COVID-19 and Rewiring the Business Model

Corporates in the sectors of insurance, banking, aviation, tourism, hospitality, manufacturing, automotive, e-commerce and many others are trying to cope with the crisis unleashed by the virus. From contact centers, to in-house Shared Service Centers, to third party service providers ... executive and front-line managers have been furiously devising plans to ward off any disruptions in the functioning of global processes.

The bitter truth is that existing business models have been severely tested and exposed while coping with the challenges of COVID-19. Business continuity plans, which forecast recovery timelines in hours in the aftermath of a disaster, have been turned upside down. Enterprises are scrambling to keep the workforce engaged for the long periods of lockdown announced by multiple nations across the globe.

Existing business models have been severely tested and exposed while coping with the challenges of COVID-19

The Great Depression in the 1930s and the global recession post the Lehman Brothers saga in the late nineties, heaped financial misfortune across the globe. In the current scenario, economists are already predicting a massive economic collapse combined with global recession and job cuts once the lockdowns are lifted. Enterprises have, so far, wired their fixed models by factoring in prolonged spells of unforeseen disruptions in business activities, given the above mentioned events.

This column evaluates the components needed to rewire current business models, which will enable enterprises to tide over the grim times ahead.

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COVID-19: Tip of the Iceberg for Tectonic Shifts in Shared Services Delivery Models

Contingent Workforce

As per HCMWorks, contingent workers are defined as freelancers, independent contractors, consultants, or other outsourced and non-permanent workers who are hired on a per-project basis, and can work onsite or remotely. The advent of a contingent workforce model with formal structures, risk protocols and governance, would be worth evaluating – depending on business needs and criticality of processes. With employees confined to homes and governments promising to supply them with essential items until the lockdown era passes, there has been a huge surge reported in orders for firms operating in the e-commerce, logistics, retail, warehousing, food and healthcare space.

As per the recent CNBC Workforce Wire report, the likes of CVS Health and Instacart are hiring contingent workers to meet the swelling demand. Amazon, Papa Johns, Kroger’s and Walmart are ramping up both regular and contingent workforce to assist with last mile deliveries. Enterprises could explore the option of contracting service providers or staffing firms to meet contingent workforce requirements going forward. While contingent workers currently receive low compensation and are denied the benefits available to a regular employee, this may undergo a change in the future. Though not a foolproof measure, having a ready and fit contingent workforce could limit any disruptions in the event of shortfall of regular employees getting impacted by virus attacks.

Work from Home (WFH)

In terms of the commute to the office, WFH is likely to be part of the mainstream for enterprises in the near future. The frowns and suspicion cast upon employees doing WFH by many companies, including reporting managers, in the pre-coronavirus times is expected to reduce. In the current situation regarding COVID-19 and social distancing measures, WFH has become inevitable.

“We’re being forced into the world’s largest work-from-home experiment and, so far, it hasn’t been easy for a lot of organizations to implement,” says Saikat Chatterjee, Senior Director, Advisory, at Gartner.

Enterprises around the globe are likely to amend existing Human Resource policies and prepare for future work place needs. A blog titled ‘Impact of Corona Virus is Limited but Ongoing’ by the Everest Group, mentions that many multinationals and Global In-House Centers have imposed a work from home policy for all staff in China and Hong Kong until further notice. The same is happening in multiple offshoring locations, including India and the Philippines.

How is your SSO / GBS responding to the challenges of COVID-19? Provide feedback in our new "COVID-19 Impact on Global Service Delivery Models" survey – and we'll share the results in a webinar and a report next month.

Wellness

Corporate Wellness Programs will gain more traction as enterprises will be keen to sustain a healthy workforce in order to minimize the impact of bio-virus attacks. The cadence on monitoring employee health and conducting awareness programs is likely to receive a boost.

Shared Services Centres could likely see an increase in medical facilities, heath indices and sanitary measures in their sites or campuses after the subsidence of the coronavirus. A healthy workforce is likely to be beneficial in terms of costs and operational risks in the event a coronavirus like situation in the future.

Business Continuity Planning (BCP) and Business Continuity Management Systems (BCMS)

The biggest fall-back of the coronavirus has been the rusty and woefully designed enterprise BCP plans. A majority of the existing BCP plans have only evaluated scenarios like natural (floods, cyclones etc.) or physical disruptions (law & order, terrorist attacks etc.), and hence have been rendered ineffective in the face of the coronavirus attack.

In this context, the blog by Everest Group states that service delivery centres or shared services operating in China and Hong Kong, which are largely servicing internal customers, are themselves operating at reduced capacity or are closed completely until further notice. Going forward there is a need to revisit BCP plans, including the fit regarding type and criticality of processes for remote work. Accordingly, elements of digital business continuity need to be incorporated.

The frequency of conducting BCP and BCMS drills have to be significantly increased and any shortcomings addressed with speed. The location strategy and future expansion of offshore centres or captive SSCs must be redrawn to counter any such unforeseen eventualities.

IT Infrastructure

This deserves the utmost focus, given the current situation where organizations have thousands of employees operating from home. IT infrastructure including security protocols, helpdesks, systems access, physical assets, cloud, virtual/digital workplaces, remote internet devices, desktops, tele-conferencing, internet and broad band networks etc. have to be upgraded to meet any such challenges in the future times.

A leading global Information Technology Enabled Services based in India is shipping 6,000 laptops every day to enable employees to work from home. For many global enterprises that have outsourced work to vendors, the existing processes and IT protocols, which have been unable to cope with current challenges, need to be debated and amended where necessary.

In this context, a leading executive of an IT company in India mentions that as part of their contractual obligations, they are expected to provide these services out of approved facilities (these typically have access to client networks). They also stated that if they are moving things outside the approved facility, there are implications for secure connections, and without approval it’s a breach of contract.

Finance

The outbreak of coronavirus has unearthed multiple unknown variables leading to unseen provisions in terms of associated costs. Cost allocations have been impacted with regards to procurement of extra laptops, incentives/allowances to employees working from home, healthcare, and governments announcing financial packages impacting taxes and employee perks.

Another aspect relates to global Supply Chain Management, and the vendors providing goods and services, which have to be reoriented to overcome adverse situations in the future.

Lizzie O’ Leary in The Atlantic (The Modern Supply Chain is Snapping) mentions that the coronavirus has exposed just how delicate the global supply chain is, running on outsourcing and thin margins. In a go-forward mode, Finance has to factor in such variables while forecasting expense models, revenue recognition, cash positions, valuation of financial assets and subsequently account for these provisions.

Summary

The critical lessons learnt so far from the coronavirus pandemic are unique and unparalleled. As organizations continue to grapple with the pandemic by either shutting down operations or remotely operating the processes, business risk and target operating models are in dire of being rewired.

Being flexible, vigilant and prepared will be the much needed attributes for enterprises to stay sustainable in the post-COVID-19 environment.