Impact on Economic Sustainability

As the number of COVID-19 cases continues to climb across the globe, businesses of all sizes and across all industries are feeling a significant impact.

Cancellations and travel restrictions are having an impact on the Cayman Islands industry. Hospitality businesses have seen a sharp decline in their customer numbers. Supply chain disruption is pervasive and only getting more difficult to navigate.

Businesses may be faced with tough decisions to alter operations temporarily, modify business hours, or operate below capacity due to the impact on their workforce, customers or suppliers. We recommend you consider contingency planning and “what if” scenarios to establish back-up plans.

These issues may lead to falling revenue, reduced financial liquidity and the going concerns of key business partners, negatively impacting companies' sustainability.

RISK RESPONSE
It is difficult to assess how long the novel coronavirus will cause significant disruption. In the meantime, cash is king: The critical element in any time of uncertainty is to ensure that the company’s liquidity position can be maintained and to buy time for the company to recover.  

We recommend that company management establish a task force to monitor the level of impact on the business and periodically report to the board on the status of the key performance indicators for critical business units. Companies may also consider the following actions, among others:

• Conduct a thorough risk assessment of business operations, taking a holistic approach across the globe rather than focusing on certain regions, to assess the level of possible interruption and formulate measures to mitigate potential impacts.
• Perform financial scenario, sensitivity and ratio analysis, examining the overall threat to the organization should sales and/or production decrease at various percentage rates. Determine what actions may need to be taken at certain stages to reduce further losses.
• Consider alternative work arrangements such as relocation (working from home or other locations), reassignment of workflow (altering shifts), or reallocation of production.
• Review the pace of expenditure in relation to the company’s expansion plans and existing development projects (if any) and slow down the cash burn rate.
• Re-prioritize the allocation of resources to unaffected business lines.
• Assess any impact relative to customer behaviours or sales over the past month(s) to determine if adjustments should be made to the level of staff needed or business hours.
• Explore and identify business transformation opportunities and models to reduce over-reliance on existing business segments.
• Identify measures for controlling budgets and increasing cost savings, such as assessing the possibility of outsourcing or reduction of non-critical business activities.
• Explore opportunities for collaboration with new strategic business partners for new market development and to meet customers’ needs.

Identify alternative solutions if forced to suspend operations at the business premises.