“In the corona crisis, the CEO must act proactively and courageously,
out of care for their employees, to secure liquidity and ensure the survival of the business.
Timely, bold measures must be taken by top management within the company.”
The COVID-19 pandemic is already one of the most severe economic crises since World War II. Especially since the “second wave” and the renewed lockdown in November 2020 across nearly all European countries and many other nations, company leaders have been confronted with new challenges on top of the already complex day-to-day business: the medium- and potentially long-term COVID-19 crisis management of their company. Particularly in industries that were already impacted by disruptive changes such as digitalization and electromobility before the pandemic—such as the automotive industry, fashion industry, machinery and plant engineering, media and entertainment, professional services, and of course the hospitality and restaurant sectors—there is a search for new solutions to cope with the economic effects of COVID-19. Many of our colleagues at Executive Interim Partners are currently working as Interim Managers in executive roles or as consultants in companies both in Germany and abroad, leading these companies through the crisis, and helping them survive, or even come out stronger from the COVID-19 pandemic. We are supporting numerous companies as crisis managers in the role of interim Chief Restructuring Officers (CROs) or Chief Transformation Officers (CTOs). We have summarized our practical experience since the outbreak of the COVID-19 pandemic to provide you with effective crisis management strategies.
What initially seemed like a temporary task in March 2020, the establishment of a Corona Task Force, has now become a permanent body in almost all companies. In addition to the management or executive board, members of the supervisory board or advisory board, as well as other crisis managers, are part of the usually weekly virtual Corona Task Force meetings. The task force ensures that decisions are made quickly, measures already agreed upon are managed and implemented, and redefined if necessary.
Almost all companies now use communication platforms like MS Teams, Cisco WebEx, or Citrix GoTo to ensure as many employees as possible can work from home. In this context, standardized and effective IT equipment must be provided, while continuously ensuring cyber security.
For a realistic risk assessment, it is essential to model and represent potential new lockdowns and worst-case scenarios in integrated financial models with various assumptions (duration, impact, effectiveness of measures). The following business scenarios should be considered, particularly:
Strict liquidity management with central decision-making processes and new spending rules is a crucial success factor for ensuring survival during the COVID-19 crisis. The principle here is: Cash is King! A bottom-up liquidity plan must be created, and new decision rules for payouts must be communicated and implemented. Furthermore, stringent management of working capital, i.e., receivables, liabilities, and inventory, must be ensured. This working capital management includes measures such as consistent receivables management with continuous checks on overdue receivables and negotiating deferral agreements with suppliers or possibly with landlords. In case of a liquidity crisis, it is advisable to involve an insolvency lawyer, even though the mandatory three-week insolvency application period has temporarily been suspended by lawmakers. This requirement applies only if insolvency or over-indebtedness is caused by the COVID-19 pandemic, which must be proven in each individual case.
In special situations, all solutions for securing financing with existing and new financing partners and shareholders should be checked and implemented. First, the crisis resilience of the company’s existing financing structure should be analyzed. This also includes reviewing relevant agreements in loan contracts with financial institutions and identifying unsecured assets. It is also important to conduct a “stress test” based on the worst-case scenario, particularly for the agreed-upon covenants with banks if external financing has already been taken out. There are often additional financing alternatives for short- and mid-term liquidity security, such as factoring, sale and leaseback, or the sale of land or buildings. During the COVID-19 crisis, many companies are already utilizing attractive state financing aids in the form of special loans, soft aids, or guarantees from regional or federal governments. Unfortunately, the application process for state support programs is still often as time-consuming and complex as obtaining loans from commercial banks prior to the COVID-19 crisis. Operating losses in the previous years (2018 and 2019) often lead to the rejection of aid applications. In many cases, financing partners require restructuring and restructuring reports according to IDW S6 before providing financial aid. These application processes for “immediate aid” can sometimes take up to six months or even longer.
The Corona Task Force must continuously review all costs that are not essential for the company’s survival and, if necessary, adapt them to the new situation. In addition, new decision rules, ideally at the management or board level (C-Level), must be communicated for expenditure approval limits. Measures for immediate cost reductions include, for example, cutting costs for temporary and external workers, insourcing services, halting advertising and marketing expenses, and reviewing all consultancy costs and projects.
The highest priority for personnel measures is the duty of care for all employees and maintaining the company’s operations for its survival. The employer’s duty of care includes developing and implementing a dynamic hygiene concept with a step plan that follows the current regional and nationwide restrictions and defines the levels for internal hygiene and safety measures. Home office regulations for employees who do not need to be on-site should also be regulated in a company agreement and with the relevant insurance company. To ensure the survival of the company and the long-term protection of jobs, companies affected by the COVID-19 crisis in terms of sales and labor shortages should negotiate special measures with the affected employees (if no works council exists) or the works council. These include, in particular, agreements on short-time work, which can be flexibly adjusted according to the different waves of the pandemic.
Due to the high risk of infection with the coronavirus through droplet and surface transmission, almost all production companies have now implemented strict hygiene concepts and developed emergency plans to keep operations running. Companies must act agilely during the COVID-19 crisis. This includes continuously adapting work and production planning to changing capacity utilization and demand situations, as well as responding to employees who have tested positive or are in quarantine.
Suppliers have often also been affected by the COVID-19 crisis. It is now necessary to intensify and maintain continuous dialogue with all strategic suppliers about their status and how they are managing the crisis. Suppliers’ delivery capability and creditworthiness, particularly of system-critical suppliers, must be continually reviewed. At the same time, inventory levels in the company (raw material stocks, semi-finished products) and order volumes need to be checked and adjusted. The procurement organization must ensure that, if necessary, alternative suppliers, raw materials, or products with higher availability or lower costs can be switched to. A contingency plan with alternative suppliers or substitute suppliers should already be prepared.
Regular and intensive communication with all customers and the implementation of measures to secure short-term revenue will help guide companies through the crisis. Customer dialogue should be intensified, particularly with strategic clients, and the crisis resilience and trust in the professional handling of your company should be demonstrated and proven. Some companies in the crisis situation also rely on support from their customers. The support provided by customers can include improved payment terms or the expedited handling and comparison of pending complaints (“claims”). Our experienced Interim Managers at Executive Interim Partners, who specialize in crisis situations, are available for further information or support.
We will get back to you as soon as possible.
Don’t hesitate to seek advice – discretion is guaranteed: with experienced top-level interim managers, you will achieve your goals.
Residenzstraße 27
Preysing Palais
80333 Munich
Phone: +49 89 552 7979 20
Fax: +49 89 552 7979 01
© Copyright – Executive Interim Partners
