Chapter 1 The Journey to Resilient Growth

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The Journey to Resilient Growth

The new reality of business growth

On New Year’s Eve 2019, global GDP growth stood at a healthy 2.9 per cent. But there were signs that this decade-long trend would soon be disrupted: the effects of environmental disasters, financial crises, social and trade tensions all loomed large.¹

Such disruptions are nothing out of the ordinary, of course. Their effects have typically been short-lived. Businesses have always looked for growth and profits in positive times while focusing on managing costs in challenging periods. The cycle between the two is regarded as business as usual, and any slump has been regarded as something to recover from quickly.

But as the COVID-19 pandemic gripped the world, it became apparent that we were facing a different kind of disruption – one that would soon become part of our daily lives.

In a survey² conducted with 205 corporate leaders, over 60 per cent of C-level executives said the COVID-19 crisis had affected their business. There had been a 20-50 per cent reduction in monthly revenues, they said.

Furthermore, the majority of respondents anticipated that it would take six to 12 months to recover fully.

¹International Monetary Fund, World Economic Outlook, April 2020
²Survey commissioned by Standard Chartered in June 2020 and conducted with 205 corporates (annual revenue USD100m-500m) based in Mainland China, Hong Kong, Singapore, Malaysia and India

Rebalancing priorities

Adjusting to this new, more profound disruption calls for a change in business priorities. Building resilience has tended to be regarded as a costly, low-priority activity. But now it needs to be seen in a new light.

Yes, short-term profitability may have to take a back seat so global businesses can become better prepared for a new, post-COVID-19 world.

But resilience will make it possible to weather future storms, providing opportunities for new routes to profitable growth through innovation and transformation.

FIGURE 1

Major shifts in a new world³

³World Economic Forum, ‘5 ways entrepreneurs and SMEs can build resilience in a coronavirus economy’, May 2020; PwC, ‘Managing cash pressures due to coronavirus disruptions’; Standard Chartered, ‘From just in time to just in case: COVID-19 brings supply chain resilience to the fore’, April 2020; Channel News Asia, ‘COVID-19 is reshaping what work looks like’, April 2020; Supply Chain Digital, ‘COVID-19 - accelerating the digitalisation of operations’, April 2020

A journey with defined stages
Recovering from the pandemic should be thought of as a long-term journey with a series of defined stages (see Figure 2). Each stage is a milestone along ‘the Road to Resilient Growth’, indicating the progress made toward minimising the impact of future disruptions while keeping profitable growth front of mind.

FIGURE 2

The Road to Resilient Growth

Q: Where do you see your business on the road to resilient growth?

Phase 1 of “immediate response”: tackling new challenges as they emerge in order to get through each month
Phase 2 of “preservation and stability”: putting in place near term plans to manage our cash flow and operations so that we can be up and running
Phase 3 of “preparing for growth”: we have stabilised our business with measures to manage future disruption and planning for future growth

STAGE 1 ON THE ROAD TO RESILIENT GROWTH

Immediate response

As the COVID-19 pandemic spread, businesses faced an urgent challenge to their liquidity. Offices and factories were closed, there were restrictions on the movement of goods and people, supplies dried up and supply chains ground to a halt. Meanwhile, consumers stayed at home and stopped spending.

Short-term transactional measures such as reorganising production schedules and furloughing staff became an urgent necessity.

STAGE 2 ON THE ROAD TO RESILIENT GROWTH

Preservation and stability

In the second stage – preservation and stability – it will be important to get critical operational activities up and running once more, and fast. There should also be an additional focus on ensuring business continuity, taking full advantage of the invaluable lessons learned during the lockdown period.

Critical success factors here will be:

Transparent and timely communication with employees to help minimise unease and improve morale.
Optimise supply chains by shifting from just-in-time to just-in-case models,⁴ and identifying partners who can fulfil existing demand.
Increasing customer engagement and experience efforts to restore both demand and loyalty.
Boost cashflow via various means, such as offering prompt or early payment discount terms to suppliers and customers and looking for lower-cost payment mechanisms through the use of digital tools.
Finding support from banking partners for debt restructuring, trade finance, supply chain financing, structured solutions and foreign exchange.

⁴Standard Chartered Global Research, ‘COVID-19 – Impact on global supply chains’, May 2020

Preservation and stability

CASE EXAMPLE

Malaysian manufacturer defies COVID-19 led decline

STAGE 3 ON THE ROAD TO RESILIENT GROWTH

Preparing for growth

Following a broader reopening of economies, most companies will start to make progress towards operating at full capacity. A loosening of restrictions must not give way to a relaxation of efforts though. There needs to be a strong and sustained focus on resilience to drive sustainable and profitable growth for the long term. This will require that organisations:

Focus on digitalisation
Virtual working practices must become the norm. Use digital tools for internal data management, sourcing materials, manufacturing and warehousing, customer engagement and billing.

Build supply chain transparency and harmony
Can your supply chains handle an increase in demand? Identify ways to improve flexibility and visibility by working more closely with suppliers and customers.

Enhance risk protection
Strengthen internal processes and supplier arrangements to manage any future uncertainties. Digital tools like blockchain can deliver complete end-to-end tracking across a supply chain.

Build financial strength
Enhance your capital reserves. Consider alternative sources of capital, such as raising funds through capital markets, private equity, or even the divestment of non-core businesses.

Read about Standard Chartered’s pilot initiative providing blockchain-based smart guarantees in trade finance here

Preparing for growth

Looking ahead

Organisations across the world emerging from lockdowns are cautiously moving forward once more. Those that have successfully minimised pressures on revenue to increase their cashflows, and reorganised their operations to reflect current capacity, will be best placed to build greater resilience. This will be essential in their journey towards ‘Resilient Growth’.