BUSINESSES FIND NEW EQUILIBRIUM IN UNCHARTERED WATERS

Business Today Malaysia|April / May 2020

BUSINESSES FIND NEW EQUILIBRIUM IN UNCHARTERED WATERS
It is increasingly clear our era will be defined by a fundamental disunity -- the period before coronavirus pandemic and the new paradigm that will emerge in the post-viral era -- the “new normal”

In this unprecedented new reality, we will see a dramatic restructuring of the economic and social order in which businesses and society have traditionally operated.

And beyond, we will see the beginning of discussion about what the next normal could entail and how sharply its contours will diverge from those that previously shaped our lives.

While organisations shift and adapt towards ensuring immediate business continuity and shock resilience, others are already considering what their business functions will look like on the other side. Managing through a crisis towards a sustainable business means that leaders need to consider how major global crises may affect their operations, in the immediate, near and long term – and how to manage for success on the other side.

Companies need to act fast, stay informed, and do whatever it takes to survive, adapt and contain the business impacts from the pandemic. They need to focus relentlessly on the necessary short-term arrangements required to weather and survive, adapting to new operational paradigms, and containing damages.

Cash flow issues that plagued companies for months was the final straw as no other options were available except to cease operation. Whether the decision is meant to be temporary or permanent remains uncertain.

Research Manager in Economics and Business at the Institute for Democracy and Economic Affairs (IDEAS), Lau Zheng Zhou says small and medium enterprises (SMEs) will be badly affected in terms of cash flow as many of them may not have reserves saved up.

Lau points out that prior to the outbreak, businesses were already feeling the brunt from the US-China trade war in 2019 and with the Covid-19 pandemic happening now will only add to the burden.

“Many of these firms were already affected by the trade war and with supply chain disruptions, they will face serious cash flow issue,” Lau tells Business Today.

On a side note, Ian Ho, Regional Managing Director of Shopee, also that the pandemic and the implementation of the Movement Control Order (MCO) posed a different set of challenges to businesses in the country.

Reports had shown that 71 percent of SMEs in the country only had cash balances to keep sustaining for another month or two.

And in any given day, businesses across the nation are already facing daily struggles to keep operations running smoothly. Amid the ongoing crisis, these struggles have amplified, raising further questions if existing smaller players in the industry will be able to keep their doors open even after the crisis subsides.

On another note, PKR’s Subang MP, Wong Chen, tells Business Today that what SMEs really need is wage subsidies.

“We need to ensure that SMEs do not close down in the next three to six months, or the nation will face mass unemployment,” Wong says, adding that the government will do well to go back to the drawing board and engage the SMEs on the issue of wages.

On April 6, Prime Minister Muhyiddin Yassin announced an additional RM10 billion supplementary stimulus package specially targeted to support SMEs.

The supplementary stimulus is critical to ensure the survival of SMEs who are the backbone of the Malaysian economy. SMEs currently account for over two-thirds of the country’s total jobs and nearly 40 percent of the economy.

This SME package is in addition to the RM250 billion economic stimulus announced on March 27, which included cash-handouts to qualified households and individuals, wage subsidies, moratoriums on bank loans and delays to income tax submissions, among other measures.

In a response to a phone interview with Business Today, Ramon Navaratnam, a Malaysian economist and corporate advisor to the Sunway Group, points out while the stimulus measures for businesses are aimed at easing their liquidity burden in the shortterm, more help needs to be provided for a longer period to SMEs which are most affected.

“The biggest challenges for SMEs are pivoting their businesses, adopting more digital technologies and regaining consumer confidence,” Navaratnam says.

“Businesses must transform to meet the future better. It is a good opportunity to recognise the needs to make radical changes.”

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April / May 2020