What does Covid-2019 taught us in strategic planning?
The outbreak of Covid-2019 is certainly unprecedented. Whether it be large or small to medium-sized enterprises it has affected them severely. The ongoing virus is of a new kind but this doesn’t mean this is first pandemic outbreak or first economic downturn. In just two decades there has been four outbreak SARS in 2002, H1N1 (Swine Flu) in 2009-10, Ebola in 2014-16 and ongoing Covid-2019, in addition financial crisis of 2007/08 too. Past cannot accurately determined the future but looking back to last two decades it can be said that organizational ecosystem doesn’t always go the way we planned, there can be many unprecedented events and we should be future ready if we don’t want to be victim of it.
Looking at the situation of the companies we have to admit that we were not ready for it and we suffered because we did not have plan for unexpected events. It cannot be said that the impact of such events can be eliminated as many factors are out of business control, but with some ‘principles of strategic management’ severity of the impact can be reduce to acceptable level.
Having Clause related to unpredicted events in SLA
Many organization are in dilemma particularly if they are in middle of contract or they suffered loss because of non-performance from their contract providers. They have suffered loss whilst other party may not be willing to insure the loss as outbreak is out of their control. So organization should have clause in Service Level Activity (SLA) that specify what action will be taken in times of events like Covid-2019, and who will be bear the loss if any which will reduce uncertainties surrounding contract.
Every organization whether they are operating in dynamic or static environment should have scenario planning. Scenario planning refers to visualize the future based on optimistic, pessimistic and expected scenario, it involves taking account of internal and external factors that impact the outcome of the organization. It can be fires, cyber-attacks, floods, infectious disease, power outages etc. Scenario which will have high impact should be prioritized and in every scenario organization should decide what action will it take? How will it handle the situation? What resources will it require and how will it be funded? This will enable the organization to better handle the threat posed by such events compare to, if it would not have ready for it.
This is closely related to scenario planning, contingency plan involves having a backup plan if something goes wrong happens. Contingency plan can save the organization from situation like machine breakdown, best employee quitting suddenly, loss of main raw material suppliers, earthquake, system crash, unexpected expenditure etc. In such situation organization should know what action it will take if planned strategy fails. Having a contingency plan save the organization from business disruption, bankruptcy or in extreme from the business liquidation. For example, an organization is investing in a high value project with high return but it has high risk and uncertainties with cash flows. In such cases company can have cash flows problem if project do not yield expected return. To mitigate the risk of being in financial difficulties the organization can arrange finance or revolving credit facilities with its bank which will save it if the worst scenario is to happen.
Being too committed to business transaction will cause organization to suffer as they are obliged to fulfill the terms of the contract despite being in cash flows difficulties. Decisions like delaying expenses on voluntary transactions, sourcing materials from different suppliers i.e. ‘not having all your eggs in one basket’ should be consider to stay flexible with cash flows and sources of raw materials. Technological flexibility such as working from home, particularly in current situation organization that has ability to work from home has suffered less compare to its counterpart.
SWOT analysis refers to analysis of Strength, Weakness, Opportunity and Threats of the organization in internal and external environment. Organization should find the answer of questions like what will happen if key employees leave the organization suddenly, how organization can minimize the disruption caused by the changes in business model, what are the strength of the organization like cash flows, intellectual property which are internal to organization and questions related to external factors which are categorized in PESTEL which refers to Political, Economic, Social, Technological, Ecological and Legal, may include what will happened if opposition party wins the next election?, what will happen if new law relating to environment or employment come into implementation?, what happens if competitor come up with innovative technology? Having the answers for such questions allow the organization to be better placed at taking appropriate strategy to combat any adverse situation while grabbing the opportunity to take competitive advantages over competitor.
-Yubraj Ghimire (Audit Staff at K.P.N. & Associates, Inventory Auditor at BAW, Agni Group, Student- Strategic level – The CIMA, UK)