DR RAJKUMAR SINGH
AMID the chaos and all the incoming advice, it’s hard to know exactly what leaders should do to day. The next normal will look unlike any in the years preceding the Corona Virus, the pandemic that changed everything. But it’s a high time to provide leaders with an integrated perspective on the unfolding crisis and insight into the coming weeks and months. Largescale quarantines, travel restrictions and social-distancing measures drive a sharp fallin consumer and business spending until the end of Quarter 2, producing a recession. Although the outbreak comes under control in most parts of the world by late in Quarter 2, the self-reinforcing dynamics of a recession kick in and prolong the slump until the end of Quarter 3. Consumers stay home, businesses lose revenue andlay off workers and unemploymentlevels rise sharply.Businessinvestment contracts and corporate bankruptcies soar, putting significant pressure on banking and financial system.Althoughmonetary policy easedin Quarter 1 has limited impact, given the prevailing low interest rates, but modest fiscal responses prove insufficient to overcome economic damage done in previous quarters. Present economic scenario: In this new extraordinary situation demand suffers as consumers cut spending throughout the year. In the most affected sectors, the number of corporate layoffs and bankruptcies rises throughout 2020, feeding a self-reinforcing downward spiral. The financial system suffers significant distress, but a full-scale banking crisis is averted because of banks’ strong capitalization and the macro prudential supervision now in place. Fiscal and monetary-policy responses prove insufficient to break the downward spiral. The global economic impact is severe, approaching the global financial crisis of 2008–09. Exponential case-count growth is hard to internalize unless you have experienced it before. Managers who haven’t experienced this or been through a “tabletop” simulation are finding it difficult to respond correctly. In particular, escalationmechanismsmay be understood in theory, but companies are finding them hard to execute in reality, as the facts on the ground don’t always conform to what it says in the manual. To overcome the situation many institutions have put basic protections in place for their employees and customers. Companies have activated no-travel and work-from-home policies for some workers and physical-distancing-at-work measures for others. The challenge for them is also evolving. For remote workers, interruptions are more frequent than in the office. Making a mental separation from a sometimes-chaotic home life is tough.Workers are finding that they don’t have the skills to be successful in an extended remote environment, from networkingto creating routinesthat drive productivity.They worry that staying remote could make them less valuable, especially in a recessionary environment. Minimum goals required: Even in this emergency-like situation, companies need to increase communication, balancing the needs of the business with expectation setting and morale building, so employees know that their wellbeing is top of mind. They also need to change working norms, making remote work practical and simple whenever possible. In addition,theymust protect people’s health, with whatever measures are appropriate to the workplace: positive hygiene habits, personal protective equipment, amended sick-leave policies to ensure health and safety. Monitorleadingindicators of how and wherethe pandemic is evolving and conduct scenario planning using both epidemiological and economic inputs. Earlier, we sketched out the swing factors to watch to understand how the Corona Virus pandemic might develop. In the urgency of the moment, it’s easy to lose sight of the actions that might be needed tomorrow—and the day after that. And so evolve the nerve centre to plan for the next phase. Having experienced a new way of living, consumers are recalibrating their spending,increasingthelikelihoodthat spendingmay permanently shift between categories and that online services could get adopted far faster. Decoding this new normal—and ensuringthatthe company has a strategyto navigate it—is an important part of the work of a nerve centre. Precautions in policy-making: Policy-making at many companies is scattershot, especially at those that haven’t yet seen the Corona Virus directly. Many, such as professional-services and tech companies, lean very conservative: their protection mechanisms often add to a perception of safety without actually keeping people safer. Asking employees to stay at home if they are unwell may do more to reduce transmissibility. Such policies are more effective if employees receive compensation protection. Being optimistic about demand recovery is a real problem, especially for companies with working-capital or liquidity shortages and those veering toward bankruptcy. Troubled organizations are more likely to believe in a faster recovery—or a shallower downturn. Facing up to the possibility of a deeper, more protracted downturn is essential, since the options available now, before a recession sets in, may be more palatable than those available later. On the other, some companies are pursuing their Corona Virus responses strictly within organizational silos. But these teams have different assumptions and tend to get highly tactical, going deep in their own particular patch of weeds rather than thinking about what other parts of the company doing. In a nutshell, the Corona Virus crisis is a story with an unclear ending. What is clear is that the human impact is already tragic, and that companies have an imperative to act immediately to protect their employees, address business challenges and risks, and help to mitigate the outbreak in whatever ways they can. — The writer is Professor and Head, P G Department of Political Science, Bihar, India.
