A Briefing Report compiled by Dun & Bradstreet, the specialist business information provider, serves to highlight the enormous economic and third party risk brought about by the Coronavirus outbreak. With operations closing in China and travel bans imposed by airlines, the full impact of the virus is becoming more apparent every day.
In less than a month, there have been hundreds of deaths and tens of thousands of people infected globally. To combat the spread of the virus, China has moved swiftly to identify the reservoir, communicate with other nations, extend the Lunar New Year celebration and ban travel in and out of 14 cities (among other measures). These precautions have most likely prevented the virus from spreading further, but have most certainly impacted businesses globally as they struggle to navigate what is a period of great uncertainty.
According to the Briefing Report, the range of businesses impacted is vast, but a few industries stand out.
One is the service sector. Under normal circumstances, Lunar New Year is one of China’s largest and most profitable holidays. Due to the virus outbreak, the Chinese Government postponed the end of the holiday to prevent mass gatherings and prevent further spread of the virus. Between the impact to holiday celebrations and restrictions on travel, service providers in China are experiencing some degree of strain.
In manufacturing, which is equally impacted by the travel ban, manufacturers are struggling to transport raw materials to their facilities and product to customers. In addition, many manufacturers will have to delay reopening of their facilities because of quarantines and travel delays detaining workers.
Like manufacturers, wholesalers in affected areas are finding it difficult to transport their products to their customers. They may also be impacted if their suppliers struggle with the staffing concerns mentioned above.
Additionally, most businesses in the impacted region are micro-level businesses with less than ten employees and small businesses with less than 100 employees. These companies will most likely be more severely impacted by the crisis and could have a harder time recovering once the outbreak is contained.
Impact on global supply chain
Companies outside of China are being affected as their Chinese suppliers are unable to deliver product and materials. To compound the issue, many suppliers outside of China rely on suppliers in China to fulfil their obligations to their customers. If the outbreak continues, it’s likely that the impact to businesses globally will grow and that companies around the world will experience strain as their Chinese partners in the service industry are unable to make payments on invoices.
By identifying the risks ahead of time and working to find a solution, companies globally can protect their supply chains and create contingency plans quickly. Open communication with both suppliers and customers can help maintain those relationships and ease the uncertainty during the outbreak.
Dun & Bradstreet’s data indicates that the most impacted provinces account for over 90% of all active businesses in China. The Guangdong, Jiangsu, Zhejiang, Beijing and Shandong provinces account for 50% of total employment and 48% of total sales volume for China’s economy.
At least 51,000 (163 Fortune 1,000) companies around the world have one or more direct Tier 1 suppliers in the impacted region, and at least five million companies (938 Fortune 1,000) around the world have one or more Tier 2 suppliers in the impacted region.
The Top Five major sectors that account for over 80% of the businesses within the impacted provinces include services (personal and business), the wholesale trade, manufacturing, retail and financial services. Among these sectors, services, wholesale and manufacturing account for around 65% of the businesses in the impacted region.
With the impact of the outbreak on the Chinese economy – which makes up about 20% of global Gross Domestic Product (GDP) – the cascading effect might cause a drag of approximately one percentage point on global GDP growth if containment is delayed beyond this coming summer.
Approach to remote working
Recently, doctors and other medical professionals have warned that the London Underground could become a “hotbed” for the Coronavirus disease, which is officially named COVID-19. The UK’s chief medical officers have also raised the risk posed to the public by the virus from low to moderate. As fear and uncertainty linger in equal measure, so more and more organisations are now starting to consider the potential effect on working practices.
Remote working is a way in which to reduce the risk of daily commuters falling ill with Coronavirus and is already being adopted as a solution in business hubs such as Silicon Valley. The merits of remote working are well understood, but the seriousness of COVID-19 means it could be a key tool for businesses to ensure employee safety.
William MacDonald, chief strategy officer at StarLeaf, stated: “Many organisations already have the systems and processes in place to support remote working. As the seriousness of the current health crisis rises, remote working is something that every company is going to have to consider even if they’ve previously not done so. Organisations will firstly need to establish their remote working policy, outlining what’s expected of staff when working outside the office. Depending on a company’s culture, that policy might go into detail about all aspects of remote work, including expectations of working hours, legal rights and privacy/security requirements.”
MacDonald continued: “To ensure employees can carry out their jobs to the best of their abilities, the right collaboration tools need to be in place. e-mails and voice calls are no longer the best way to communicate and can easily eat into an employee’s working time, damaging an organisation’s productivity. It’s critical for organisations to have an effective video conferencing solution in place for instant collaboration and content sharing.”
Previous research undertaken by StarLeaf reveals that 90% of organisations experience some sort of challenge when trying to share their screen via a video meeting. It’s also known that one third of UK organisations have difficulties when trying to start a video call due to poor audio. An intuitive cloud-based video conferencing solution will provide the capabilities and features people need to communicate easily, reliably and securely.
Due to the Coronavirus, organisations which have traditionally not offered remote working as an option are going to have to rethink their approach to ensure that any resulting disruption is kept to a minimum. They will need the right policies and processes in place underpinned by the right technology.