Earlier this year, the emergence of COVID-19 created an unforeseen period of economic slowdown in the US. Commerce across numerous industries was reduced or suspended to enforce shelter-in-place and social distancing mandates. Businesses deemed non-essential were forced to close temporarily, unemployment spiked, and earnings growth decelerated for many industries. In short, the US economy has been faced with both short-term and long-term challenges.
This was an abrupt departure from the flourishing economy we experienced just a few months prior. In late 2019/early 2020, the economic outlook was positive in part due to global growth and an easing of foreign trade tensions. In March 2020, once COVID-19 was declared a pandemic, the sudden economic fallout that followed resulted in financial instability, negative impacts on revenue and earnings, and a drop in business and consumer confidence. During the height of the outbreak, the outlook for many businesses was bleak and uncertainty was the only thing that was certain.
Looking Ahead to Signs of Recovery
But now, seven months into the pandemic, we can see that not all was lost. Some businesses were only slightly affected by government restrictions, and a few even thrived while much of the country was shut down. According to Dun & Bradstreet’s COVID-19 Commerce Disruption Tracker – which illustrates the impact of the pandemic on businesses’ abilities to operate, generate sales, and have employees perform their work duties - industries that experienced very low levels of disruption include public safety, television and radio stations, central banking, and utilities. Other businesses such as grocery stores, healthcare, and IT services benefited from consumers shifting to stay-at-home lifestyles with heightened safety and health precautions.
For those businesses severely disrupted – restaurants, retailers, travel and hospitality, among others - the implications of restrictions were catastrophic for many. However, the overall impact for some was offset by the U.S. Small Business Administration’s Paycheck Protection Program (PPP), to help certain businesses cover payroll and other necessary expenses. As cash flow shortages began to surge, this program became the difference between survival and closure for many small businesses and helped soften the overall impact the pandemic has had on the economy.
Forecasting Amid Signs of Risk
But what about the future? Going forward, how can companies forecast and act on signs of risk?
If nothing else, 2020 has highlighted the need for businesses to understand risk in order to remain agile. Business disruption has become the new normal across many industries. Understanding the financial impact COVID-19 has had can help prepare your business for future crisis situations.
Specifically, businesses should be aware of their customers’ and suppliers’ financial health to better understand the potential future impact on cash flow. When you operate with little or no data on the health of your suppliers, product shortages and supply chain disruptions may occur and drive up prices. When there is a lack of visibility into your customers’ financial health, it’s hard to know which one will pay you on time.
Simply reacting to signs of business deterioration in your supplier and customer base is an inadequate way of accurately forecasting revenue and prevents you from taking steps to mitigate risk. Poor insight could lead to supply chain disruption, late customer payments, and ultimately unmet revenue requirements.
Businesses can help safeguard cash flow by obtaining insights on both company-level as well as COVID-19 network impacts. Dun & Bradstreet’s COVID-19 analytics provide an intensive look at key factors affecting businesses during the coronavirus pandemic. The COVID-19 Impact Index and our newest analytic offering, the COVID-19 Recovery Index, help companies identify customers and suppliers impacted by – and beginning to see signals of recovery – from coronavirus. The Impact Index assesses the potential level of disruption to an individual business and provides relevant data to assist in managing risk to your company’s cash flow, growing your pipeline, revenue and profitability, and developing a risk-based assessment for your supply chain. The Dun & Bradstreet COVID-19 Recovery Index tracks companies’ operations and demand activity levels (vis-a-vis pre-pandemic activity levels) to better pinpoint recovery. Our unique global data offers analysis that can provide actionable insights that can help you not only mitigate risk and sustain positive cash flow, but also create new opportunities to grow your business.
Strategic Recommendations to Help Businesses Navigate Risk
This type of predictive insight is an optimal way to help protect your company’s cash flow and uncover potential risks throughout your supplier and customer base. Our Impact and Recovery Indices can provide the intelligence needed to help businesses drive revenue, manage risk, and more accurately forecast during the pandemic.
For example, the table below illustrates some actions a company could take with the insights provided by the COVID-19 Impact and Recovery Indices:
|Risk Range||What It Means||Strategic Recommendation||Action Steps|
Leverage Data and Analytics for Post-Pandemic Risk Management
Now that the U.S. labor market is showing signs of recovery and businesses are slowly reopening, companies are looking to brighter days ahead. As customers cautiously return to their pre-pandemic lifestyles, businesses that felt the greatest impact during the lockdown may slowly recognize profits once again. Even as restrictions continue to ease, it is critical that businesses continually plan for the unknown and create a strategy to sustain cash management. A sound strategy should include:
- Dynamically assessing revenue exposure: Evaluate shifting disruption and monitor signs of recovery. Dun & Bradstreet’s COVID-19 Impact Index allows you to continually asses shifting disruption and recovery.
- Forecasting and optimizing revenue: Quickly understand and predict where your cash may be at risk at any given time.
- Obtaining richer insight on cash flow risk: The COVID-19 Impact Index features enhanced, qualitative insight on elements that have been shown to help assess the network impact of COVD-19. The new COVID-19 Recovery Index can also help you monitor the pandemic aftermath.
COVID-19 has presented an ever-changing economic situation to US businesses. Leveraging robust global data and insights for risk management can help protect your cash flow and highlight areas of concern across your supplier and customer base.