10 Considerations for Your Response to COVID-19
Turbulence in financial markets has further compounded as business operations encounter interruptions from the COVID-19 virus. While monitoring for the long-term financial ramifications from the pandemic, leaders also face challenges with day-to-day functions like managing employee headcount and ensuring their remote workforce can securely access company systems. The following considerations may help ensure your organization is responsive to the uncertainty caused by the COVID-19 pandemic.
1. Manage Headcount Strategically
One of the most significant challenges the world is experiencing with the pandemic involves the sudden drop in demand for certain products and/or services. To the extent possible, your organization should try to avoid significant headcount reduction. Instead, consider implementing shortened work schedules, furloughs, and other methods that help to bring employee-related expenses down while maintaining the talent you worked so hard to cultivate. The cost of hiring skilled replacements for terminated positions comes with a significant residual cost, as recruitment, training, and lost institutional knowledge will become factors in rebuilding your team once conditions normalize. Certain relief benefits and funding mechanisms available through the Coronavirus Aid Relief and Economic Security (CARES) Act and other federal legislative stimulus efforts are contingent on employee retention.
2. Hire for Specific Skillset Requirements
Your business might be facing a skills shortage if key members of your organization are battling the COVID-19 virus or balancing the care of loved ones at home as a result of COVID-19. Consider supplementing these positions with interim personnel. Hiring on a contract basis can help reduce the strain put on your business if key decision makers are temporarily unavailable or limited.
3. Identify Your Remote Work Tax Implications
Across the country, most organizations have moved to remote work arrangements to accommodate the pandemic’s public health threat. These arrangements come with state and local tax considerations, some of which may not have been previously triggered. If your organization has remote staff in multiple states, you should not only consider employer tax withholding amounts based on jurisdictions and local wage taxes, but also consider other factors such as worker compensation and disability insurance. The complications involved may make outsourcing parts of your payroll and tax function advantageous. Additionally, employers will need to understand the relief opportunities offered to them from state and local governments. For example, New Jersey recently waived its nexus requirements for telehealth workers, and other states may implement similar relief measures.
4. Create a Reliable Virtual Environment
Some businesses already have systems in place to transition to virtual environments to help normalize disruptions. Even if your organization has this capability, new demands on networks and IT solutions may present challenges when employees start working from home company-wide. Make sure that your teams have secure access to collaborative tools through a reliable infrastructure to continue to perform their jobs as seamlessly as possible.
5. Ensure Data Protection
Data protection will become a concern during this time of uncertainty. Phishing schemes and other malicious cyber-attacks often accompany disruptive events. Administration of secure protocols, such as implementing robust firewalls, intrusion detection and prevention systems, secure email, and educating your employees about identifying preventative techniques is highly recommended.
Financial Management Considerations
6. Monitor Cash Flow
During a crisis, adopting a 13-week cash flow model can help your executive team track balance sheets and financial performance while making necessary adjustments. It can also keep lenders informed of their collateral positions.
7. Evaluate Liquidity Impact
Financial modeling that applies timing assumptions to disbursements for payroll, debt service payments, and other known obligations can clarify the impact the COVID-19 virus has on your liquidly. Comparing financial models to other proactive sampling, such as supply chain and distribution models as well as workforce calculations will help you diagram a long-term response for your business. If you have 500 or fewer employees, you may be eligible for a Small Business Administration (SBA) loan to help ensure stability of current operations. Larger companies may be eligible for support from the Department of Treasury.
8. Reduce Insurance Costs
If you can quantify the impact COVID-19 pandemic has on your business, it is possible to lower insurance costs by making mid-year adjustments to your policy. Reflecting lower sales and payroll projections or accounting for vehicles that are not on the road will factor in reevaluating your premiums. In addition, filing timely insurance claims can assist your response effort during business interruptions, including supply chain disruptions. To collect the full disbursement of a claim quickly, it often requires extensive information gathering and interfacing with your insurance provider.
Supply Chain Considerations
9. Assess Vulnerability
If external events or trends pressure your supply chain, consider alternative supply sources. Creating a responsive model for short-term consistency related to key products will help your business maintain its operations until your network stabilizes. Keep in mind that companies nationwide and abroad have had to adjust their supply and distribution models.
10. Mitigate Business Interruption
It is important to evaluate the cash impact of shortages, and penalties for late shipments when implementing new or alternative fulfillment models to help mitigate disruption. You will need to monitor these strategies throughout the year. Many companies have already started to use digital logistics tools to capture data to make this measurement possible and allow for future modeling.
A variety of factors will influence your business beyond simply responding to immediate pressures. While economic realities are forcing your business to redirect crucial segments of your operations, understand that we are here to help.
If we can be of assistance, please contact us. For up-to-date information, we encourage you to visit our COVID-19 resource center.
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