New research from The Hackett Group outlines five principal risks emanating from the crisis and its fallout, as well as risk management imperatives and corresponding recommended actions for each.
The unfolding coronavirus pandemic has thrown the world into a public-health crisis, resulting in major disruption of business and the global economy.
The immediate business response has been to take measures to protect the health of staff, leading to unprecedented turmoil even before the full impact of the virus on the health of the workforce is felt, and the full extent of the economic fallout is known. Further, shutdowns of large parts of economies – both in terms of the wide range of businesses and geographies impacted – are interrupting business operations and supply chains while causing radical changes in demand patterns. A global recession beginning in the second quarter of 2020 is now a near certainty.
What is unknown is its severity and duration. In these pages, we identify the five principal risks emanating from the pandemic:
- People risk
- Liquidity risk
- Supply chain risk
- Recession risk
- Business continuity risk
For each risk, we have defined a number of risk management imperatives and corresponding recommended actions. The crisis leadership team should be accountable and have assigned responsibilities for a risk management plans based on these imperatives, defining specific actions, implementation and status monitoring.
At this point, it appears that the coronavirus crisis will evolve into one of the most significant disruptive events in our lifetime, not just for individuals and businesses, but for societies, economies and global relations at large.
While the economic impact may be positive in some industries (e.g., e-commerce), it is overwhelmingly negative elsewhere, even to the point of bringing some industries to near-collapse (e.g., airlines and hospitality) and putting vulnerable businesses at risk of failure. Managing the extraordinary challenges ahead will place unprecedented demands on leadership in three stages:
• Short-term (3-4 months) – Crisis management: Execute and iterate a plan to respond to coronavirus related events and manage their immediate impact on staff, business operations and financials.
• Near-term (3-12 months) – Recession management: Develop scenarios and plans to manage through the recession expected to start in Q2 of 2020.
• Mid- and long-term (12 months and beyond) – Post-crisis/recession strategy revision: Develop scenarios to deal with the lasting effects of the crisis and recession.
Read the full report from The Hackett Group here.
