ADVISORY COLUMN: SMALL BUSINESS
Financial markets around the world are crashing, Japan ordered a nationwide shut down of all schools, Turkey closed its border with Iran, travel bans are in effect in almost every country around the world, the United States is reporting drug shortages and the International Monetary Fund is expected to significantly downgrade global growth forecasts.
The world appears to be on the cusp of a pandemic as the novel coronavirus spreads like wildfire since it first came to global attention in December 2019.
Currently, some 53 countries have confirmed COVID-19 infections, with the numbers climbing by the hour. Of the 83,700 confirmed cases worldwide, at least 2,859 people have died from the virus.
Last week, the US Centers for Disease Control & Prevention, the CDC, issued a dramatic warning to Americans to expect significant disruption amid the inevitable spread of the novel and deadly coronavirus, COVID-19. That grabbed the attention of media houses and health authorities around the world, including Jamaica.
“It’s not so much a question of if this will happen anymore but rather more a question of exactly when this will happen, and how many people in this country will have severe illness,” said CDC Director Dr Nancy Messsonnier.
Hours later the CDC confirmed the US’s first possible case of community transmission of the virus.
It was an ominous wake up call from the world’s largest economy, our regional neighbour, major trading partner and the leading source of Jamaica’s tourism and remittance inflows.
It’s not a question of if the coronavirus will negatively impact Jamaica, it is how long and how severe the human, social and economic toll will be. Although it is virtually impossible to predict the precise global impact and likely end to the COVID-19 outbreak, small businesses should plan for the worst-case scenarios.
Step 1 in the planning process would be to conduct a business impact analysis. A business impact analysis, or BIA, requires the identification and documentation of the critical operations and processes of the business.
In other words, at the very minimum, what is required to allow the business to stay operational or re-open operations after a major disruption. It also requires the business to define in financial and operational terms the parameter of a ‘major disruption’ that would then trigger the implementation of key mitigating actions.
In doing a BIA, the management must also prepare predictions or estimates of the operational and financial consequences that will result from major disruptions as per the company’s unique definition, considering several factors and scenarios.
These factors include supply chain disruptions, human resources crisis, technology disruption, customer defection or widespread dissatisfaction, delayed or lost sales, increased expenses, contractual, significant cash flow constraints, statutory and regulatory breaches and consequences.
Some of the scenarios would be the declaration of a pandemic by the World Health Organization, goods, food and medicine shortages, global travel shutdown, local outbreak, local meeting and travel bans, mass and extended quarantine, loss of key staff, and compromised safety and security of property, to name a few.
The business impact analysis can be complex and may require the support of an accounting firm or management consultant or adviser with specialisation in risk management. With the business impact assessment complete, small business owners will now have the data needed to prepare a business resilience or business continuity plan. That plan would detail treatments or mitigating actions to address all the major risks identified in the BIA.
Generally speaking, some mitigating actions many companies and organizations are adopting are business travel bans, stringent health and safety measures in the office, implementing remote work, strategising for online sales, negotiating lines of credit, creating new virtual customer channels, enforcement of ‘online only’ meetings, staff layoffs, renegotiating contracts, out sourcing some key business functions among others.
Again, the aforementioned are mere examples of mitigation actions. A business resilience or continuity plan should specifically align with and address the company’s updated business impact analysis.
Although most major risks and significant business disruptions tend to have a negative impact on businesses, there may also be upsides for some business, which should also be assessed in the business resilience or business continuity plan.
Once a plan has been finalised it must be communicated with key staff, strategically, and not in its entirety, as doing so could pose new risks to business, such as vulnerability of sabotage. After all, a BIA is also a blueprint for how to shut down a business.
Notwithstanding, staff must be sensitised as to what will happen in the case of disruption, how to prevent the spread of the virus, how they can personally prepare their households and safeguard their families, how they may or may not continue to operate their work functions, and very importantly, how the company will communicate as the circumstances change.
While we can all hope that it does not become necessary for local businesses to activate a business resilience plan, we would be foolhardy to continue or day to day business operations throughout this month and the rest of 2020 without one.
Yaneek Page is the program lead for Market Entry USA, a certified trainer in entrepreneurship, and creator and executive producer of The Innovators and Let’s Make Peace TV series.