Pandemic has forced most companies to alter business models
The Covid-19 pandemic and subsequent economic fallout have forced 77% of companies to fundamentally change their business models, according to FTI Consulting’s annual “Resilience Barometer” report. The report surveyed 2,185 leaders in large companies across the G20 countries.
The pandemic has had a profound impact on the business landscape, ravaging certain industries and driving digitalization across all areas. Retail, hospitality, travel, transportation, and oil and gas have been among the most affected industries.
Overall, FTI Consulting’s report found that 3 in 10 companies in G20 countries require restructuring or refinancing because of Covid’s impacts, while 60% are facing challenges servicing debt requirements. Companies have seen an average revenue decline of 10% and a headcount decline of 12%.
Most companies (over 60%) are also concerned about higher national debt loads as a result of stimulus spending – which will likely lead to higher corporate tax rates. The UK has already announced that it will hike corporate tax rates to 25% in 2023.
With companies expecting consumer behavior changes to be permanent – 78% think so – they won’t be able to return to old norms. That means a sizeable shift to e-commerce for retail and more emphasis on pick-up and delivery for restaurants, for example.
Increased digitalization and remote working have also opened up more opportunities for cyberattacks. Nearly one-third of companies lost customer data to attacks in 2020, compared to a quarter in 2019. Three-quarters of business leaders say that cybersecurity has been pushed up their board’s agenda because of the pandemic.
Internal misconduct also increases in tough economic times. Sixty-nine percent of companies reported an increase in regulatory breaches and investigations in 2020 as a result of the pandemic.
Meanwhile, 75% of leaders believe the pandemic has permanently disrupted supply chains.
“From debt servicing to cyber threats, businesses have never faced so many compound crises occurring at once. If 2020 has taught businesses anything, it is that those businesses that invest in resilience will be well placed to succeed when we emerge on the other side,” said Caroline Das-Monfrais, a senior managing director and global resilience lead at FTI Consulting.
Resilient companies will be better able to challenge their existing practices and seize opportunities to accelerate growth. “Such opportunities range from e-commerce sites acquiring established high-street brands, to auto manufacturers investing in green mobility solutions,” the report notes.
But while companies can increase resiliency to some degree – by diversifying suppliers or upping cash flow, for example – the force majeure of the pandemic made very clear winners and losers. How much resilience can you really pack in to ride out your industry being functionally outlawed for a year?
Technology, media, and telecom companies had a Covid-19 resilience score of 49/100 – the highest score in FTI’s report, while food and beverage had the lowest score at 35. The pandemic has been a boon to most parts of the TMT sector, as it has driven the need for digitalization, communication, and at-home entertainment. TMT firms also were better able to shift to remote work for most of their workforce.
Do pharmaceutical companies deserve similar praise for being in the “right industry” because of a global plague? Food processing, manufacturing, and restaurants didn’t have the same luck as TMT and pharma to benefit from the unique contours of the crisis. Having more cash on hand or a digitalized, diverse supply chain wouldn’t have saved them, either.
