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The Mid-Corporate Journey to Resilient Growth

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8 Jul 2020

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Awakening to a new reality

On New Year’s Eve 2019, global GDP growth stood at 2.9 per cent after almost a decade of positive growth, however there were signals, following events such as environmental disasters, financial crises, social and trade tensions, that this trend would soon be disrupted.¹ Historically, the attitude following disruptive events (such as the global financial crisis) has been focused on ‘recover to be able to continue as before’. The corporate world was, by and large, geared towards growth and profitability in normal times and managing costs in challenging periods. Resilience measures have often been deprioritised, being perceived as costly, time consuming and an impediment to growth. However, as the COVID-19 pandemic spread and held the world in its grip, it became more apparent that disruption has already become a part of our lives.

Mid-corporates, due to their size or role in the value chain, are especially vulnerable to disruption. In a survey* conducted with 205 mid-corporates, over 60 per cent of C-level executives indicated that the current COVID-19 crisis impacted their business by causing a 20-50 per cent reduction in monthly revenues, with majority of respondents foreseeing it will take 6-12 months to recover from this disruptive impact. Therefore, whilst building resilience may initially lower their levels of profitability, it will ultimately better prepare them for a new post-COVID-19 world and enable them to successfully weather future storms. Whereas this world is expected to be shaped by disruption, it will also be an opportunity for new profitable growth through innovation and transformation.

What will the future look like?

There is growing consensus that recovery from the COVID-19 crisis will not bring the world economy back to where it was at the end of 2019, due to lingering economic and employment uncertainties driving apprehensive consumers to prioritise saving over consumption. To survive and flourish, mid-corporates will need to strengthen and develop new, differentiated capabilities and resulting propositions; all through the lens of resilience and growth.

Resilience, defined as the ability to limit the impact of disruption and recover quickly, will need to be built into their business models to allow flexibility for accommodating and weathering future disruptions in their pursuit of profitable growth. Our survey indicated that over 70 per cent of mid-corporate executives selected ‘making their operations more agile and flexible’ as most relevant to their company’s growth priorities at present compared to before the start of the COVID-19 crisis.

Instead of viewing resilience as a cost, as it has been traditionally perceived, companies (especially mid-corporates) now need to fundamentally shift their mind-set and focus on building resilience upfront, considering it an investment that will deliver sustainable growth and profitability in the longer term. However, building resilience must be considered as a journey.

Major shifts in a new world

Major shifts in a new world figure

Figure 1: Major shifts in a new world

The road to resilient growth

As mid-corporates emerge from the lockdown restrictions, they must be cognisant that their recovery from this crisis will be a long-term journey, involving a series of defined stages (see Figure 2) which will enable mid-corporates to achieve resilient growth. This is akin to running a marathon with distinct milestones along ‘the road to Resilient Growth’, where companies move towards resilience through the adoption of capabilities that will minimise the impact of future disruptions and yet still facilitate profitable growth.

The road to resilient growth figure

Figure 2: The road to resilient growth

Stage 1: Immediate Response

As the COVID-19 pandemic spread across the world, governments imposed urgent restrictive measures (Immediate Response Stage) requiring companies to immediately adhere to new regulations. Delayed or suspended receivables have led to significant liquidity issues, compelling mid-corporates to focus on transactional short-term measures to protect their cashflows, such as reorganising production schedules, rebalancing resources (labour and materials) and managing employees’ and customers’ expectations through clear and regular communications. With the exception of digital tools for remote working, few of these new resilience measures have been embraced at this stage.

Immediate response

Exit criteria

It is critical for mid-corporates to successfully meet certain ‘exit criteria’ upon completion of each stage in order to be adequately prepared for the next stage of the ‘Road to Resilient Growth’. Before governments start easing restrictive measures, mid-corporates must ensure they have fulfilled the following criteria:

Road to resilience exit criteria

Stage 2: Preservation and Stability

With the lifting of lockdown measures, many companies would now be exiting the Immediate Response stage, having adhered to government regulations throughout the lockdown period, and are now backing up their active business continuity planning (BCP) processes and focusing on preserving their businesses whilst establishing a measure of stability in the near term. In this Preservation and Stability stage, mid-corporates will aspire to reinstate critical operational activities and reframe processes to ensure business continuity and viability, whilst continuing to adhere to regulations (e.g. safe distancing measures). Some of the key critical success factors for Stage 2 include:

Preservation and stability

Exit criteria

This stage is typically considered to be successfully completed when the following criteria have been met:

Road to resilience exit criteria

Case example: Malaysian manufacturer defies COVID-19-led decline

Case example

Stage 3: Preparing for Growth

Whilst seemingly far off, stability and growth will return, with the pace being different for each business, industry and economy. Following a broader reopening of economies, companies can expect to progress towards operating at full capacity, with planning done on a longer term (monthly/yearly) basis. There needs to be a strong and sustained focus on resilience in order to drive sustainable and profitable growth in the longer term. Some of the key critical success factors for Stage 3 include:

Preparing for growth

Exit criteria

Mid-corporates will be ready for the new world once they have a well-defined resilient growth strategy incorporating:

Road to resilience exit criteria

What’s next?

Companies across the world are now emerging from the lockdown and moving into the second stage of the journey – preserving operations and re-establishing stability. Mid-corporates that have successfully minimised pressures on revenue to increase their cashflows, and reorganised their operations to reflect current capacity, will be best placed to build greater resilience which will be essential in their journey towards ‘Resilient Growth’.

Future topics of the Road to Resilience Series will include action-oriented insights on Regulatory, Finance and Working Capital Management, Alternative Capital and Investments, Manufacturing and Supply Chain, New Ways of Working, and Driving Efficiencies via Digitalisation.

4-stage journey of resilience, recovery and growth

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¹ Survey commissioned by Standard Chartered in June 2020 and conducted with 205 mid-corporates (annual revenue USD100m-500m) based in Mainland China, Hong Kong, Singapore, Malaysia and India

² Standard Chartered Global Research, ‘COVID-19 – Impact on global supply chains’, May 2020. Read a summary article on supply chain resilience for more information.

*International Monetary Fund, World Economic Outlook, April 2020

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The Road to Resilient Growth

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