U.S. businesses began feeling the effects of the coronavirus long before any COVID-19 cases were reported in North America. In mid-January the world became aware of a rapidly spreading novel coronavirus in Wuhan, China, a manufacturing hub and critical link in many supply chains. Within days, Chinese authorities had imposed quarantine restrictions and factory shutdowns, causing supply-chain anxiety everywhere. Within weeks, the virus had spread around the world, ravaging economies as it traveled.
Before the outbreak, the U.S. was experiencing the lowest level of unemployment in decades. With strict quarantine measures and mandated business closures now in place for most of the country, a new reality is gripping organizations across industries. No organization is immune. If anything, the coronavirus crisis has revealed just how connected all segments of the economy are. Shutting down restaurants, for instance, doesn’t only affect those employees, it also impacts the farmers, bakers, cleaners, linen suppliers, and all the others providing behind-the-scenes support. And those people have their own suppliers, who have their own suppliers – all of which are feeling the effects.
Businesses have adapted to these rapidly changing conditions by sending workers home, cancelling events, and switching to videoconferencing. But the depth of the impact of the coronavirus caught leaders off guard. The closest comparison to the current crisis happened with the Spanish flu pandemic in 1919 – an event not in the collective memories of today’s leaders.
What will the coronavirus pandemic mean to your carefully crafted strategy? How can you effectively manage strategic risks in an environment where conditions are changing by the day – or even by the hour?
Some organizations have responded by flipping production of their own products to pandemic-related products like hand sanitizer, ventilators, masks, gloves, and other PPE. Those products may not be the most profitable and may drag down margins, but it makes sense if the move is aligned with corporate values. Workers may be energized to be part of the cause. And it may keep the lights on.
These moves, however, aren’t without risk. The decision to produce hand sanitizer, in particular, brings in additional risks because it is regulated by the FDA as an over-the-counter product, subject to the agency’s safety and efficacy standards (although the FDA has said it won’t take action against any company that produces it for consumers or healthcare workers).
One thing is clear: traditional approaches to managing risk are useless in a crisis like this. By the time siloed functions come to agreement on action, the moment has not only gone, but the situation you thought you were dealing with has completely changed.
While no one could have imagined the exact depth and breadth of this crisis, some organizations are clearly more prepared, with systems, processes, data, structure, and people in place to quickly understand the situation and make bold decisions.