Managing through the challenges that COVID-19 is creating for business will require a significant amount of support from key business stakeholders. We are already seeing Government stimulus and a flexible approach by lenders to certain business groups in anticipation of a significant adverse economic impact.
Effective communication is crucial in crisis management. Trust is essential and can be earned by being factual, transparent and truthful.
As financial, operating and legal risks caused by the pandemic materialise and businesses start re-mobilising in the rebound phase, there will be an increasing focus by businesses on fixed costs, securing supply, contract negotiations and disputes, and cash flow. This will inevitably lead to negotiations with lenders, suppliers, customers and employees to find a compromise that can offset the significant impact on demand.
To achieve this balance in the current environment, we suggest management teams:
- Act quickly – Get ahead of the story and issue a response immediately. Use only the facts at hand, don’t speculate where there are unknowns.
- Take responsibility – Acknowledge the events that led to the crisis and the impact on stakeholders. Be transparent and don’t try to cover up the facts.
- Develop a strategy – Management should have a clear strategy developed from a comprehensive risk based assessment of the business that prioritises key stakeholders requiring support to bridge any structural or funding gaps. Setting out a robust plan that supports the strategy and understanding the funding gap in different scenarios will assist with developing and executing the plan.
- Understand the stakeholders’ perspective – You should understand what is important to your stakeholder and the information they require to make a decision.
- Understand your ‘levers’ and options – Any request is subject to challenge and ‘push back’ to get to a position that is mutually agreeable. Clearly understanding the various ‘levers’ available to negotiate and their impact on cash will allow for a more efficient negotiation and ensure the right outcome is achieved.
- Remain engaged – Keeping all relevant stakeholders updated on progress until the situation is resolved is important to ensure ongoing support.
This will be a challenging environment for all stakeholders given the level of uncertainty and pace of change, and the legal complexities that will need to be navigated. It will be important for management teams to be proactive and flexible with negotiations to strike the right balance for any compromise.
Opening your plan up to an independent perspective and challenge, and getting support working through all possible options will help to strengthen your position going into difficult or complex negotiations.