COVID-19 BACK-TO-WORK PLANNING GUIDELINES AND RESOURCES

Photo Credit; VIACOM-CBS. Like Captain Picard of the USS Enterprise, leadership will have to steer the ship safely through the battlefield

BUSINESS UNUSUAL: BACK-TO-WORK PLANNING GUIDELINES AND RESOURCES FOR COVID-19 READINESS

ON 1 MAY 2020 PHASE 4 OF THE EMERGENCY REGULATIONS WENT LIVE IN ALL 9 PROVINCES. SOUTH AFRICANS WILL RETURN TO WORK IN A PHASED APPROACH AFTER AN UNPRECEDENTED COVID19 LOCK-DOWN STARTED MORE THAN 5 WEEKS EARLIER.

READING TIME: 4 min

This article was originally published on LinkedIn - you can read the original post here.

For many organisations, reopening might not simply be a case of unlocking the doors and switching the lights back on. Quite a lot might have happened while nothing happened during the lockdown.

The following is a high-level checklist / key considerations for executives and business owners alike. Additional South African and international resources are provided at the end of the article, some of which contain detailed examples, boilerplate templates, etc.

While some of the references specifically refer to South African business law and requirements, the recommendations are generic and applicable to businesses in various countries

1. Conduct an Overall Assessment

Brace yourself - while the damage or impact of the lockdown might not be immediately visible or easily identifiable the moment you walk back through the doors, the organisation might have "sprung a leak below the waterline” (metaphorically speaking). There is also the very real possibility of a future risk event that might still fully unfold in the next few weeks or months (e.g. as a consequence of the chosen strategy, implementation thereof, and extent of compliance with regulations, or other factors). 

Conduct a thorough and comprehensive assessment to determine the impact of the lockdown/virus to date on:

• Staff and management
• Business Assets, Stock, IT systems
• Other Stakeholders – customers, suppliers, shareholders, creditors, landlords, regulators, etc.
• Business operations
• Business Finances and Cashflow

2. Understand the requirement of the various Stages and Regulations of the Disaster Management Act [1] and its impact on your strategy, operating model, and plan corrective action:

• Establish a Covid19 Task Team (if you have not done so yet, and appoint specific COVID19 Compliance Officer(s) ), co-opt expertise and allocate responsibilities and develop a strategy as well as supporting policies.
• Confirm if and when your business or organisation qualifies to open and trade during a specific Phase of the lockdown. Also, confirm whether or not any additional permits are required. If unclear or if your specific organisation falls in a grey area which is not spelt out in the Emergency Regulations, contact your legal advisor and obtain professional legal advice.
• Take the time to do a detailed impact assessment to understand exactly what the requirements for each phase are, and how these may impact both your organisation as well as the wider industry in which you operate. Note that there are different requirements for different sizes, types of businesses and industries which might affect locations or different types of outlets differently.
• In real-world terms, these requirements could affect the date that your business can practically open for business because these measures need to be put in place first, e.g. steps to ensure social distancing, preventing crowding in admin offices or public spaces like the staff canteen, or while customers wait for quotes or while collecting goods. This is also impacted by the required level of hygiene, PPE for employees, additional safety requirements, etc.
• Consider whether the business operations should be suspended, and if not, which products and services can be offered now, vs. phased in subsequently in compliance with lockdown regulations.
• Plan the necessary workforce and capacity requirements accordingly.
• Demand planning may require a rethink, as well as any impact of these changes on outsourced services and contracts where capacity might have to be reallocated in the short run, in consultation with service providers.
• Reopening requires a high degree of Response Preparedness [12], and may necessitate Scenario planning – e.g. how will you handle a situation where the company operates across multiple provinces, but some of these provinces operate under different phases (e.g. Phase 5 or Phase 3)

Covid19 Workplace Plans[2] should include:

• Return-To-Work Policies, updated HR and Operational Policies and Procedures,
• Risk and Hazard assessments and Preventative Measures,
• Compliance Checklists

3. Review of Financial position

• Do not arbitrarily increase prices to make up for losses or to profiteer from market shortages [15]
• Carry out a line-by-line analysis of expenses to determine minimum cost and strategies to curtail costs until business conditions improve,
• Determine restructuring costs (if applicable) as well as Covid-19 related expenses, and bring these into consideration when completely re-working the budgets, forecasts, projections and cash flow. Communicate these changes to the line managers,
• Review solvency and liquidity, financing arrangements and debt repayments,
• Review and (re)negotiate trading terms with a view to optimise liquidity and maximise working capital.

More resources available from [8] and [11] below.

4. Consider Occupational Health & Safety requirements[3] and Sectoral or Industry Guidelines:

New risk assessments are required that could necessitate amendments to existing Risk Management as well as HR policies, AND special measures to be implemented such as proper social distancing, action plans in case of infection or symptom screening, etc. Existing Risk management policies and procedures will have to be updated (refer to Point 9 below).

The OHSA further requires employers, to ensure, as far as is reasonably practicable, that all persons who may be directly affected by their activities (including but not limited to own employees, customers, clients, contractors who enter their workplace or come into contact with their employees) are not exposed to hazards to their health or safety. 

Source: https://www.zupermar.com/

• For one business this might require social distancing, supplying employees with PPE and hand sanitizers while electronically screening customers for fever at the door and recording their details. Note the Department of Trade and Industry published requirements for material masks

Source: Gautrain Whole-body Disinfection

• For another, this might e.g. require intermittent professional disinfecting of public areas and or equipment or further steps. 

5. Review the Supply Chain:

Supply chains and logistics could have been significantly affected due to:

• Supplier factory lockdowns,
• delayed raw material shipments or stockouts,
• import delays due to ships unable to dock at ports or air cargo curbed,
• warehouses might have limited capacity to accept new stock,
• some stock items might have spoiled or deteriorated or might simply be unavailable for an undefined period.

Under the current circumstances, the efficient frontier might have shifted and you may need to find a new happy balance between service, capacity, inventory, and lead time.

• Review stock levels, re-order levels (specifically where programmed/automated re-order levels exist) and investigate outstanding orders. Ensure that no artificial shortages are created in the process [15].
• Re-rate suppliers: consider supplier resilience, flexibility under fluctuating demand and ultimately, supplier reliability,
• Reassess respectively, the degree of visibility, and the viability of the current supply chain – resources and capacity might have to be rebalanced.

6. HR considerations, Staff Planning and Consultation

The Department of Labour communicated stringent requirements in a briefing by Labour Minister Thulas Nxesi on 3 May 2020 (view on Youtube). The media statement with transcribed speech can be found here [16].

Consider staffing capacity requirements and re-activation, e.g.:

• identifying specific staff members forming part of the first 30% or applicable regulated percentage for your type of business,
• vs each subsequent wave as lockdown restrictions are gradually lifted.
• This will require a detail situational assessment to e.g. deal with employees currently based in other provinces or other cities.

All changes to existing Policies and Procedures, as well as any new requirements, must be communicated formally with staff [2]. Staff may also require training in new or amended operational procedures.

Consider flexible work arrangements such as:

• staff rotation,
• or continued working from home,
• and how IT can be used to your benefit to reduce the need for clients or staff to come to the office.

7. Assess the IT landscape

Consider the potential impact of changes in business operations on critical infrastructure, systems, and processes, e.g.:

• Productivity software to improve work-from-home efficiency and productivity,
• Disinfecting of keyboards, electronic equipment, access control equipment, and or contactless alternatives for time and access control systems,
• Consider increased IT risks (refer to point 9 below).

Source: Youtube Fever Screening Solution

8. Legal Review: Contracts, SLAs and Projects, ongoing Litigation and Disputes

Stay on top of existing litigation and disputes pre-dating the pandemic.
Investigate and identify any potential new contract breaches, terms not complied with, obligations not met, situations where performance was delayed, partially or completely withheld, where deliverables and deadlines were missed during the lockdown – both from the viewpoint where:

• your organization is the recipient of goods or services, as well as where
• your organization is the provider of goods or services.

Identify any instances where it was, or remains impossible to perform or fully comply, as a result of a set of circumstances beyond the reasonable control of either party.

• Obtain professional legal advice – some situations might be remedied with respectful and mutually pragmatic (re)negotiation.
• Standard contracts, terms and conditions might need some improvement going forward.

For more legal resources, please refer to [13] and also refer below under Governance and Risk.

9. Governance and Risk management

Be mindful of Directors Duties [4] in general, and specifically under Covid19 conditions (see resources here [5] and here [6]) where financial distress [7] poses a very real risk. Review your risk management plans.

• Consider any additional governance/reporting requirements [2][3].
• Consider increased IT-related risks (e.g. cybercrimes such phishing, malicious websites, and malware [9]) targeting a distributed workforce, or leaking of information [10].
• Institute strict record-keeping and improve overall risk management[11], including but not limited to OHS/PPE compliance and fever temperature screening. Accurate and complete record keeping will be crucial as the new Emergency Regulations appear to shift the onus and burden of proof onto the employer.
• Review insurance policies, business interruption, liability cover, etc.
• When in any doubt, obtain legal advice.

10. Stakeholder management

Communicate as may be required with, and monitor communication from certain stakeholders including Staff, Customers, Suppliers, Shareholders, Creditors, Landlords, Regulators, Government, Other interested parties.

Conclusion:

Successfully navigating the risk and many pitfalls of the Covid-19 crisis will require leadership, teamwork, frequent measurement, and adapting the plan and operations to changes in the environment from time to time.

If you found the article helpful or interesting, please feel free to share.

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Resources*: The following resources were consulted in the compilation of this article.

[1] https://www.gov.za/documents/disaster-management-act-regulations-29-apr-2020-0000
[2]https://neasa.co.za/covid-19-return-to-work-toolkit/
[3] http://www.gpwonline.co.za/Gazettes/Gazettes/43257_29-04_Labour.pdf
[4] https://www2.deloitte.com/content/dam/Deloitte/za/Documents/governance-risk-compliance/ZA_DutiesOfDirectors2013_16042014.pdf
[5] https://www.werksmans.com/firm-news/covid-19-duties-of-directors/
[6] https://www.financialinstitutionslegalsnapshot.com/2020/04/managing-a-company-and-covid-19-south-african-directors-and-their-duties/
[7] https://www.bowmanslaw.com/insights/restructuring/covid-19-financial-distress-insolvency-and-restructuring/
[8] https://www.ansarada.com/ COVID-19 resources
[9]https://www.riskiq.com/blog/analyst/covid19-cybercrime-update/
[10]https://www.ensafrica.com/news/detail/2651/south-africa-coronavirus-covid-19-how-to-avoi/
[11] https://www.aon.com/event-response/coronavirus.aspx (generic but valuable information)
[12] https://www.aon.com/COVIDplanningtoolkit/default (generic but valuable information)
[13]https://www.lexisnexis.co.za/news-and-insights/covid-19-resource-centre
[14]http://www.treasury.gov.za/comm_media/press/2020/Annexure%20B%20-%20Recommended%20Guidelines%20Fabric%20Face%20Masks%20RSA%20DTIC.pdf
[15] https://www.bowmanslaw.com/insights/competition/excessive-pricing-in-south-africa-in-the-age-of-covid-19-2/
[16] https://www.gov.za/speeches/minister-thulas-nxesi-directions-coronavirus-covid-19-alert-level-4-3-may-2020-0000

*Information made available in the public interest and shared in good faith. Respective sources remain fully responsible and liable for the accuracy of the information published by them.

** All artwork and photos remain the property of their respective owners.

BUSINESS UNUSUAL IN A TIME OF CORONAVIRUS (PART 1) - WHERE AND HOW DID THIS CRISIS ORIGINATE?

Doing business in a time of Coronavirus/Covid-19, Supply Chain disruption and Business interruption - Where and How did this crisis originate?

NOTE:

• This is a developing situation. Accordingly, role players continue to react and markets continue to adjust to the emerging situation. The historical data, facts and figures contained in this article were accurate at the time of publication, but statistical figures and some facts can change over time (e.g. share prices, mortality figures, etc). References below for further reading.

• This article will be posted into 3 parts:

• Part 1.   What happened and how did we get here? (Word count: ±852)
• Part 2.   How can the current crisis affect commerce and industry? (Word count: ±1080)
• Part 3.   What are the business priories – immediate and over the next few months? (Word count: ±1675)

PART 1 – What happened and how did we get here?

2020 is fast turning into a watershed year. In early January the global economy was chugging along nicely, with some international Indexes peaking around record highs. However, New Year euphoria was cut short as news gradually broke about a virus spreading in Wuhan, China.

Figure 1 - Wuhan Map

Wuhan is a hi-tech hub and China’s “motor city”. It is the biggest city in Hubei province, known as the “thoroughfare of China” by virtue of being a transport and industrial hub for central China and the region’s political, economic and commercial centre. More than 300 of the world’s top 500 companies have a presence here. 

By 13 January, the first case was identified in nearby Thailand. By 22 January 2020, the novel coronavirus (subsequently referred to as Covid-19) had spread to major cities and provinces in China, with 571 confirmed cases and 17 deaths reported. On 23 January 2020 (2 days before Chinese New Year), authorities informed residents of Wuhan of an imminent lockdown from 10 am. An estimated 300 000 citizens left the city immediately. The lockdown spread as quarantine was imposed in various cities and regions. On this same day that the lockdown occurred, the first case of Corona was identified in Singapore. From early February, Chinese authorities began shutting down factories in a desperate attempt to halt the spread of the virus.

This plan did not work, and virus contagion spread to the rest of the world. And economic contagion followed – the following is a summary: 

• China is the world's manufacturer and is also the world’s largest container cargo handler and home to seven of the world's 10 busiest container ports – processing around 30% of global traffic or around 715,000 containers a day in 2019

• The lockdowns meant that factories could not get stock shipped out that was already manufactured and simultaneously stopped manufacturing altogether. China’s manufacturing activity plunged to an all-time low in February, with the official manufacturing purchasing managers’ index (PMI) slowing to 35.7, according to the National Bureau of Statistics (NBS). Comparatively, during 2008’s Financial Crisis the manufacturing PMI only dropped to 38.8 in November 2008. Services were similarly affected, and the services index almost halved last month to just 26.5 from 51.8 in January (and first time lower than 50 since the index was started 15 years ago in late 2005.

• Ports had insufficient capacity to load and offload ships. The Ningbo-Zhoushan Port Authority, in the city of Ningbo, typically has 24,000 registered container truck drivers. By Feb 12 only 800 truck drivers were working. Ships could not get into Chinese ports, as the loading and discharging of goods slowed down and shipping traffic dropped 19.8% in February from a year earlier.

• Incoming cargo clogged ports and shipping lines started charging surge fees for refrigerated containers importing food. Some cargo ships left China carrying as little as 10% of TEU capacity, others cancelled trips. 
• Overall China’s exports and imports plunged. Exports fell by 17.2% in January and February combined compared to the same period a year earlier, according to the General Administration of Customs
• A survey by Beijing-based think tank the Shanghai International Shipping Institute shows that capacity utilisation at the main Chinese ports fell by 20-50%, while more than one-third of ports said storage facilities were more than 90% full.

International impact

This lowered throughput had a knock-on effect on the other side of the Supply Chain in receiving countries:

• LA handled 705 000 containers in Feb 2019. The same period Feb 2020 was down to 544 000 or 22.87%. By 18 March Los Angeles ports have seen 40 + “blank sailings” - ships scheduled to arrive that didn’t, numbers previously unheard of. 
• On the Asia-Europe trade route, at least 61 cancelled sailings have been announced, representing a 151,000 TEU capacity reduction. China typically represents about 30% of Hamburg's container throughput and about 25% of Rotterdam's. Rotterdam Port Authority estimated that a 1% drop in its annual volume, which after recording throughput of 14.8 million TEU would amount to 148,000 TEU. Hamburg harbour reported a 40% plunge in trade volumes.

Oil Price War

Then, on 8 March 2020, after a potential oil production cut agreement with Russia fell flat, Saudi Arabia initiated a price war with Russia. This triggered an immediate international fall in the price of oil, with US oil prices falling by 34%, crude oil falling by 26%, and Brent oil falling by 24%.  Oil prices dropped to 18-year lows. For more info see here and here 

CONCLUSION

The fallout and contagion (both medically and financially speaking) spread nearly globally in the space of 3 months. This caught many off-guard, as global supply chains and financial markets were disrupted. In the next post, we will consider the potential and combined impact of the virus, supply chain interruptions and business disruption on commerce and industry, and potentially on your own business or organisation where you work.

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For more information, visit our website on www.cogniplex.co.za. A copy of this article is also posted on Linkedin.com 

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