The state of Industrial
COVID-19 has turned into a global crisis, evolving at an unprecedented speed and scale. No industry is immune, and Industrial Equipment is no exception.Industrial companies are grappling with the immediate impact of COVID-19 as both their manufacturing and supply chain operations are being disrupted, and their customers’ own operations arefacingsimilar challenges. This is having an exponential effect down the whole supplier network, hitting Industrial companies with a lag, but at full force nonetheless.
COVID-19 comes at a time of Economic Uncertainty
This comes at a time when companies were already facing severe economic headwinds with clear signs of a recession in their main markets around the globe. The global economy was cooling down (Global GDP growth declined by 13% from 2017-2019; Source: Accenture Research based on IMF DataMapper world economic outlook) and Industrial production in most global markets has strongly decelerated. The COVID-19 crisis is adding yet another vast layer of complexity to an already hugely challenging environment.
Industry is critical to the world’s economy: with over US$3 trillion in revenues it represents about 25% of the manufacturing GDP with a significant workforce, up to 30% of all manufacturing employees across the globe.
The time to act is now, while preparing for the future
Industrial manufacturers must act now to preserve the integrity of their operations and protect their people while preparing for the ramping back up of their operations and the future post COVID-19. And while some companies have started responding to the immediate crisis—taking steps to protect their workforce, supply chains and operations—not all have. And fewer still have started to face the equally important challenge of planning for the new ways of working which will emerge as COVID-19 infection cases start to decrease significantly, and we come to grips with new norms such as social distancing and Self-isolation.
How to manage now?
There is no ‘one-size-fits-all’ solution to the issues facing Industrial due to the scale and diversity of the sector. Global operations rely on international supply chains which are under immense pressure, while different regions and markets mean many different reactions to the COVID-19 crisis.
Right now, business continuity and prioritization is the focus
The scale of the impact on supply chains eclipses anything most Industrial companies have had to deal with. And right now, companies must ensure the most resilient supply chain possible whilst protecting their workforce. This requires them to:
- Establish a command center and begin rapid response deployment;
- Rapidly adjust operations and continue response cycle;
- Establish an on-going operating capability.
All of this must be done with a specific focus and prioritization on their customers’ core needs, as client-centricity continues to be of the essence.At the same time companies must enable virtual work whenever possible to protect their people while ensuring highest levels of productivity. This change in the current ways of working will clearly stress existing IT infrastructure and systems.
System resilience is of the upmost importance putting even more pressure than before on technology teams and IT infrastructure across the whole enterprise.And digital channels must be leveraged to their fullest extent to keep commercial links with customers and partners as well as the products, machines and assets in operation.
But cash is becoming critical!!!
The potential of an extended lockdown is looming, and based on current cash reserves, Companies can only afford a full lock-down of business for a maximum of 2-3 months.Yet those same cash reserves are also vital to prepare the company to ramp up business and go back to industrial markets. This requires companies to
- Reprioritize investments and put on hold all non-essential investment programs, as well as;
- Launch cost reduction initiatives across the enterprise with both immediate and longer-term impacts.
This makes managing the COVID-19 crisis a timeline battle: the remaining cash buffer vs the necessary financial demands to revive the company.
What’s on the horizon: Reinventing Industrial?
Companies, while focusing now on maintaining their customers’ core operations should also start anticipating the ramping back up of the business. They must take a longer-term view and think through the post COVID-19 implications.There are several critical business capabilities Industrial Equipment manufacturers will have to adjust. These are ‘no regret’ moves that should be anticipated: (1) a more elastic workforce and digitally enabled workplace, (2) differentiated and resilient supply chains by customer segment, (3) resilient and distributed IT infrastructure and systems and (4) digital channels and ecommerce platforms.
Companies will need to scale their leverage of digital across the enterprise and its ecosystem – from proof of concepts (PoC) to scale deployment. But this requires rethinking the portfolio of products with an acceleration of the development of digital services.
Survival strategies for businesses during COVID-19 lockdown
Hit by the COVID-19 slump followed by social distancing and a nationwide lockdown, businesses are experiencing major impacts no matter how established they are and are having to re-look at how they manage and operate their business including re-visitation of their business plan.It has become challenging for most businesses to keep their financial wheels turning during the lockdown period due to less revenue churn and the general uncertainty in the global financial environment.
Unfortunately, the impact on start-ups or small businesses can be way more brutal as they have scarcer cash reserves and a smaller margin for managing sudden slumps. The ripple effect of this shutdown will have a key impact on India’s economy, as all business sectors get affected resulting in low revenue generation due to an eventual halt/slump on the sale of products and/or services. It is expected that India’s growth rate in FY20-21 will be down to 2% from a range of 4.7%–5.2% as was predicted earlier by the rating agency Investment Information and Credit Rating Agency (ICRA) of India Ltd.So, during such testing times, start-up entrepreneurs will have to adapt to a new set of rules and be mindful of the following aspects to alleviate risks and to survive the slowdown caused by the impact of COVID-19.
Tracking expenses against the Revenue Status
During this contagion, it is of utmost importance for businesses to conduct a proper assessment of their fixed and variable expenses as well as the actual revenues. This assessment will give a clear picture of where a company stands financially and help the entrepreneurs in planning ahead in the current disconcerted market. This strategy can be implemented even when the pandemic effect settles.
Checking the feasibility of the business model
Considering the market is changing every week (and for the worse), it is imperative to reconsider the business model and reassess where your business stands as per your assumptions concerning the revenue and cost. This is also a crucial time to track current financial metrics and cash flow. Be mindful of what your runway is. Businesses need to evaluate the impact on new sales, collections, credit cycles and potential bad debts.
Plan policies for next 3 months/ 9 months/ 18 months
Since, it is difficult to gauge how long this epidemic will last, it is important to be prepared for all scenarios. If we consider it as a 3-month problem, an instant halt on variable expenditures like hiring, marketing, travel, etc. can help. However, if the crisis continues for 9 months to a year, entrepreneurs will have to reconfigure their business strategy to reduce the variable expenses, renegotiate fixed expenses (rent, salaries, equipment lease payments, etc.), and focus only on the crucial essentials for survival.While most rental leases have Force Majeure clauses, it is in the interest of both the business operators& landlords to reach a mutually acceptable solution since these are long-term business relationships which need to be fostered even during such difficult circumstances. Rental leases can be renegotiated to be made variable in nature, on a revenue-sharing or profit-sharing basis during the eventual business reopening period, until the stabilised pre COVID-19 levels of performance are achieved, reducing the pressure of fixed costs on business owners. It may be a good idea to revisit sales strategy – selling online versus in-person. Analyze if you need to cut back or scale up on marketing costs. Some serious reconsiderations would be required if the effect of the pandemic continues for 18 months or beyond. Businesses will need to strategize, communicate, and act with compassion. They would require a revision of sales revenue goals and product timelines along with a new operating plan. In that case, entrepreneurs and leaders will have to keep the communication transparent as much as possible with their investors and employees.
Be patient in securing investments
Every business needs capital to run and the question that crosses the mind of every founder/entrepreneur in these difficult times is from where they will get the capital. There are many funds who have enough capital to deploy for the coming years and they may not shy away from it.
However, we might witness a dip in VC/HNI funding in the short run. Investors will be more vigilant and may take longer than usual to make funding decisions after following stringent diligence procedures. But there is nothing to worry about because if we look at the previous economic downfalls, we can notice the market eventually bounce back after the end of an epidemic crisis. In order to extend the runway, businesses can even approach existing investors for additional funding. Since, they are already invested and have their skin in the game; they are more likely to help out during this time.
Small businesses should be on the look-out for borrower-friendly loans rolled out by government authorities. The US govt. has rolled out a US$350bn fund for direct business loans under the Small Business Administration (SBA) as part of its larger US$2trillion COVID-19 Stimulus Package. These are interest & tax-free loans with a deferred repayment period, to adjust to the business owners’ needs. Moreover, businesses already having sizeable loan commitments can request lenders for moratoriums on repayments owing to halted operations& dried-up cashflows.
This is the time when understanding the gravity of the situation and turning it favorable for the business is all that matters to let it sail smoothly in these difficult times. Here are a few tips to stay connected and afloat during the shutdown:
- Communicate transparently with your customers
We are all in this together, so the ideal way is to stay transparent with your consumers about what your business is going through. Customers can empathize with companies facing a crisis, as long as the communication is transparent. Communicate with customers to understand their perception of the product/solution offered by you.
- Maintaining healthy relationship with contracted parties
It is understandable that it might be difficult to pay out vendors/suppliers during the lockdown. However, it would be helpful to give your vendors, suppliers, landlords’ etc. sufficient notice in case there is going to be any delay in payments so that they can also be prepared and there is no bitterness in this already difficult time. It is important for businesses to remember that such business relationships will need to be tapped into during the eventual restart and ramp-up of operations post COVID-19, and jeopardising such valuable relationships is not in their long-term interest. Trying times like these bring an opportunity to galvanise business relationships through mutual understanding & cooperation.
- Managing employees & related optimization
For large companies considering layoffs, the primary option should be to cut the salaries of the higher paid exec/employees to try to retain the people who can least afford to lose their jobs employed. However, when the time comes to make the tough call, do it with compassion look out for government directives, and offer extra compensation as and when required. Such implementation should be carried out only once and not in stages such that it does not affect employee morale.
- Keep Service Team Engaged
The team relies on you so keep them updated about every development. As a promoter, it is your responsibility to keep team members engaged and stay connected with them through available video conferencing tools. It is very important to maintain high spirits within the team and understand the general mood within your remote workforce.
- Communication to stakeholders
Consult with your investors or external experts to plan the right form of communication with stakeholders, most importantly customers and employees. Have an honest conversation on the situation and its impact on your business with your entire leadership team. Any negative message should be delivered with utmost empathy along with transparent reasons.
In these difficult times it is important to stand united and help one another in whatever way we can.Stay safe and stay healthy. Please remember that some of the best initiatives are built in trying times. Like all difficult situations, this too shall pass!
The Concept of Secured Governance into the Banking Industry
Secured Governance offers a strategically initiative by the Government for the Government to enhance the spending’s on basic infrastructure development with a minimal investment by the respective Banks. It is a concept of developing Techno Economic Corridors connecting hubs which will act as growth centre for individual sectors. The very concept of “Secured’’ here implies a secured convergence or knitting with various sectors defining a growth for an economy.”
Advantages of the Proposed participation of Banking Industry in theSecured Governance
- Secured governance initiatives acts as a catalyst for improvising the effective Infrastructure across India as well reducing Non-performing assets (NPAs) in banking sector drastically byunleashing National Growth of business. The Value proposition of the proposed banking HUB under SG initiatives tends to grows many folds.
- Banking HUB under SG─ A cluster been created in a concentrated city or rural area In India, that is considered to be a focal point for the Banking & Financial associated services along with many Integrated Commercial Developments. Synergy, or the potential financial benefit achieved through the combining of banking sector with industries. The Special Purpose Vehicle (SPV) becomes an indirect source of financing for banks by attracting independent equity investors to augment their debt obligations.
- These HUBs are home to all type of public & private industries and enterprises. The financial services coupled with commercial establishments will be provided under the various initiatives of the banking industry to all business enterprises.
- Banks could provide loans to public and private industries for investment in infrastructure development of the proposed Banking HUB.
- The banking industry could also facilitate an exclusive CA, CPA, Legal, Management services such as auditing, bookkeeping, payroll processing, and tax return preparation from these HUB developments, so as to have the Integrated HUB development on par with International Integrated Commercial centers.
- The proposed Banking HUB development initiatives across India shall be running in concurrence with the Govt. of India’s Global Smart City Initiatives across 120 Cites in India.
- The proposed Banking HUB would also setup to facilitate OBU (offshore Banking unit) Free trade Zone under its International Financial Center (as Special Economic Zone in India) offers loans in the Multi currencies as well accept deposits from foreign banks and other OBUs.
- The proposed Banking HUB would eventually facilitate the best of REIT (real estate Investment trust) growth prospects in India by which the real estate in India would grow multi fold with greater International Investments attraction.
- The proposed Banking HUB initiatives could facilitate and improvise the SME & MSME sectors in India due to its various cluster developments with a lesser burden on infrastructure Investment Cost by the Industry owners across India.
India needs to be becoming a major international HUB for the Global Banking industry. The goal of the Secured Governance strategy is to develop many mini HUBs in semi urban cities and nano HUBs in rural areas. Besides it could provide a route into financial professions and develops skills that are useful in a range of banking & insurance sectors. These HUBs could be a financial and business centre established by non-government organisations of India to attract international financial services and multinational corporations to grow and develop the market for financial services in the region. The secured governance HUB development aims to help all registered small, medium and large scale firm’s growth and generate new and sustainable revenue streams. It provides access to local and regional investment opportunities in large scale.
These HUBs development that yield net present value in terms of demonstrable user fees or a direct increase in additional revenues to the government and policy makers can enhance the efficiency and productivity with used to create resilient economic prosperity. It could enhance access to direct and indirect job opportunities and services for both skilled levels.
The Policy Times presents a thought provoking article on Strategies for Revival and survival of Business and Industries during and after Covid 19 by 2 young and enterprising Authors : Nisarg Gagrani a IITian and Business Analyst and Aditya Sekhar Research Scholar on Smart Cities, Entrepreneurship and Security. The article gives deep inroads in understanding the Covid 19 impact and innovative solutions for the Government, Industries with all Business activities to get back and exceed for a meaningful all round growth.
By Nisarg Bhushan Gagrani
B.Tech IIT, Financial Analyst
By Mr. Aditya Sekhar
Research Scholar in Smart Cities & Electronic Security System