Humankind is facing an unprecedented crisis, with the COVID-19 virus leading to widespread social and economic lockdown, a halt in international mobility and the disruption of global supply chains. It made some known global risks appear as less of an immediate concern and at the same time introduced a new set of uncertainties. When looking at global experts’ perspectives, one must analyse how different factors should come into play when crafting corporate strategies to mitigate key risks in the months ahead. Here are six steps that global companies and policymakers should follow to build resilience in their planning, decision-making and operation processes.
According to Financial Times’ economics commentator Martin Wolf, it is paramount to analyse some macroeconomic variables to understand what comes next. Two things are relatively certain: First, that the next 24-36 months will be distinguished by large levels of debt both in the public and in the private sector, and to the prolonged period of inactivity may trigger several defaults in the private sector. Second, compared to the austerity policies imposed after the 2008 subprime crisis, things will be different—we are in the proximity of even lower interest rates and higher taxes to boost the economic recovery.
Beyond these almost certain predictions, it is important to consider what will probably happen that is not related to the world pre crisis.
The forced change in technology that turned everybody into experienced smart workers will not disappear with the virus, as it accelerated a process that was already on the way at a much slower pace. This key transition will benefit some and destroy many others that will not be able to keep up with the change. On the one hand, companies like Facebook are planning to shift entirely to work-from-home for at least half of their workforce, given that they were well ahead in the learning curve of digitalisation much before the crisis. On the other hand, many others, especially SMEs, will be stumbling and struggling in a forced digitalisation due to the lack of basic technological resources. One should support their investment in tech infrastructure and capabilities, otherwise they may lag behind or be pushed out of the economy forever.
Change goes hand in hand with reconstruction after every crisis. This time, reconstruction could be a way to change for the better. With the support that governments are providing to large businesses and small-and-medium sized enterprises, it is important for everybody to make a conscious change in mentality and set new priorities to set a new pace for our world. Sustainability should be a key component of economic recovery and social revolution, which we could kick off with well-thought stimulus packages. Investing in greener economies—whether through cleaner energy, greening growing cities, or creating more environmentally sustainable transport and mobility systems—will be a necessary part of building a better future.
Many scholars maintain that the current emergency has been a demonstration of the fragility of hyper-globalisation and global supply chains, with highly interconnected economies far more exposed to global shocks. In the future, supply chains are more likely to restart at the local level, even if at higher costs, enhancing the protectionist and nationalist policies that countries like the US were already implementing before the crisis. From an operational perspective, many companies may choose to stop maximising for efficiency and economies of scale, and may prefer to increase process redundancies (higher stocks) and diversification in warehouses and supplier networks to mitigate the risks of ever-increasing shocks.
The ultimate question for international policymakers is whether reconstruction should be shaped at the national or global level. It is true that globalisation has been a driving force in the spread of the COVID-19 virus. Yet, the responsibility for an immediate response to the crisis—such as buying medicines and personal protective equipment—has mostly fallen on domestic institutions, while global alliances have only provide some technical assistance.
Nonetheless, in the long term, a “global plan” is needed for two key reasons. First, global coordination over the developments of a vaccine would significantly speed up the process and provide more equitable distribution. Second, history has taught us that a more interconnected world is also a safer and more prosperous one, under the right conditions of solidarity and sustainability.
A global reconstruction plan entails mutual trust—sharing information and resources openly and coordinating policies. The COVID-19 pandemic, more than any other episode in human history, is a shared experience, therefore global solidarity rather than disunity is paramount for recovery. This is easier said than done but the positive impact that such a plan could have definitely exceeds the costs of implementing it.
Overall, the future looks very uncertain, and now the only safe predictions are those related to the consequences of macroeconomic measures already put into action.
The standard, one-way economic forecasting models are not enough to face a fast-paced post-crisis world. In such volatile, uncertain, complex and ambiguous times, one should stop thinking about what is probable and plan for anything that is possible through scenario planning. Scenario planning is a set of strategies that considers all possible outcomes related to the occurrence of some key events, to analyse the various developments of the risks and the approaches.
This is the only way to shift to a higher, proactive gear. So far, governments have been primarily responsive rather than preemptive. It is time to change this approach in favour of a more strategic and complex one that can prevent and mitigate future crises and enhance our collective responses to them.
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Nicolo Andreula is the Scientific Director of the Master in Digital Entrepreneurship at H-Farm. He holds MBA courses and seminars in leading business schools around ...Read More +