Truth be told, the novel Coronavirus Covid-19 pandemic is a serious business risk crystalized. The impacts of the pandemic and responses from the people in an attempt to curb it altogether have unprecedented debilitating effects on business survival and profitability.
The lockdown imposed in many cities is to help curb person-to-person transmission as a major way the virus spreads. Lockdown implies that many businesses and offices with be closed down for as long as it takes. The financial impact of the lockdown on businesses is huge as sales will drop and people will not be able to come out to patronize. Except for critical and essential services like hospitals and maybe some food companies.
Social distancing requires we avoid large gatherings and maintain at least about 2 meters distance with a next person. Meanwhile, virtually all human economic and social activities require gatherings and direct human-to-human interactions and contact. What has happened to sports? The Olympics has been postponed! Sporting activities are suspended globally.
Those are just few of the immediate human reactions to the pandemic. The real question is:
How are employers and business owners in Nigeria reacting or responding to the pandemic and lockdown?
With declining sales and huge loss of revenue, a business entity will look for ways spontaneously to survive: either
1. Raise more revenues, or
2. Remove unnecessary costs
Take for example: I have a client who owns and runs a big hotel with a bar and a club in Lagos. When Covid-19 struck, the state enforced compulsory business lockdown in the area and banned all gatherings, bars, clubs and also imposed curfew. This has been in effect for a month now.
Can you imagine the impact that will have on the business?
With or without patronage, there are some fixed and also recurrent costs that must be born by every business. How would a business stay alive without liquidating during this time?
EMPLOYERS' AND BUSINESS OWNERS' REACTIONS
1. Layoffs
Wages and salaries are paid from the monthly cashflows of many businesses. In the case of my client who has about 70 staff with monthly salary overhead of about a million Naira, and then in a whole month makes sale of less than N100,000 what would be wise to do? The sales revenue is not even enough to pay power bills which will come whether the business is open or not. Or whether sales come or not. That is not yet mentioning other costs of consumables and services being paid for to cater for the business.
In this case, layoffs may happen. From 70 staff, my client had to scale down to 15. What happened to the remaining 55? Off! At least for now till the end of the lockdown or pandemic, whichever is earlier. This is just the case with many businesses.
2. Compulsory Unpaid Leaves
Just like temporary a temporary disengagement, many firms and businesses have asked their staff to proceed on compulsory unpaid leave till further notice. This implies that the staff will stay back home doing nothing and without receiving any monthly wages since they are not working. And the employer is not generating any revenues. I heard cases of some banks taking this path. What I was not able to confirm is whether the staff will be paid full or part salary or not at all.
3. Pay Cuts
Still subtle, some business owners and employers have decided to take this path. They pay their staff only a fraction of their usual monthly pay for at least some time. This is better than outright layoff for many.
The question is: if the lockdown persists as we have seen and the pandemic bites harder, for how long would an employer continue to bear this cost knowing fully well that sales are not coming and revenue is not being generated? Not for long. The first two strategies may be the ultimate eventuality.
4. Wind up
Though this may amount to minor fraction of the businesses, the risk crystalizing from this pandemic will kill many struggling businesses or some businesses that have not put in place the right business continuity plan or lack one. Every business needs to have the right business continuity strategies put in place in case some unforeseen risks crystalize. Agreeably, no one really foresee pandemic of this global scale, truth is many businesses will die. Some businesses will be so indebted after the pandemic that they will have to go the bankrupt way and fold up.
To mitigate against many of these negative effects of the pandemic, the federal government and the CBN are attempting to make some business palliatives available to all. This is still at the implementation stage and we hope we feel the positive impact soon.
5. Nothing
There are certainly many uncommon ways other employers have taken in response to this pandemic and the consequent lockdown. Some still stay afloat and keep their full staff force on full payroll. Such employers and maybe others above may have found ways of engaging the services of their staff from home or online. Service industries that don't deal in physical goods are common examples. Services can be rendered online and over the phone. And the staff can work from anywhere. I say kudos to these ones. All in all, we hope the curves are flattened soon and the lockdown is removed and then life can go back to normal.
In the meantime, lets all continue to follow the guidelines set forth during the pandemic and lockdown:
1. Stay home, stay safe
2. Maintain adequate social distance
3. Avoid large gatherings
4. Practice personal and social hygiene
5. Wash your hand regularly with soap and water, or use alcohol-based hand sanitizers
6. Refrain from touching your face with unclean hands
7. Do not give in to fear and do not propagate fake news
8. Wear face/nose masks where appropriate
With these and more, we will all stay alive to see the end of the pandemic which has affected us all in ways we never expected. And hopefully, like many economies like Wuhan, China, the lockdown can be lifted and businesses can reopen too. This requires we all #takeresponsibility.
How have employers you know handled this trying times? Share below.