The pandemic has redefined day-to-day business for almost every company, regardless of industry, size or geography. Many have experienced a degree of declining activity and will continue to face difficulties.
The implications of the “new normal” for companies include managing the workforce remotely, accelerating digital transformations, building more resilient supply chains and strengthening customer relationships in the coming weeks and months. The initial panic-induced behavior is beginning to disappear, but in the resilience stage, companies continue to focus on managing cash flow, as it will underpin their ability to turn the engines on as demand gradually returns.
Also, companies that will continue their digital transformation will have an advantage - informed decisions, based on data about customer preferences and the ability to quickly update their offers and prices will produce better returns. Eventually, consumer demand will return as jobs are recreated or created, and general anxiety will dissipate. In the end, the new reality will draw new trends and the probability that some current behaviors will be supported.
Throughout this journey, companies need to think and act strategically and continually evaluate their strategies and business plans influenced by economic, sectoral and company forecasts.
Recovery patterns are influenced by many factors, including the rate of return to demand (from slow to fast) and the degree of permanent change in industry or the value chain (from low to high), but can be classified as it follows:
Painful reset: It will impact industries and companies struggling to recover due to "permanently" reduced demand for their supply, insufficient capital to withstand the widespread recession and / or poor execution of the digital transformation. This pattern of return could take the form of the letter "L", because recovery takes a long time and occurs in the medium or long term. Airlines, the hospitality industry, tourism and event organization are likely to follow this pattern.
Gradual transformation: It will manifest itself in industries and companies that will return more difficult, requiring capital reserves to transform operating models and keep pace with new consumer expectations. This pattern could take the form of the letter "U", as the return occurs after several quarters of crisis and stagnation. The automotive and retail trade may enter this pattern.
Agile adaptation: It will be needed in industries and companies perceived, through their daily work, as essential and which will suffer during the slowdown in consumer demand, but will recover faster as consumer demand returns. This could be in the shape of the letter "V", as the quick recovery comes after the initial dive. Examples that could be included in this pattern are the consumer goods industry and banking services.
With so much uncertainty, it can be difficult for leaders to feel confident in their actions. Understanding the trajectory of the pandemic, the path to recovery in an industry, and the vision of the New Reality can help leaders assess their current position and adapt their strategies to ultimately thrive.
Leaders rethinking business strategies should therefore consider the following:
• Admit from the beginning that any prediction will be only partially accurate. Therefore, it is essential to be prepared to rotate and adjust the models regularly.
• Be creative and consider all possibilities. In making the decision to take into account a number of factors, including the significant impact on supply chains and new rules for customer interactions.
• Take into account the blurring of sectoral boundaries. Re-discuss current thinking in their industry and consider opportunities for new or changed services in different sectors.
• Think and prioritize business agility. This pandemic has shown the importance of the ability to pivot quickly. Assess digital capacity and appropriate strategies to effectively address major future challenges.
• Consider new alliances and the power of ecosystems. It is necessary to prepare now how new partnerships and alliances with third parties can secure the future operating model and support the digital transformation.
About PKF Finconta
For more than 25 years, PKF Finconta is one of the 10 leading professional services companies in Romania. Since 2006, we are a member of PKF International Limited. PKF International is a leading international business advisory organization. The company grew consistently over the years, forming a Group of four companies: PKF Finconta, PKF Finconta Consultanta, PKF Finconta HR and Finconta Consulting SPRL, members of national professional organizations CECCAR, CAFR, CCFR, and UNPIR. We provide a wide range of business advisory and related specialist services. We have seven core areas of expertise and within these areas, we tailor our services to your business and your needs: audit, corporate finance, tax, bookkeeping and accounting advisory services, transfer pricing, payroll and personnel administration, and insolvency.