing the gig economy. South Africa’s move from analogue to digital transmission – while controversial – opens the door for increased spectrum and provides mobile service providers increased spectrum to improve their coverage. This will hopefully also provide opportunities to decrease the price of data which would allow more South Africans a chance to become entrepreneurs. An article by My Broadband pointed out that South Africa once ranked the highest country in the world in terms of the cost of data. This has decreased significantly to the point where we are almost on par with Nigeria which is the cheapest provider of data on the continent. This is a significant cost when doing business and the cost of doing business is a significant role player in any Covid-19 recovery effort.

The PwC survey points out that private businesses favour options that keep staff onboard, like mandating the use of holiday or overtime pay, over staff cuts. Agility champions are having to resort to both options to keep their businesses viable in the face of the current crisis.

While technology is a starting point and enabler, it can’t drive growth on its own. Private businesses should also take a fresh look at their product and service portfolio and even their business model. Sixty-nine percent of survey respondents say they’re doing both, far more than their global counterparts.

Partnerships are key
PwC points out that respondents to the survey are also well-aware that it’s difficult to achieve success on their own and are far more likely to be working together with partners to achieve their goals, whether via strategic alliances or by collaborating with start-ups.

Agility alone isn’t enough to ensure resilience, but it can play a strong role. Some industries are more sensitive to systemic disruption and cyclical downturns, for example, but exploring new business model options can help offset these factors. A strong balance sheet is critical too.

PwC believes that resilience isn’t something that you can simply switch on when you need it. It requires continuing commitment and a willingness to invest time and money in all the essential agility criteria, so that they become mutually reinforcing. That means doing your homework, for example on how technologies can help your business, and being ready to make more fundamental changes in ways of working and how you do business.

The role of the turnaround professional
The PwC survey points out that many private businesses are doing this quite successfully. This is reflected in revenue forecasts that are notably better than those of larger companies surveyed in other research.

Private businesses will continue to provide critical support for economies throughout Africa. However, government responses to the current crisis have the potential to enhance resilience, or to undermine it.

So where do turnaround practitioners fit in? As pointed out above, companies are cognisant of the fact that they cannot achieve success alone and that collaboration increased their chances of a successful recovery from Covid-19. The ability to objectively look at a business’s operating model and to stress test it is key to this recovery and can be done with the assistance of suitably experienced turnaround practitioners.

Additionally, the digital business-space cannot be ignored, this will come with significant investment which comes at a cost. Turnaround practitioners can help companies plan their budgets accordingly and recommend interventions that would help them recover their investment in the shortest time frame.

Lastly, managing creditors is important in any Covid-19 recovery as they are important company shareholders. ESG is a good way to ensure that companies are more attractive to investors. However, the best way to achieve this is through effective and proper creditor management.

Robin Nicholson is the Director of Corporate-911 and s a Senior Business Rescue Practitioner.