Knowledge and Insights
Due to the rapid acceleration of the COVID-19 pandemic, countless organizations are putting together strategic plans in order to alleviate the potential effects on their operations, while continuing to meet the needs of their customers and constituents.
As of right now, it is too premature to be able to evaluate the final outcomes this pandemic will bring on organizations. So far, we’ve seen the stock markets fluctuating, limitations on travel, canceled or postponed events and public gatherings, as well as the closures of schools and non-essential retail businesses. Since the outlook is unknown, organizations need to exercise caution and be proactive about having proper protocols in place.
How is the virus spread? What can your organization do to stop it?
COVID-19 is a respiratory infection that is transmitted to others when an infected person coughs or sneezes. It can also infect people who touch a surface or object that has the virus on it and then touching their face (specifically the mouth, nose or eyes) without washing their hands. Large public gatherings, such as parties, meetings or corporate events, may cause the attendees to become susceptible to exposure. This has made it difficult for organizations to uphold productivity while supplying a harmless work environment to employees. Preventive measures should be put in place, including an up-to-date communicable illness policy to promote a safe and healthy work environment for employees, customers and clients.
Your organization can aid in halting the spread of the virus through safeguarding employee and customer welfare, and at the same time, diminish negative economic impacts on the organization, though these steps:
- Post signs around the office/building and send communications to employees to reiterate the importance of consistent hand washing and/or sanitizing, as well as keeping up with personal hygiene.
- If your employees can work remotely from home, instruct them to do so to minimize possible exposure and spread of the virus. If they cannot work from home and your organization is an essential business that has not been required to close, encourage employees to stay home at the first onset of any cold or flu-like symptoms.
- Ask employees to inform HR of recent travel in and outside of the U.S., as well as any potential exposure to COVID-19.
- Practice social distancing as much as possible.
- Implement remote work policies and capabilities if your organization has not done so already.
- Provide proper cleaning supplies (e.g. Lysol, wipes, hand sanitizer) and confirm that outside cleaning services are thoroughly cleaning and disinfecting frequently-touched objects and surfaces.
- Determine procedures for reacting to employees that display symptoms, and what to do in the event one of your employees test positive for the virus.
How will this affect your organization’s financials?
Undoubtedly, certain organizations will experience negative effects from the COVID-19 situation. Organizations should think about the risks involved and the short-term and long-term impacts they will have on the company. In some instances, the impact may require modifications to accurately reflect the financial state of the organization such as:
- Evaluating the need for potential disclosure of subsequent events in the notes to the financial statements as well as the organization’s plan to respond to the events as they unfold; and
- Reassessing the reasonableness of allowance and/or reserve balances, if impacted by the crisis.
What kind of economic impacts will we see from this pandemic?
The amount of COVID-19 cases continue to increase rapidly across the U.S. and the world. As a result, organizations of all sizes operating across various industries are experiencing a significant disruption in their business and financials.
These disruptions can lead to decreased revenue, diminished cash flow and affect relationships with key business partners and vendors, causing damage to the sustainability of organizations.
Organizations should consider following these protocols:
- Complete an in-depth risk assessment of their operations (taking an all-encompassing approach) to evaluate the degree of disruptions, then put countermeasures in place to reduce potential risks or disruptions.
- Prepare for voluntary/involuntary employee availability issues and reduction in staff, which will affect production and services offered. Plan alternative work arrangements such as relocation (working remotely) or reassigning work schedules (altering shifts/limiting how many people are in the office/building at one time).
- Reallocate resources to unaffected business lines.
- Initiate collaborative relationships with new strategic business partners for further market development and come up with innovative ways to continue to meet customers’ needs and exceed their expectations.
What about existing contractual obligations?
Organizations are experiencing negative effects on sales, production, operations and supply chain, among others, as a result of recent business interruptions due to COVID-19. In addition to what we mentioned above, the disruptions will also affect organizations’ capabilities to meet contractual obligations.
If you haven’t done so already, you should meet with your organization’s legal advisors and review contracts to determine what obligations may be impacted, then discuss rights and remedies available to combat any contractual interruptions.
Organizations should also document the reasonable precautions they have taken to minimize the side effects of this pandemic. In the event your organization cannot follow through with their contractual obligations, you may have to quantify the amount of financial and operational damage, as well as the influence on long-term business relationships as a result of the COVID-19 crisis.
Additionally, organizations should connect with their insurance providers to review existing policies and coverage and determine whether any losses incurred are covered under these policies or if they need to be altered for additional coverage.
Increased reliance on technology
In today’s world, many organizations are heavily reliant on various forms of technology to conduct their operations. Due to the current business environment, organizations should have contingency and business continuity plans in place to allow employees to work remotely to limit the spread of the virus. The significant number of employees working remotely, with no definitive end-date in sight, may put a strain on the organization’s network connectivity and other technologies. This may also cause down-time for some employees if they experience any technological issues, which will affect productivity, as well as put strain on the organization’s IT team to aid in fixing these issues.
Cybercriminals and bad actors continue to attack organizations, and are now exploiting the COVID-19 frenzy, through scams such as phishing emails that appear to have guidance about COVID-19, but are actually embedded with malware or ransomware in email attachments or hyperlinks claiming to contain critical information on the matter. Beware of what you click and open in emails and texts!
To combat any technological or cybersecurity issues, your organization should:
- Review your cybersecurity protocols and security settings for remote connections to ensure they are operating effectively and will keep your organization protected.
- Evaluate what your network capabilities are for extended periods and its capacity to handle large numbers of employees using the remote network at once.
- Encourage staff to use other approved technology platforms and tools to boost efficiency while working remotely, such as video chat software (e.g. Zoom, Microsoft Teams, etc.) as well as cloud-based collaboration programs for editing and sharing documents such as Google Drive or OneDrive.
- Deploy multi-factor authentication requirements for all employees who login to the organization’s network.
- Communicate with your clients and customers that your staff will be working remotely from home.
- Ensure all employees have successfully completed security awareness training to combat and be vigilant of cyber-attacks and scams.
- Review the organization’s data backup policy and confirm data backups are working properly in the event of an issue.
For a more comprehensive business sustainability checklist for organizations to consider during crisis, please click on the following link: https://www.mercadien.com/resource/business-sustainability-checklist-for-organizations-during-crisis/
Mercadien professionals can help you plan and be prepared for various short-term or long-term affects this pandemic may have on your organization and its employees. We are available to offer advice, whether it relates to your operations, financials or any other questions you may have. Feel free to contact me at email@example.com or 609-689-2319.
DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice, and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.