Since the outbreak of the COVID‑19 pandemic, a huge toll has been exacted on businesses across the globe, with many economies fallen into recession. In particular, the impacts of COVID-19 on businesses have been observed to include:
Consumer behaviour and Markets
With the execution of lockdown policies and the shutdown of economies, many companies have struggled with maintaining their revenue performance, resulting in temporary halts or permanent close-down of businesses. Companies that have taken the hardest hit are mainly those in the travelling-related sectors, like hospitality and tourism, and sectors that require personal visits, such as personal care.
With reduced in-person contacts and interactions, many consumers have turned to online channels for obtaining products and services that they want. To cope with this change in consumer behaviour, some businesses have explored the feasibility of offering virtual customer experiences. Similar changes have been observed on the marketing front – with the absence of events and conferences alike, businesses have moved their focus away from traditional marketing means.
There are a few industries that have been free from much of the negative impacts brought about by COVID-19. In particular, industries that have a good fit with extensive home staying, such as home entertainment and essentials, have shown great resilience during this period. Further, online-based businesses, from internet usage to social media, from online commerce to education to food delivery services, have demonstrated strong performance. Given the demand for alcohol cleaning products, health products and masks, healthcare, medical and pharmaceutical businesses have outperformed those in most other industries.
With risks come opportunities. A time when many are holding back on spending may pose the best opportunity for some to invest. Build an online business or service line, invest in digital transformation, businesses that seize the opportunity to make the right moves now may find themselves ahead of competitors after the pandemic and downturn.
Finance and Cashflow
Aside from revenue impacts, plummet in demand and sales combined with shipment delays mean that businesses may not receive payments as early as they need to, posing potential liquidity issues. This is especially the case for businesses that run on high fixed costs, such as rent and salary.
Businesses should be careful when they select their financing options and avoid acting out of panic. For example, with the pandemic still expected to last for quite some time, financing with terms that are too short may not provide sufficient time for a business to stand back on its feet.
In many countries, governments and organizations have offered financial aids and stimulus programmes. Companies should pay close attention and take full advantage of these schemes. The ability to maintain good financial health should help businesses rebound and grow after the downturn.
Operations
Given the restrictions on in-person contacts and interactions, process automation is an area that many businesses have been looking into. The importance of IT from an operations perspective has certainly grown since the outbreak of COVID-19. Feasibility of adopting automation, however, depends on the nature of each process. Management should avoid implementing blanket automation before thoroughly assessing the processes one by one.
For supply chain, prompt response is required to deal with fast-changing disruptions and government and medical restrictions. For companies that have their supply chain spanning across countries that have severe COVID-19 issues, supply chain transformations may be a solution to minimize disruptions.
It is important to note that the operational impacts brought about by the pandemic are constantly changing. As such, businesses may consider building modules, rather than fixing themselves into rigid arrangements, to cope with the continual changes.
Workforce
Workforce disruptions have challenged businesses to find ways to maintain their productivity, quality and timely products/services.
We have observed that many companies have had staff stuck in foreign jurisdictions since the outbreak of COVID-19. These staff have continued to work in the foreign jurisdictions due to travel bans and/or quarantine requirements. We have also noticed that “work from home” arrangements have prompted some businesses to consider the feasibility of allowing staff to “work from anywhere” going forward.
Last but not least, while the dismissal of employees has been used as a short-term fix for many companies, management should consider the costs of training and integration that may be required in the future.
To summarize, companies have made or contemplated to make adjustments in the way they do business in order to cope with the changes brought about by the pandemic. It is important to note that adjustments, such as the implementation of digital and/or supply chains transformations and the revamping of working arrangements, may potentially trigger significant tax and other implications that businesses are not prepared for. We recommend businesses consult their advisors prior to executing any such arrangements.
Want to learn more about the tax implications of your COVID-19 business arrangements? Feel free to contact us at inquiries@rillatax.com.
#tax #covid-19 #covid-19impactsonbusinesses #rillatax