BUILDING BUSINESS RESILIENCE AND SUSTAINABILITY AMID A PANDEMIC.
When I first heard of Covid-19, in January of 2020, I, like most of my friends and those around me, quickly dismissed it as a passing storm, as a fire that would quickly burn out on its own. As it has turned out, we were all in for a rude shock. Slowly but surely it spread and its impact has been seismic to say the least. Such has been its effect that the World Health Organization (WHO) declared it a pandemic on the 11th of March, 2020.
It has claimed about 4.55 million lives worldwide
so far and has bedridden even some of the most resourced healthcare systems in
the world. That’s just the tip of the iceberg. Its impact has been twofold:
health on one hand and economies on the other.
On the economic front, the World Bank predicted that
Africa’s economy was headed for a recession occasioned by the pandemic for the
first time this century. The World’s merchandise trade fell by
5.3% in 2020 as businesses suffered shocks from the pandemic .
Financial markets have not been spared either. Trading had to be halted at the
Nairobi Securities exchange as the NSE index fell by more than 5% the first day
a covid-19 case was reported in Kenya. The Kenyan bourse’s market
capitalization has so far dipped by 7.94% to sh2.02 trillion .
The Dow Jones’ Industrial Average index on the New York Stock Exchange- the largest
stock exchange in the world by market capitalization fell by 943 points,
approximately 3.4% by the close of business on the 28th of October
2020. The S&P 500 slipped by 3.5% while Nasdaq fell by 3.6% .
In July this year the New York Stock exchange took its second largest hit
during the pandemic ( after the October one) as the Dow Jones plummeted by
725.81 points or 2.1%, S&P dropped by 1.6% to 4258.49 and Nasdaq by 1.1% to 14,274.98. The
situation is attributed to low investor confidence as corporate profits have
been forecasted to take a dip as a result of shocks imposed by covid-19.
By October of 2020, approximately 1.7
million Kenyans had lost jobs with the unemployment rate doubling to 10.4% from
5.2% in March of that year . While statistics for Kenyan
businesses that wound up during the pandemic are unavailable, the Central Bank reported
that loans totaling to sh234.7
billion from Small and Medium size
enterprises(SME’s) were restructured a whooping increase of about 89.5% from 2019’s
sh20.6 billion. On the global scene, approximately 114 million
jobs were lost .
The decline in economies’ and business
functionality is a result of lockdown policies imposed by governments, that saw
businesses close, as governments’ rushed to curtail further spread of Covid-19.
With the discovery of vaccines, we have seen countries slowly re-open and
economies’ and business begin to pick themselves up. However, we might never
return to normalcy as we knew it. It is almost impossible to tell how long Covid-19
will be around with resurgent waves continuing to imperil both lives, and businesses
as governments will be forced to impose lockdowns and restrictions from time to
time. Furthermore, in a world of innumerable uncertainties and increasing
complexity, more pandemics are bound to break out in future. Businesses
therefore have to keep on re-inventing themselves in order to keep afloat.
Managers across all strata, from micro
enterprises to those managing blue-chip companies are under constant pressure
to re-configure their business operations in a bid to survive. It is becoming
imperative for them to build resilient and sustainable business operations that
will see their businesses overcome current headwinds, and also be prepared for
future shocks.
Business resilience is the ability of a business to withstand, adapt, and thrive in the face of shocks that are internal and external, as well as those known and unanticipated. Sustainability on the other hand is the ability to maintain business operations at a certain level. It can therefore be argued that sustainability stems from resilience and that resilience has to be achieved first, before a manager can think of sustainability. The question therefore is, how can businesses achieve resilience during pandemics and economic recessions?
Fostering resilience.
For ease and transparency, most businesses
concentrate supply among a few suppliers .However, this has heightened their vulnerability
in the face of the pandemic where lockdowns have seen supplier businesses shut
and hence supply chains severed. The United Nations
Organization (UN) estimated that world trade would contract by close to 15% in
2020 amid sharply reduced global demand and disruptions to global supply chains . A perfect case study is that of trade between China and
India.
Between 2018 and 2019, over 65% of India’s total
imported Active Pharmaceutical Ingredients (API) were from China. As a result of
the pandemic, India has been experiencing delays in the supply, production and
distribution of its pharmaceutical products.
To build resilience and ultimately sustainability,
businesses ought to review each product’s bill of materials so as to determine
whether inputs are sourced from high risk areas and if there are ready
substitutes in case of emergencies. It is also
imperative for businesses to build more redundancy into supply chains. This
involves taking time and perhaps resources to identify alternative backup
suppliers who can step in when primary supply chains break down. Businesses
should also maintain sufficient inventory of key parts as a financial bulwark
against unprecedented disruptions in their supply chains. This can also
position businesses to meet sudden spikes in demand such as those witnessed in
retail chains across the world when buyers out of fear of the uncertainty that
would come with the imposition of lockdowns succumbed to panic buying.
Digitization is an ideal frontier to build business
resilience on. As social distance guidelines have limited the number of
employees a business can house in a given space and the number of customers
allowed into any given business premise, businesses that have digitized have
been able to build continuity. During Covi-19’s nascent days, Nike used predictive analytics to
critically mark down goods and reduce production early on to pare down impact.
The company was also able to redirect products from physical stores to
e-commerce sales, driven in part by direct-to-consumer online sales through its
own training app. As a result, Nike sustained a marginal drop in sales as
compared to its competitors.
While elevating customer experience, lessening costs
and improving compliance for highly governed industries such as finance,
digitization should also focus on creating novel products and services in
response to shifting customer demands and tastes. Digitization should also
focus on automating routine tasks therefore enabling employees to focus on
higher value activities.
On the 9th
of August this year, Safaricom entered into a partnership with the Nairobi
Securities exchange making it possible for safaricom customers to invest in
shares using accrued Bonga points at the comfort of their mobile phones. By so
doing, Safaricom has been able to use digitization to innovate. This should in
turn bolster the telecom’s competitive edge in the long term.
It has become imperative for businesses pursuing
resilience and sustainability to seek new partnerships both within and outside
of the industry. Most recently, insurance companies have been collaborating
with connectivity providers to spawn virtual clinics while pharmaceuticals have
been partnering with hospitals in inoculation exercises. On the local scene,
Jumia Kenya has partnered with Twiga Foods-an e-commerce business-to-business
market place that sources produce directly from farmers and delivers it to
urban retailers. Apart from sustaining Jumia’s supply chain during the
pandemic, the partnership has also allowed Jumia’s 1.5 million customers to
have access to garden-fresh fruits and vegetables from Twiga foods. Sendy, a Kenyan e-logistics provider partnered with Tuskys
Supermarket to facilitate home delivery for the supermarket’s punters. By
entering into partnerships, businesses are able to share essential knowledge
and experience, pool resources and share risk which in the long run cultivates
resilience and hence sustainability.
Businesses that embrace diversification are also
more likely to be resilient to shocks. Diversification can be pursued on two
fronts: market and product diversification. Market diversification can be
achieved by entering a new market in which you do not currently operate in. In
the face of decreasing apparel demand in Europe and tremendous rise in the
demand for Personal Protective Equipment (PPE’s) in Kenya, Hela industries
ventured into the production of PPE. In April and May of 2020 alone, Hela was
able to produce 10 million masks hence diversifying its market from apparel to
health equipment. On the product side, many gin distillers in the United
Kingdom took up production of alcohol based hand sanitizers thus enabling
them to tap into the rising demand for
hand sanitizers even as demand for gin took a dip as a result of the closure of
restaurants and bars. This has enabled the distillers curtail sharp drops in
profit levels hence ensuring business continuity and fostering resilience.
Unlike other pandemics before it, Covid-19 has affected
both the supply and demand sides. On the demand side, consumer demand has taken
a nose-dive amid falling disposable incomes that have been occasioned by
massive job losses, this has in turn jeopardized the survival of businesses as
profits have declined .Governments can ensure business resilience amid
pandemics by establishing stimulus packages where consumers receive transfer
payments that will cushion the onslaught on their consumption levels and in
turn keep businesses going.
Businesses that cultivate resilience and
sustainability should be able to withstand initial shocks and also rebound from
those shocks bigger, better and stronger.
Wow, this has to be pinned
ReplyDeleteThankyou.
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