There are four critical steps that Nigerian companies could take to ensure business continuity while the government must prioritise five things amid the ongoing coronavirus-induced economic meltdown, according to global consulting firm, McKinsey & Company.
McKinsey’s recommendations, published this week, are based on the firm’s discussions with risk and health professionals in more than 200 companies across various sectors.
For companies, the steps revolve around the creation of nerve centres that can coordinate their responses on four key dimensions – which are to protect workforces, stabilise supply chains, engage customers and street-test financials.
In protecting workforces, the focus is to guarantee continuation of employment in a safe working environment; adjust to shift or remote work with the required tools; and preserve the employees’ health through safe working facilities and strict isolation of suspected cases.
To stabilise supply chains, companies need to guarantee business continuity through transparent supplier engagement, demand assessment and adjustments of production and operations.
Meanwhile, in engaging customers, companies can hone their crisis communication and identify changes in key policies, ranging from guidelines to guarantee social distancing, to waivers of cancellation and rebooking fees.
Finally, stress-testing financials entails developing and assessing relevant epidemiological and economic impact scenarios to address and plan for working capital requirements.
They will also need to identify areas for cost containment across the business.
Beyond their own businesses, private-sector firms also have a critical role to play in supporting governments to tackle the pandemic and its economic fallout, according to Mckinsey. This is especially true of large business and business associations, which will need to work hand-in-hand with governments to manage and mitigate the crisis.
Across the continent, there are examples of business stepping up. One example is the Nigerian Private Sector Coalition Against COVID-19, formed by the Central Bank of Nigeria (CBN) in partnership with private-sector and philanthropic organisations including the Aliko Dangote Foundation and Access Bank, the country’s biggest bank. The Coalition is mobilising private-sector resources to support government’s response to the crisis, and raising public awareness. The CBN said on Wednesday that contributions to the relief fund it set up had reached N15 billion, a sign that the private sector is indeed committed to supporting the government in these trying times.
South Africa’s largest business association, Business Unity South Africa, is also coordinating large-scale private-sector involvement in addressing both the health and economic aspects of the crisis. Individual companies across sectors also have a critical role to play. Examples include beverage producers switching production lines to hand sanitiser; apparel manufacturers producing face masks and hospital robes; telecommunication companies adjusting their data offering; and banks adjusting tariffs. Many companies have also made monetary contributions to solidarity funds for the most vulnerable. According to McKinsey, more such commitment will be needed.
For government, McKinsey outlined five priorities in managing the impact of the virus on economic activity.
First is to set up national nerve centres.
Governments, with the close involvement of the private sector and other key stakeholders, need to take rapid action to set up or build out national nerve centres to coordinate and accelerate their response to the crisis. These nerve centres should bring together crucial leadership skills, organisational capabilities, and digital tools – giving leaders the best chance of getting ahead of events rather than reacting to them.
The second recommendation for governments is to anticipate and manage the health crisis.
Governments will need to take even stronger measures to delay and reduce the peak of the epidemic, including more intensive social distancing through mobility restrictions and lockdowns as well as larger-scale surveillance to test and isolate identified cases. In parallel, governments must immediately prepare for a potentially rapid surge of cases, which will demand significant numbers of testing facilities, hospital beds, ventilators and other medical equipment, as well as additional health professionals.
Given the limited existing resources in most African healthcare systems, bold and locally tailored measures will be required to create surge capacity and prevent mortality among the most vulnerable population.
Third is to secure food supply and essential services.
Governments need to secure food supply chains, particularly the supply of priority products, and ensure the appropriate pricing of these products. They will also need to ensure that access to essential services such as telecoms and utilities is maintained.
Fourth priority for government is to ensure support for most vulnerable populations.
This includes taking measures to protect jobs and to support affected communities, particularly the most vulnerable populations, through social safety-net mechanisms, including cash transfers.
Finally, governments should anticipate and manage the impact on the economy.
Governments need to anticipate what the impact on their economy is likely to be through scenario analysis and offer a short-term stimulus package to maintain financial stability and help businesses survive the crisis, particularly those in strategic industries. Given the expected loss of tax revenue, governments will also need to identify opportunities to urgently reduce non-essential spending. Additionally, governments will need to anticipate and prepare for what the post-crisis “next normal” will look like.
While most African countries have already announced specific initiatives across all five areas, they will need to build on these early efforts with great boldness and commitment to collaboration, McKinsey said.
