How UAE Businesses Can Protect The Ecosystem While Navigating The COVID-19 Pandemic
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In normal times, a business faces enough daily challenges to test the nerves of the strongest of leaders. And fair to say, these are not normal times. So, how are business leaders to be measured during the COVID-19 crisis? They do not have to be even close to perfect. But they do have to be good enough.
React but do not overreact
The revenue streams of many businesses have been cut off entirely. What to do in such a situation? These companies had no choice. Doors were forced shut, so staff were sent home, and contracts were cancelled where they could be. Very few companies have large cash reserves, and even those that do would be reluctant to burn through any significant amount of it without being forced to.
But a total revenue cut-off is the extreme situation, and most companies are not facing such a scenario. The damage currently being inflicted ranges from moderate to extreme revenue reductions. For the lucky ones, there is no revenue reduction or minimal reduction. And for some we are even seeing significant revenue increases due to the fact that the COVID-19 crisis is actually driving more business their way.
In absence of a total revenue cut-off, then, companies need to react and not overreact. Yet, one of the first moves taken by many organizations was to cut and freeze as much spend as possible, without even considering whether this was needed.
While a healthy profit should be the goal of any business, cutting unnecessarily weakens the entire economic environment. In the UAE, where there are no direct unemployment benefits, there is nothing short of a moral obligation among companies to take measured and careful steps when deciding where and how much to cut in order to navigate their businesses through the COVID-19 minefield. To be clear, the right approach is to cut no more than necessary.
Be precise– and forget profit
It is not business as usual right now. And it is not profit at all cost. Over the course of the COVID-19 pandemic, business owners and decision-makers in the UAE will do well to remember that taking care of the system -and not ourselves and our businesses alone in isolation of that system– is what is needed.
Companies should be willing to live with less profit or even carefully managed losses during this period- this is, in fact, essential in order to keep the UAE business ecosystem intact.
Managing cash flow seems to be a skill few companies get right over the long-term. The discipline is simply not there for the majority. A few months of paying on time is often followed by a period of scrambling to cover payroll and vendor invoices.
There are many reasons why companies get this wrong, and it is not worth going into here. But what does need to be made clear is that whatever a company's history with regard to cash management, during the COVID-19 crisis, there is a need to get more precise than ever with financials. Only then can proper decisions be made.
In absence of accurate financial forecasting, the reaction in a crisis is usually one of panic– a panic that leads to blind cost-cutting instead of more measured adjustments.
And it is a blind cost-cutting that will leave a long-lasting scar on the UAE business ecosystem. It will lead to an "every man (company) for himself" environment, where vendor contracts are cut without consideration of the ensuing trickle-down unemployment effect.
Force a better mindset
The unique mindset of the UAE business environment must be clearly acknowledged so that we can act with dignity in the face of the COVID-19 crisis. Namely, perhaps more than anywhere else in the world, here in the UAE, we are truly miserable when growth is negative (or even flat).
But now is a time to get control of such emotions. Until we are on the way out of this crisis, we will need to force ourselves to adopt a more respectable stance. Granted, we do not know how the COVID-19 crisis will play out. If this becomes a long-term reality, then the number of businesses going bankrupt will be devastating– as will the ensuing job losses. If that happens, it will be a very unpleasant world, possibly for years to come.
It is however unlikely to come to that. The more likely scenario is that we will start to get back on our feet in the months ahead, as China now seems to be carefully doing.
And so, we need to navigate the next months with grace. UAE business owners and business leaders need to remind themselves that being unselfish –which, to state again, in this case, requires us to think about the entire business ecosystem, and not just ourselves or our companies in isolation– is the only way to be.
The greater good right now requires as much balance, measure, and responsibility as we can deliver.
Reduce spend only as much as is needed– and know your numbers with accuracy so you are not making best guesses.
Avoid laying off staff unless you are certain you are not going to need them again when the worst is behind us. Instead, if absolutely needed, reduce salaries across the board temporarily– as a percentage equally distributed across all employees.
Pay your bills as close to on time as you can. If you cannot, show that this matters to you by reaching out to your vendors (before they reach out to you) to let them know you need more time. Then tell them how much more time you need.
And the list goes on, but you get the idea.
Until just a few weeks ago business owners in the UAE were probably planning for a half-decent year, and most employees were likely not worrying too much about job security. And even though we knew COVID-19 was spreading, we still somehow didn't see this coming, until it was on our doorstep.
If we keep our eye on the greater good –in this case, the whole, and the sum of its parts together– we have the best chance of mitigating things. Decision-makers need to be crystal clear on their responsibilities here.