COVID-19 is a giant opportunity for micro, small and medium enterprises (MSMEs). Those who can survive in the immediate term and adapt are going to flourish, the rest are going to perish. But, even the most difficult situations can leave us with lessons, and this one is no different.

Radha TMT, a leading manufacturer of the eponymous brand of 550 TMT bars, MS flats, MS squares and plain rounds, has resumed operations post-lockdown with detailed standard operating procedures (SOPs) in place for COVID-19 management. Each element of the SOP integrates staff safety at the core. And, includes starting out from home to returning there safely.

In the face of a global crisis, well-prepared businesses can help protect their workers and their bottomlines.

The COVID-19 outbreak is exceptional by any standards. It comes with extreme scope and levels of uncertainty. It’s a situation that is well beyond the experience of most business leaders.

Business leaders see managing a crisis as an inevitable part of their role. According to PwC’s most recent Global Crisis Survey, nearly seven in 10 leaders have experienced at least one corporate crisis in the last five years in their companies, and the average number of crises experienced in these firms is greater than three. COVID-19 will test many business leaders to the limit.

The key to managing any crisis is preparation. Here are seven actions that you as a leader can take to ensure your organisation is in the best shape possible to withstand what’s ahead.

 Review Workforce Locations And Travel

The priority is to establish exactly where your staffs are and how many workers are in affected or vulnerable territories. Do any need to be repatriated? Or have they asked to work from home? Clear policies should be in place to address absence due to sickness or the procedure for reporting illness, and travel restrictions.

Secondly, be prepared to continuously refresh and update these policies as circumstances evolve. We at Radha Smelters formulated a strong standard operating procedure on resumption of the company’s operations during the COVID-19 outbreak to serve as a guide on the recommended health safety precautions and measures that should be adopted to mitigate or minimise the impact of COVID-19 on employees and visitors within the premises of Radha Smelters. I urge the companies to formulate SOPs and policies to fully comply with the Ministry of Health’s (MoH’s) guidelines and work closely with MoH and health officers to manage any circumstances of infection.

     Revisit Your Crisis And Continuity Plans

Every well-run business has a crisis or continuity plan, and many will have a specific pandemic plan. But nothing tests theory quite like reality. Generic plans need to be adapted and tailored to cope with the specific challenges of an epidemic. For example, if a large number of your employees have to work remotely for a long time, we have to ensure there is enough technology bandwidth to cope with the situation at hand. Also, will your operations be impacted if casual employees are unable to come to work? How will communication with employees be managed?

During any crisis, the biggest worry for management is gathering accurate information quickly. How will data flow during this crisis?

In this environment, CEOs will have to take tough decisions. The actions they take now must be tactical, but they should also align with a company’s purpose.

In this environment, CEOs will have to take tough decisions. The actions they take now must be tactical, but they should also align with a company’s purpose.

Many businesses spent the first several weeks of the crisis reviewing continuity plans, establishing crisis command centres, and ensuring the safety and security of their workers.

We thus would expect these businesses to be entering the “stabilise” wave of a three-wave crisis model (see infographic,  The three waves of a COVID-19 crisis response), in which companies are learning to operate in “the new normal” and yet are continuing to fight immediate fires.

Much of the focus in the “stabilise” wave is on implementing tactical steps to preserve business value, including liquidity analysis, operational scenario planning and an assessment of the various government stimulus programmes.

     Evaluate Supply Chain

Many steel makers in India have scaled down their production by up to 50% amid the nationwide lockdown in the wake of the pandemic. Several ratings agencies have been pointing out that the spread of the coronavirus has adversely affected steel markets across the world, including in India, in terms of prices and profit margins. In the process, these two factors have affected the raw material supply chain and demand, with the latter leading to a build-up of inventories.

A clear understanding of your supply chain will help to expose any potential vulnerabilities – this means beginning with the most critical inputs and looking well beyond the first- and second-tier suppliers, right down to the raw materials, if possible. For example, if you need iron ore from a place that becomes isolated, is there a secondary supply source? Contingency plans can run into difficulty quickly if the virus spreads.

     Identify Potential Points Of Failure

The COVID-19 outbreak in India followed by the lockdown has impacted the steel industry severely. It has created demand destruction, affected the output of steel players as well as the supply chain.
Steel mills stare at an uncertain future. The domestic steel prices outlook is bleak amid the coronavirus pandemic disruption. The impact on performance will not only be led by demand loss and realisations, but also put pressure on margins. Profit margins are expected to fall, led by higher input prices and weaker steel pricing.

Bottlenecks in logistics, like higher handling charges and stranded load, could pose problems for a rapid scale-up in the supply chain after the lockdown ends. Liquidity risk would also need urgent attention as payments begin freezing in the corporate and SME supply chains. Attention will need to be given to the liquidity requirement of banks and non-banking financial institutions with stretched liquidity-coverage ratios to ensure depositor confidence.

Given the magnitude of the potential unemployment scenario that will likely unfold, along with business failures and financial-system risks, a comprehensive package of fiscal and monetary interventions announced by the government are welcome. Through the revised measures, the government has instilled a lot of faith in India’s backbone – the MSME ecosystem. Particularly, INR 3 lakh crore collateral-free loans, INR 50,000-crore equity infusion, disallowing global tenders and the push towards government procurement tendering will help businesses like us work further to address the upcoming needs of our country’s future.

We urge a clutch of fiscal incentives like tax cuts and exemptions on infrastructure spending, raising depreciation limits and moratorium on interest payment, among other steps. We also suggest a scale-up in government infrastructure projects like the “national infrastructure pipeline” and speedy clearance of government’s dues to contractors to improve working capital flows.

We also urge a reduction of the consumption tax on high steel consuming sectors like auto and construction. Other incentives include reducing interest rates and increasing debt rollovers and GST credit rebate for salaries paid during the lockdown and ESIC/EPF payment relaxation for secondary units, as steel is a manpower-intensive industry.

There is also a need to expedite movement of workforce to steel manufacturing hubs through special transportation arrangements.

The government should also consider allowing deferred payment of mining dues, including royalty without penal interest. It also recommended an extension of time limit to comply with new mining leases and a six-month moratorium on payment of registration charges and upfront dues for newly auctioned mines.

We recommend the provision of additional ad-hoc working capital to the extent of 25% of the currently sanctioned working capital limits without any collateral or margin money. The sector should be granted infrastructure status so that it can have access to finance at competitive rates from various markets and other sources. Who are the teams and individuals on whom critical plant operations or services depend? Are there workers with the right skills who could step into critical roles if needed?  Can steps be taken to reduce the level of human interaction, such as staggered shifts?

     Get Communication Right

Although we’ve seen employers work hard to keep their workforce informed, disinformation and confusion have spread along with the virus. Your employees (and wider stakeholders) will be looking for reassurance from you that they are being protected and that the business is prepared. Leadership should be a source of truth. Consistency and accuracy of messaging are the key. Your workforce will need to know that their welfare is of paramount interest.

     Use Scenario Analysis

COVID-19 holds the potential to impact every part of a business for months, thus scenario planning is a critical tool to test preparedness. What are the best- and worst-case scenarios, and is the business equipped to cope with both? What could be the impact in the longer term, for example, on working capital? Ask your finance team to highlight critical sensitivities.

     Don’t Lose Sight Of Other Risks

COVID-19 isn’t the only threat on the horizon – and often organisations are at their most vulnerable when dealing with a crisis that dominates their attention. The many other risks that your business faces aren’t diminished by an epidemic. We don’t know what the next few weeks and months could bring.

Sunil Saraf is the Chairman of Hyderabad-based Radha Smelters Pvt Ltd

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