Developing a virus recovery plan for your company
The impact of COVID-19 on small businesses is expected to be severe. Here’s a potential recovery plan for SMEs that have felt the negative impact of the coronavirus’s infection of the Jordanian economy.
Economists agree that the longer the current lockdown lasts, the harder it will be for businesses, particularly SMEs, not only to recover but even perhaps to survive. The Jordanian government has recognized the truth of this and has implemented policy measures designed to support businesses during and after the coronavirus shutdown and the countrywide social distancing measures.
The Central Bank of Jordan (CBJ) decreased its main policy rate from 4% to 3.5% on March 4, and again to 2.5% on March 16, a total reduction of 150 basis points. The moves followed similar actions by central banks around the world, including the US Federal Reserve, to offset the economic effects of travel restrictions, business closures and supply disruptions.
CBJ also reduced banks’ cash reserve requirement from 7% to 5% of the monthly average of daily customer deposit balances. This released additional liquidity of around 550 million JOD, which is expected to limit any liquidity stress and allow banks to “deploy funds to affected businesses and households”, according to rating agency Moody’s.
CBJ also called on banks to reschedule loans and offer appropriate “repayment holidays” with no additional charge to their clients.
Recovery committee
In a major move aimed at an effective recovery from the effects of the coronavirus lockdown, the Lower House of Parliament, in cooperation with the Jordan Economic Forum, has developed a joint policy paper on strengthening the capacities of economic sectors to respond to the implications of COVID-19. Recommendations of the policy paper, which was approved by the Lower House on April 6, 2020, include:
● Formation of a national team representing the public and private sectors, civil society organizations and universities to establish a plan to stimulate economic growth.
● Resuming production and creating a plan to stimulate and support the Jordanian economy post-coronavirus based on five axes: the private sector; the social safety net and labor; measures for vital and highly affected sectors; the gradual return to economic activity; and the opportunities derived from the coronavirus crisis.
● Strengthening the private sector through postponement, scheduling and structuring of measures already in place at Jordanian banks to alleviate the effects of the crisis on companies and individuals.
● Finding a fair legal solution for insured individuals who paid the fees but did not benefit from their insurance as a result of the Defense Law, and an extended tax filing period.
● Continuing to reduce the differences in fuel prices category to zero until the end of 2020.
● Designing an employee retention program for companies in the sectors most affected by the coronavirus crisis, tourism and transportation, provided that half of the employees’ salaries be paid by the employers and the other half by the Social Security Corporation’s (SSC) unemployment insurance.
● Allocating 50 million JOD for facilitated loans in specific sectors for businesses with social security that have paid into the SSC for more than three years. Loans are recommended to be set at a value between 1,500 JOD and 5,000 JOD.
● Increasing support for the Jordan Tourism Board to enable it to increase its campaigns around the world to revitalize tourism in Jordan.
● Reducing electricity prices for the tourism sector, including hotels, by 20%.
● Exempting tourism facilities from 50% of licensing fees during 2020.
SMEs can take a leaf out of the Jordanian government’s playbook and put in place a team that focuses on post-coronavirus recovery, said a business continuity consultant.
“The team should be as broad-based as possible, covering every aspect of the business, from finances to operations to business development,” he said, preferring to remain unnamed. “A good idea would be to include on this committee an observer from your banking provider as well as an external consultant to advise.”
Some of the aspects that the Recovery Committee could consider in depth are:
Financial health
Is your company eligible for any of the government and banking measures announced so far to ease the impact of the COVID-19 lockdown? How can these benefits be acquired? How will the company distribute the benefits among the various departments, keeping in mind immediate as well as future needs?
These are the first questions to be considered by the committee and the decisions implemented immediately.
Accounts receivable need special attention. Which of the company’s clients are still operational and can release payments? Follow those up aggressively. Create a mutually beneficial payment plan for clients who are considered “non-essential” by the government and are under the stress of lockdown.
“Remember, in such a crisis, cash flow is king,” said the consultant. “Since revenues will be slow or non-existent, it is critical to preserve and effectively deploy the cash that your company already has or can acquire through the financial easing measures announced. Deploy the cash keeping recovery in mind.”
Business health
Just as accounts receivable are crucial for cash flow, accounts payable are important for business continuity. Develop payment plans in consultation with creditors, again keeping future recovery in mind.
Also consider whether it is possible to diversify the company’s business into “essential” sectors in the short term and any other sectors in the long term? Diversification is one of the golden keys to unlock business continuity. The lockdown is a good time to make concrete plans that can be put into implementation when the lockdown is lifted.
Diversification also includes moving into products and services that you may not be providing today but which have market potential and require only an incremental increase in resources.
Workforce health
A company is only as successful as the quality of its people.
Some of the key questions that your company’s Recovery Committee should answer are: How can we keep staff healthy in the duration of the coronavirus crisis? How can we ensure that our staff have enough financial resources to survive the lockdown?
Some resources being made available by the Jordanian government to ease the pressure on individuals include:
● The Lower House policy paper has called for transferring 100 JOD for a period of 2 months to people working in the informal economy who support families and do not receive National Aid Fund assistance or have SSC subscriptions. This scheme is expected to benefit 100,000 people at an estimated cost of 20 million JOD.
● The paper also proposes increasing the 146 million JOD approved within the budget for the National Aid Fund by 50% to reach 219 million JOD. As of now, up to 80,000 families are benefitting, and with the 50% increase, 120,000 families are expected to benefit.
At the same time, your company’s Recovery Committee could work closely with the HR team to develop a layered list of workforce members graded by how essential they are to operations during the lockdown as well as during the recovery period.
Based on the grading, the company could offer some staff full pay but reduced benefits, some of them reduced pay and benefits, others a token salary while they remain benched but available, and yet others a severance package.
Structured communications
Through the entire period of the lockdown and the early days of recovery, perhaps the most important thing that a small business can put in place is a structured communications plan. The Recovery Committee can use the resources of the company’s communications team and partners to develop such a plan by identifying:
● All the stakeholders that need to be informed of the company’s plans and progress in implementing them.
● The type of information that will be disseminated to each category of stakeholder.
● The medium via which each category of stakeholder should receive the communication.
● The channels through which the information will be broadcast.
● The periodicity of communication for each stakeholder category.
● The internal and external sources of the structured information.
● The core team that will manage the sources and the dissemination.
“An effective level of transparency with stakeholders — including categories such as vendors, clients, customers, staff, government and media — is a powerful way to get on your side the people critical to your success,” said the consultant.
