Today is Good Friday. It was declared good because Christians remember this day as when Christ died for our sins. He died to share His great love for mankind and obtained every blessing for them. For me, what is remarkable about this day is that it leads to Easter. This is the Sunday after the first full moon after the spring equinox, as declared by the Roman emperor Constantine. Besides the fact that Easter commemorates the resurrection of Christ, it also promises a new life or a fresh beginning for everyone. It is a chance for every one to be reborn. I guess this is also the reason eggs have become a symbol for Easter.
With this in mind, I would like to share a survey conducted by the International Association of Financial Executives Institutes, the global society to which the Financial Executives Institute of the Philippines (Finex) belongs, and a series of webinars that Finex plans to hold to assist our local businesses recover from the public health crisis we are now having.
According to the survey conducted in November and December 2019, more than half of businesses in the United States already expect a recession this year. This was even before we started seeing the dire effects of the coronavirus disease 2019 (Covid-19) pandemic. Of those surveyed, 59 percent planned to strengthen their balance sheets, 58 percent were reducing costs, 49 percent were increasing liquidity and 31 percent were scaling back on investments. Companies planned to increase their cash holdings because of the uncertainty. Hoarding cash is generally the most obvious approach in dealing with a recession and the resulting lower revenues. It is also during a recession when lending markets and banks would become ultra conservative in their practices. Banks will be on the defensive precisely because of the increased credit risks. This, unfortunately, could lead to a vicious cycle that could, in turn, lead to bankruptcies unless central banks intervene with calculated monetary policy injections to infuse liquidity into the market.
Other pressing concerns at the end of 2019 included difficulty in hiring and retaining qualified employees. Economic uncertainty was only second in the US at that time, but how the times have changed since then. These concerns were followed by data security and the high costs of employee benefits. In other parts of the world, economic uncertainty was the major concern. Nearly 70 percent of Latin American chief financial officers listed it as a top concern, as did 58 percent in Asia and 51 percent in Europe. Many developing countries were also troubled by currency risks, as well as government policies and regulations.
So even as early as December of last year, some companies were anticipating a recession. No one expected the extent of the problems and the crisis the pandemic caused for the global economy. Markets have crashed and more than half the world are in a standstill. Supply chains have been disrupted and no one really knows when these would return to normal. It is certain the world is moving into a deep recession and we all have to do our part to survive.
Among the topics that the Finex webinar — a portmanteau of “web” and “seminar” — would cover are key considerations in supply chain and operations. This will be presented by an SGV partner, Stephanie Tan Hamed. I have a keen interest in this topic, as I previously managed the supply chain of one of the major telecommunications firms. The major considerations at the time still hold true, but the implementation is now more challenging. We have to assess the various nuances and risks and their impacts. Companies have to quickly identify, size and prioritize. We have to quickly implement an action plan to reduce financial impacts. Now more than ever, we need to quickly see updated end-to-end data. We need to clearly initiate governance models with clear roles and responsibilities, as well as reporting protocols, especially with the personnel gaps we are anticipating. We need to focus on making the supply chain resilient based on new disruption scenarios. We need to reduce key points of failure. We need to learn quickly on how to operate in this “new normal” and future-proof ourselves for the next disruption.
The basic premises of optimizing the infrastructure and organization of the company with regard to sourcing and product complexity rationalization, including the distribution footprint, have to be achieved. Our program will describe how to transform the supply chain from a rigid linear process to an agile network ecosystem in which all parties march together.
We are all looking at a fresh start and we are optimistic that this coming Easter will give us a chance to reinvent ourselves. It is important that we learn new tools for this new world unfolding before our eyes. We have to make sure we do not miss this opportunity to become better, as this would determine whether we simply survive or prosper after Covid-19.
Ronald Goseco is a trustee of the Finex Foundation.