How successfully a business emerges following this pandemic will depend to a great extent on how quickly it identifies and implements long term necessary changes.
Nobody is yet clear what the post-Covid-19 world will look like. It is possible that things revert back to the way they were quicker than anyone imagines. That said, it is very difficult to imagine no lasting or consequential changes to the way we work or live. Certain trends, such as the use of online retail and the move to more flexible working patterns, have accelerated too rapidly in the past few months to fully reverse.
Companies must therefore consider what these changes might mean for them. In a strange way the disruption brought by Covid-19 gives all companies an opportunity. An opportunity to embrace change (in ways and at a speed that most would not have thought possible even a few months ago), to adapt more quickly than their competitors, and to become more relevant to customers and employees alike.
We have outlined some issues (outside of normal day-to-day trading) where Covid-19 may, or will, act as a catalyst for change, and which we believe will be a focus of corporate decision making in the coming months.
Companies are getting used to working remotely but, in the main, have done so whilst reliant on systems and processes designed to support face to face working and sales. We have seen a material shift to online learning, remote working, e-health services, e-government services and rises in e-commerce. Changes will be required to better facilitate interaction between colleagues, and a reassessment of virtual routes to market is overdue for many businesses.
The reality is that post pandemic, more people are going to be spending more time in their homes. It is therefore expected that we will see a rise in smart technologies used in homes. Voice-controlled technology for example is expected to grow significantly over the next few years, as well as conversational AI tech which will enable the platform to follow much more complex conversations than at present.
Additionally, machine learning and AI are set to be further utilised by companies to aid efficiency in the coming years. Computer based AI removes any possibility of human error and means that vast amounts of information can be navigated, computed and analysed in much shorter timescales. These machines are set to develop, become more user friendly and reliable which will likely be a key focus of corporate decision making.
The continued deployment of 5G is set to be extremely beneficial because of higher bandwidth, lower latency, faster browsing speeds and more stable connections. This will ensure faster and more efficient home life and working practices and companies will seek to rely on this technology where they anticipate a long term move to remote working.
Fairness and equality
How companies acted (and continue to act) during the Covid-19 crisis and the support that they provided to all of their stakeholders and the wider community may well influence future customer behaviour and employee retention and recruitment. Companies have had to re-consider their purpose and priorities, and most can see that it makes good business sense for them (especially if, for example, they have benefitted from government support measures) not to abuse their position or to undermine their social licence to operate.
Increased scrutiny is likely to endure, and directors will need to carefully consider the balance between the interests of company members and those of other stakeholders, which is required by section 172 of the Companies Act 2006. There are corporate benefits for companies that are transparent and fair in their behaviour, that promote equality and that are considerate of environmental and social issues. Companies earn their reputations slowly but can lose them quickly.
People and premises
A big change for many triggered by lockdown has been home working. Companies can expect employees will want to continue enjoying the flexibility of increased home working (even if the weather may not always be so good). Employers can expect an influx in the number of requests for Flexible working.
At the same time the death of the office is probably exaggerated. Companies typically acquired or leased offices for the long term, so the space will not be lost immediately. The role of the office as the centre for corporate collegiality may evolve. Over time we might see office space reinvented as an ‘ideas hub’, and the long-term trend will no doubt be for smaller premises but, in the short-term, companies may be grateful if excess space allows them to appropriately manage social distancing.
As we have previously said (in our article ‘Why Companies should be thinking about M&A’), a number of drivers exist to make an acquisition strategy attractive in the months to come as a driver of change. While not without risk, for companies seeking an advantage, now is not the time to put strategic or opportunistic deals on indefinite hold.
Companies not suffering financially following Covid-19 will be in the minority. Strengthening the balance sheet will become a priority for many, capital spending will reduce and directors will have to consider whether to take on additional external finance, whether through equity or debt.
The unwinding of government support measures will occur to soon for some companies to cope. Those that took advantage of the furlough scheme are, in the case of larger employers, already having to address what will happen when it ends. Similarly, those companies that have benefitted from government supported lending schemes must factor repayment of that money into their strategic plans.
The emergency funding and furlough measures are unprecedented peace time interventions in business by government. With much economic uncertainty and a government committed to economic intervention, companies will have to get used to operating in a rapidly changing regulatory landscape.
By way of recent example, the Corporate Insolvency and Governance Bill has been described as the biggest shake-up of English insolvency law for a generation and the government had trailed a mini-budget (now expected to be more limited in scope) in early July to contain measures designed to kickstart the economy. Laws to prevent foreign takeovers that pose a risk to national security are being mooted, and Brexit too will be the source of yet further changes.
What the last couple of months has taught us is that the world is less certain and more changeable than we previously thought, something which may persist for some time to come. To stay relevant and adapt to this period of rapid change it is not just employees who have had to become more flexible, company decision making became more agile in lockdown.
Company boards have taken decisions quickly, because they had to. Those companies that can continue, to think and act quickly, will have an in-built advantage over competitors. Within the confines of good governance, some companies may start to re-consider their reporting and management structures.
Covid-19 may drive fewer changes to the world than we might currently envisage. The new normal may not look that different to the old normal, but the shock to the system of the past few months has caused companies to think and act differently. How they continue to adapt to those points of difference will play a [large] role in determining their future success.
Covid-19 has impacted all companies differently, however those that emerge most successfully from its shadow will understand the need for change, have the foresight to identify the changes that they need to make, the commitment to make those changes and the flexibility to continue to adapt and evolve.