While a return to “business as usual” may still take some time, all organizations will ultimately need to either revisit or develop new plans for how they approach their operations in the post COVID-19 economy.
Like all challenges, there are risks and opportunities in terms of how companies are going to successfully navigate this new reality as the global economy attempts to get past the coronavirus pandemic. Whether your company has mandated employees to work remotely or you need to completely re-work your supply chain due to government-ordered closures, all organizations need to be prepared to safeguard their operations from future large-scale disruptions.
There are a number of important considerations that have come to the forefront during these early stages of the COVID-19 pandemic – chief among them the need for supply chain risk mitigation and diversification, infrastructure disruption planning, the adoption of critical solutions and the growing need for a comprehensive Business Continuity Plan.
Any business, but particularly those with an international footprint, will be best poised for success in the next phase of this interconnected, globalized economy by applying these lessons to their operations moving forward.
1. The importance and value of a comprehensive Business Continuity Plan
Developing a detailed Business Continuity Plan (BCP) that can guide your organization through a crisis like COVID-19 is essential for success. However, many organizations are likely to have found that their BCPs stopped short of anticipating a widespread and unprecedented global pandemic.
Even during the best of times, customers, partners and stakeholders will have little patience for any disruptions to service. So when that disruption impacts everyone at the same time, as is the case with COVID-19, being able to get quickly back on track is critical.
One of the most important aspects of a BCP is ensuring employee safety so that workers can do their jobs remotely while following public health guidelines to self-isolate. This includes providing them the tools they need to work effectively from home, whether that’s for a matter of weeks or months.
A comprehensive BCP should also look beyond the operational, and at the fundamentals of the business itself. For instance, the post-COVID economy may look much different than what was experienced before early 2020. That increases the importance of having cash on hand, as well as visibility of that cash. Partnering with a bank that has the technologies necessary to enable that visibility can help your business rapidly adapt to shifting consumer behaviours in the post-COVID economy.
2. The value of adopting critical solutions
While we recognize many organizations are operating under guidance from their BCPs, part of this process is being nimble enough to adopt critical solutions as quickly and seamlessly as possible to limit the impact on day-to-day operations.
At HSBC, we’ve been on a digital transformation journey that has allowed us to speedily adapt to a seamless remote working environment1 . Many processes that had once required paper and physical proximity are now being done online, ensuring our ability to deliver services for our clients in all circumstances.
One of the core functions of HSBCnet, our online platform for managing accounts, is allowing our clients to manage their foreign exchange exposure and the costs of paying international and domestic suppliers all from one place.
3. The need to uncover unseen dependencies and risks in the supply chain
An organization’s supply chain is often their lifeline. Without access to critical supplies, companies can shut down quickly. COVID-19 has shown that mapping your company’s first- and second-level supply chains, and identifying potential weak links, is critical. If a key supplier has heightened risk in their own supply chain, it can have a drastic impact on your own.
Being able to draw a clear map of all the supply lines that feed your business will allow you to create necessary contingency plans as part of a BCP. That means you can continue to function if there is a disruption that directly or indirectly impacts your supply chain.
4. The need for supply chain diversification
We’ve all heard the phrase about not putting all your eggs in one basket. The same applies to supply chains. Companies must be strategic to ensure any disruption in one region can be offset by a supplier in another. Having too much reliance on one market or region could have severe financial consequences due to disruptions of the type we’re experiencing today.
A good example of supply chain diversification comes under the new USMCA North American trade deal that is set to replace NAFTA. One of the key changes is the country-of-origin rules, particularly surrounding the production of auto parts2. For passenger vehicles and light trucks, there will be an increase in the amount of production across the continent. Currently, only 66% of parts need to come from either Canada, the United States or Mexico. But by 2023, this will rise to a required 75%. Because of this, expect to see a shift in auto parts manufacturing investment to North America from Asia.
Diversifying the supply chain can provide not only added access to supplies in bad times, but increased operational benefits in good times. With a range of measures to support the diversification of supply networks, such as HSBC’s ability to extend working capital cycles and mitigate delivery risks when trading on open account terms is not possible (which is often the case with new international suppliers), organizations have ample support in sourcing and securing agreements that can help to limit their exposure.
5. The importance of anticipating potential impacts on major infrastructure
Whether it’s shipping by land, rail, sea or air, virtually all major ports and logistics and distribution centres have been affected by COVID-19. Before the virus outbreak, we saw here in Canada how the closure of the country’s main rail networks posed trade problems for companies across North America and around the world. Similarly to mapping out your supply chain, having backup plans to reroute supplies must be a priority moving forward.
COVID-19 has also caused major delays in federally funded infrastructure projects across Canada. This delay will have a knock-on effect for municipalities for years down the road, and can cause additional disruption to businesses.
Recognizing the potential for uncertainty and disruption to trade routes and processes, HSBC offers our clients shipping guarantees that can provide peace of mind. In the event goods arrive at port before the required documentation, we can issue these shipping guarantees in many countries to ensure goods are released promptly across the supply chain, limiting further disruption.
These are unprecedented times for every business across Canada, but amid today’s uncertainty, there are already lessons that organizations can heed and apply to their operations to help them return not just to “business-as-usual,” but stronger than before. While these five aforementioned considerations offer practical and integral guidance for companies navigating the global pandemic, there are sure to be more lessons to come as we continue to travel this uncharted territory.
Contact HSBC to find out how our products and services can help your business be proactive when it comes to adapting to change and planning for the future.
This article was developed based on content shared during HSBC Bank USA, N.A.’s April 1 webinar, COVID-19: Trade Disrupted.