The Covid-19 pandemic and solutions for businesses in times of crisis

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Enterprises need an urgent situation handling unit to implement financial solutions

Lowering growth rate

On May 4, CEL's economic experts released results of the business survey and proposed solutions for businesses in the crisis period.

The impact of a pandemic does not spare any economy or type of business. Growth rates for the year are forecast to decline to 1.5% instead of the previous forecast of 2.4%, according to the Organization for Economic Co-operation and Development (OECD).

Considering Vietnam's economy, real estate, logistics, consumer goods, construction, industrial products and agriculture have been hit by the Covid -19 pandemic.The survey conducted in late March and the first two weeks of April shows nearly 60% of businesses had serious supply and demand problems. A pandemic weakens the supply chain when inventory runs out quickly, along with drop in demand that disrupts cash flow of businesses.

According to the Vietnam Association of Logistics Services Enterprises (VLA), since the outbreak of the disease, production activities in China have become stagnant, leading to low output of exported goods. As a result, many international shipping lines have had to cancel shipments at some of China's ports due to a lack of cargo. Some Vietnamese products imported from China are affected by this. For example, fabrics, fibres, iron and steel have witnessed sharp declines in value in the first two months of 2020. This means the capacity of each link on the value chain can make a strong impact on the others.

The situation changes day by day and in potentially dangerous situations. A few sectors like masks, medical supplies and food received orders from regions struggling to deal with the pandemic such as Europe and the US. The pandemic has motivated future investors to move production lines from China to Southeast Asian countries.

In addition, the free trade agreement between Vietnam and the European Union (EVFTA) was approved to bring Vietnam's economy to a level comparable to other regional countries.

Only companies that adapt well with flexible supply chains or "spend" will survive. Biti's quickly changed its product portfolio to keep up with new market trends, launching a new product line with a message to support the fight against the pandemic with "no one was left behind."

Similarly, Samsung had to air-transport electronic components from China to factories in Vietnam. Businesses turned to developing online sales channels that serve the "home economy" as demand arises from online teaching, gaming and watching movies, remote health care apps, and online shopping. In addition, the sudden demand for home delivery during social isolation also entails recruitment needs in delivery enterprises.

Financial solutions in times of crisis

According to experts, the work of businesses in the aftermath of the Covid-19 pandemic is to build and consolidate an unbroken business plan to cope with unexpected risk.

In times of crisis, cash reserves become even more important due to liquidity. The pandemic caused a serious decline in demand, followed by disruption of business cash flows and high risk of bankruptcy. The smaller the business, the less money tends to accumulate.

Therefore, ensuring liquidity should be a top priority; businesses need to set up an urgent situation handling unit to implement financial solutions to help them cope in times of crisis.

Specifically, review weekly pressure on working capital: cash, inventory, investments, short-term receivables and payables, taxes and wages; review liquidity and prioritise payments. This helps businesses comply with obligations and maintain business operations or at least meet the performance of services at an acceptable level for core customers.

To implement the budget estimation "from zero", all costs must be made and for a new business cycle; minimise cash leakage (inventory, costs). Review each process and activity that causes damage, unused or excessive materials or materials that cause waste.

As recommended by experts, enterprises should take measures to minimise negative impacts related to demand and supply. Market fluctuations need to be updated quickly and accurately to apply to specific strategies.

Consider different scenarios to devise appropriate responses for each scenario and act quickly. The increase in many scenarios may occur to help businesses prevent beforehand to avoid being surprised and being in a passive situation.

In addition to the aforementioned solutions, businesses must take advantage of this time to promote outstanding or undeveloped tasks such as website design, standardising processes, researching new products and services, training and restructuring the workforce towards streamlining and raising core values ​​will help businesses to be ready for future uncertain situations with lessons learned from the Covid-19 pandemic.