A lot of Australian businesses are doing it tough. First the ongoing drought, then the Black Summer bushfires, then we had floods and now we’re dealing with coronavirus. One or more of these external factors can ‘make or break’ a small business. Whether they do, depends not only on whether a business was directly or indirectly affected, or totally unscathed, but on how prepared it was for dealing with such an event.

In the current coronavirus (or COVID-19 as it’s being called now) climate in Australia, we are already seeing:

1. International travel bans
2. Freight disruption and delays
3. Tourism decline
4. Panic (or opportunistic) buying of everyday essentials and foods with long shelf life
5. Empty retail stores and restaurants
6. Event and function cancellation or deferral
7. Supply chain disruption
8. Mandatory self-isolation requirements, with hefty fines or potential jail terms for non-compliance
9. Temporary closures of offices, schools and health facilities
10. Cancellation of events that attract large crowds
11. Restriction on gatherings to a maximum of 500 people.

The financial and operational flow on effects of all this, for businesses, can include:

1. Cancellation or deferral of meetings, negotiations, functions, trade shows, etc.
2. Inability to source products or components as normal
3. Inability to fulfill orders or meet demand
4. Reduced demand for some products/services
5. Stepping up production to meet increased demand
6. Increased opportunity to supply products/services to Australian businesses that have been reliant on offshore providers
7. Lower revenue than expected
8. Staff unable to attend work as normal, or working remotely
9. Staff not having any work, or being overloaded
10. Temporary closure of premises
11. Unbudgeted costs for fumigation or deep cleaning of premises
12. Draining of cash reserves.

The point is, your business can be indirectly affected significantly by COVID-19, even if you, your staff and your customers never actually contract the virus.

The protection of individual and community health is being given priority – as it should be. However, understand that the prevention and containment measures appropriate for the management of COVID-19 do not equate to business as normal. It is important for businesses to have a plan to manage any financial or operational flow on effects they may experience, whether COVID-19 is contracted by an employee, contractor or customer who has been onsite, or not. It is also important not to write-off any existing long term planning and strategies and focus solely on COVID-19.

So, let’s look at some basic steps for contingency planning we should all be undertaking now:

Step 1: Identify ways in which your business may be affected either directly or indirectly by COVID-19.
Some questions to get you started:

1. Is there a change in demand for your product/services in the market? Could this change if Australia was to take stronger self-isolation measures?
2. Can you effectively scale production to meet demand?
3. Has your supply chain been affected, either in terms of production being impacted or in terms of freight options being reduced?
4. Can you reliably source products/components elsewhere?
5. Could normal business operations continue if a staff member, contractor or recent visitor was diagnosed with COVID-19 and you had to temporarily close for cleaning or self-isolate for 14 days?
6. If your revenue has been affected, how much cash is available to carry you through until it picks up again?
7. Are there practical ways you could reduce costs?
8. Are some business activities performed by only a few key staff?
9. Are the prices for products/components you procure fluctuating?
10. How can you protect your cash flow?
11. Is there a possibility business and personal assets could become at risk? Are these protected by appropriate business structuring measures?

You could also look at this in terms of a SWOT analysis:
1. What are your strengths in this situation?
2. What are your weaknesses?
3. What are the opportunities it might open up for your business?
4. What are the threats it presents for your business?

Step 2: Determine how much of a threat each of the scenarios you identified presents for your business, and how serious is is that you offset the impact.
If one or more of these scenarios eventuate for you, or are happening now, is that an improvement or a downturn on your normal business conditions?

Identify options for reducing threats, then consider when and how you will implement them and who will be responsible. For some, options could include:

1. Investigating and validating alternative supply options
2. Increasing prevention measures against the spread of COVID-19 in the workplace
3. Assessing finance options and securing additional lines of credit
4. Reviewing costs and cutting those that are not critical to business operations
5. Where appropriate, ensuring key business activities are able to be performed by multiple staff, increasing cross training or ensuring there are procedures written
6. Reassigning staff to unaffected projects.

Step 3: Plan how to benefit from new opportunities that may be evolving.
New opportunities may be out there, but they are unlikely to translate directly to increased sales unless you do something to encourage it. Is this a time to run a targeted campaign to get new clients on-board?

What action do you need to take to capture opportunities that may be opening up?.

Step 4: Define triggers, action items and responsibilities.
Are there action items you want to get happening straight away? Determine who you will assign each of those action items to and when they should be done. Are you going to have someone responsible to ensure action items are followed through, or will you check this yourself?

Are there some plans that would only become action items if a trigger point has been reached? For example, demand might have reduced but not enough to seriously affect your business at this stage. So you don’t want to adjust production at this point. However, if demand reduced by 30%, the situation would need to be reviewed.

Step 5: Schedule regular reviews.
It is important to keep on top of what may be changing. Decide how often to check in on the progress of action items and how often you will reassess your contingency plan to make sure it remains the most appropriate response to the situation. In a crisis, the situation can change fast.

Step 6: Document your plan, roll it out and communicate, communicate, communicate.
Put your plan into writing, then roll it out. Clearly list any action items, who is responsible, and at what point they should be taken. Communicate this to your whole team, along with the review dates. Some elements of your plan may also need to be communicated to your customers and suppliers.

If the situation or plan changes, update your staff. With the current COVID-19 situation, there is a lot of fear and uncertainty and keeping your team confident that you are managing this situation appropriately is critical.

Links to some further resources you might find helpful are provided below:

1. K & L Gates: COVID 19 Employment Policies and Fact Sheets for Companies in Australia
2. Cooper Grace Ward: Coronavirus – what are my obligations as an employer
3. Info Entrepreneurs: Crisis management and business continuity planning
4. Host my office: 6 ways to keep your business running during a crisis
5. Employment Hero: COVID-19: Important Update from Employment Hero CEO to Customers
6. The Federal Government’s Stimulus Package to help Australia through COVID-19

If you have any questions about dealing with how your business is being or might be impacted, you can call us on 03 5339 3200 or contact us here.

Thanks for reading.

The information contained on this website has been provided as general advice only.  The contents have been prepared without taking account of your personal objectives, financial situation or needs.  You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.