March 13, 2020

Coronavirus and Business Continuity

By David Mustin, Partner, Advisory Services

Related Services Advisory, Tax Advisory Services, Coronavirus Resource Center

Coronavirus and Business Continuity Advisory

With the rise of the Coronavirus globally and in the U.S., many organizations are starting to assess how to continue operating while keeping their employees and customers safe. Conferences and travel are shutting down. Face-to-face meetings are being cancelled. More and more companies are permitting—even encouraging—their employees to work from home. However, not every business can do that. If you’re a manufacturer, a retailer, a restaurateur or contractor (or many other types of businesses), if you have no employees on the frontlines, or worse no customers, the impact can be severe, possibly even threatening the future of the company.

While the Coronavirus continues to spread in the U.S., it is important to have an action plan, with an understanding of the issues pertinent to your company and alternatives to ensure your ongoing viability and the continuity of customer service. As the saying goes, “Hope is not a strategy.” Coronavirus is forcing many business owners to move beyond hoping and into planning and executing.

Five Key Steps to Ensuring the Continuity of Your Business

1. Setup a Planning Team

Select business line leaders in your organization and engage them in preparing together. This starts with the top executive, whether that’s the president, CEO, chairman or owner. The team should also include key leaders in sales and marketing, customer service, operations, supply chain, finance, HR and IT.

2. Identify Scenarios, Risks and Impacts

A business impact analysis (BIA) seeks to identify, quantify and prioritize the key risk threat scenarios—those  that could bring a halt to business operations, or create a loss, interruption, or disruption. The prioritization should focus on activities that are mission-critical and how fast they must be recovered. While the Coronavirus may be the immediate threat for now, taking time to understand any other imminent threats is equally important.

As you consider scenarios, think internally (i.e., employees get sick and can’t work or show up, similar to what happened in China) and externally. What if customers stop coming? What if your suppliers cannot deliver?

How real are these possibilities? What if the issue(s) continues for weeks or months? How much will this cost your business? It is likely that fixed costs will not stop (rent, salaries, utilities, loan payments), while revenue may be severely limited.

3. Document Alternatives and Action Steps

Once the scenarios and potential risks are identified, it is time to plan for alternative actions to limit the impact. Some examples:

Risk Alternative
Employees don’t show up for work Identify contractors / temps who are available
Supplier Capacity Constraints / Readiness Identify secondary suppliers that can serve as backups
Employees wish to work from home Test computer networks and remote access to ensure capacity
Cash flow may be delayed with curtailed product shipments or  reduced work force Ensure lines of credit to manage working capital and accelerate accounts receivable where possible
Increased demand for technology capacity as employees work in alternate locations Ensure computers are appropriately backed up and functioning under heavier workloads
Customer demand exceeds supply Suggest alternate products in inventory that can serve as appropriate substitutes
Limited staff Explore alternative locations where work can be distributed
Use of contractors Ensure training systems are up-to-date to rapidly on-board contractors
Computer systems are down Identify manual procedures to ensure work is being processed
CIn-home service delivery is curtailed, interrupted, postponed or refused Communicate with customers around safety precautions and promptly re-schedule

While you are developing scenarios, ensure that someone is documenting the plan so there is clarity on the decisions and alternatives. The plan should be continually reviewed and updated or modified as circumstances evolve and new information becomes available.

Some elements of the plan should include:

  • Goals, objectives and assumptions
  • Key roles and responsibilities
  • Critical business functions – status of each
  • Scenarios and impacts
  • Supplier readiness
  • Activation and response (who is declaring an emergency and what is the response)
  • Communications (employees, customers, suppliers, community, regulators, others)
  • Training and practice
  • Important contacts (internal and external)
  • Site emergency procedures

4. Implement, Communicate and Train

It is important that employees, suppliers and customers know that you are ready, willing and able to manage the emergency situation; this should be communicated to all key stakeholders, with updates sent as necessary.

All employees should be trained on the issues and alternative scenarios so that they know what to expect and how to proceed.  Briefs that are simple to follow are critical to ensuring employees have a “go to” set of instructions, including emergency contacts, just in case.

Testing

Testing in urgent crisis situations is critical to ensuring the success of your plan. Many organizations run tabletop exercises, where employees walk through scenarios and possible responses to ensure there is understanding and preparedness. A full-fledged simulated test of scenarios is not always possible and can be expensive. However, even limited testing in a tabletop scenario can improve overall outcomes.

Being prepared for the unknown is critical in moments of crisis. Letting cooler heads prevail and having step-by-step models to guide people through unfolding situations is essential to successfully navigating the “unexpected.” It also reassures employees, customers and suppliers that your business can weather the storm—and even potentially emerge stronger when the sun begins to shine again.

Your Marcum professionals are available to help you through business continuity preparation and planning. Call Dave Mustin at 440-459-5755 or email Dave for assistance.

Coronavirus Resource Center

Have more questions about the impact of the coronavirus on your business? Visit Marcum’s Coronavirus Resource Center for up-to-date information.