Companies around the world are making significant operational changes to become more resilient, after many found their contingency plans were not robust enough to cope with the novel coronavirus (COVID-19) pandemic.
The new Navigator report, “Building Back Better”, from HSBC Commercial Banking, shows that many firms neglected contingency planning in key operational areas such as technology, finance and sustainability prior to the crisis.
Drawing from a survey of over 2,600 companies in 14 countries and territories, the report found that 47% say they could have done more to prepare for the challenges of recent months.
For some, the shift to remote working exposed weaknesses in their continuity preparations. Fewer than three in five (57%) saying they prioritised investment in technology to improve operational resilience over the last two years. Maintaining cash flow was also a challenge, with only 44% having prioritised steps to strengthen their financial position.
The crisis has forced many businesses to adapt, and 63% have modified their operations already. Nearly half (44%) will change their products and services further, with 33% saying they will diversify, and 17% saying they will reduce their offering to become more specialised.
Over the longer term, business plans now call for more agile staffing and office arrangements, together with a greater focus on technology and sustainability. Key findings include:
- Diminishing real estate occupation: 38% are rethinking their physical footprint of office and production locations, with 29% expecting to reduce their office space.
- More flexible working arrangements: Over two thirds (69%) believe flexible working will become standard practice, as a third (34%) expect to cut their air travel.
- Technology will be critical: Six in 10 (61%) think virtual collaboration will become standard practice over the next two years, with 57% saying that virtual meetings – internal and external – are here to stay, even after lockdown measures are cancelled.
- Sustainability to power the recovery: More than nine in 10 (91%) aim to ‘build back better’ by re-engineering their businesses to be more sustainable. Nearly a third (27%) intend to make their supply chains more environmentally sustainable over the next two years.
Barry O’Byrne, CEO of HSBC Global Commercial Banking, said, “Businesses aren’t waiting to be told how to ‘build back better’, they’re starting now. The huge economic damage and human tragedy caused by COVID-19 have accelerated transformation plans and have brought relationship inter-dependencies to the forefront of leaders’ thinking.”
O’Byrne added, “Since history shows that some businesses will fail coming out of a downturn, it’s vital that leaders push ahead with efforts to make their enterprises more agile and more resilient.”
The HSBC report points to the importance of collaboration between businesses during the crisis, which has been key to survival for many:
- Over the last six months, almost all (93%) firms have supported the businesses they work with, with larger businesses in particular supporting smaller partners;
- Almost six in ten (58%) have shared information (25%), expertise (24%) or premises (13%) and around a quarter (26%) have offered advice;
- 40% have collaborated with other businesses to get their products and services to customers.
However, while collaboration has helped sustain commerce during the crisis, businesses see a number of challenges ahead as they seek to build resilience over the next six months.
Weaknesses in financial and workforce structures were the top barriers to change identified by two thirds of businesses, both by 62%). Just under a third (31%) struggled to maintain sufficient cash flow. Additionally, a third of businesses (33%) see poor employee morale as a barrier to building resilience over the near term.
Commenting on the report, Todd Wilcox, Deputy Chairperson and CEO of HSBC Egypt, said, “Our customers in Egypt tell us that investing in technology, digitisation, and skills training are fundamental to their plans for growth and operational efficiency post COVID-19. We are committed to supporting our customers navigate the emerging trends that are shaping the business environment as they strive to raise their competitiveness and succeed at home and abroad.”
The report also identifies a series of changes businesses expect to make to their supply chains in the coming two years, in a bid to increase transparency and security.
- Three in ten (29%) want to diversify their supply chain and to work with more partners, with a quarter (26%) wanting to work with businesses in markets that are more stable;
- Conversely, a third plan to restrict or shorten their supply chains to reduce risk;
- Over two-thirds (67%) plan to increase their supply chain security by identifying and securing critical suppliers, and three in ten (31%) plan to review their suppliers’ ability to withstand future shocks.