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Emerging Strong After COVID-19

John Fitzgerald, CPA

5.21.20 | Vision 2020 – COVID-19  Update

It has finally begun.

With the announcement by Governor Cuomo of the first steps toward the reopening of New York State,1 the question is no longer when we will come out of this, but rather how we will come out of it and what will the “new normal” be going forward?

Government Action

According to state medical tracking analytics, New York appears to have passed its peak of COVID-19 cases, and Governor Cuomo has announced the gradual reopening of the epicenter of the national health crisis. To mitigate the risk of a fast reopening, New York will go region-by-region. Regional reopening depends on achieving the following health metrics:2

  1. Decline in total hospitalization – A 14-day decline in net hospitalizations for COVID-19 or a total no more than 15 new hospitalizations daily on average over a three-day period.
  2. Decline in deaths – A 14-day decline in virus-related hospital deaths, or fewer than five a day, averaged over three days.
  3. New hospitalizations – Fewer than two new hospitalizations per 100,000 residents over a three-day period.
  4. Hospital bed capacity – A hospital-bed vacancy rate of at least 30 percent.
  5. ICU bed capacity – An ICU bed availability rate of at least 30 percent.
  6. Diagnostic testing capacity – A weekly average of 30 virus tests per 1,000 residents a month.
  7. Contact tracing capacity – At least 30 working contact tracers per 100,000 residents as part of a program developed in collaboration with the NYS Department of Health, former New York City Mayor Michael Bloomberg, the Johns Hopkins University School of Public Health, and Vital Strategies.3

Once a region has achieved all seven-health metrics, it may commence with reopening businesses by industry identified under four phases.4 Effective May 15, 2020, phase one is scheduled to start in three regions of the state, there will be a two week pause before the institution of the next phase. The phases are as follows:

  • Phase One: Construction, Manufacturing, Retail – Curbside Pickup Only, Wholesale, and Agriculture, Forestry, Fishing and Hunting
  • Phase Two: Professional Services, Retail, Administrative Support, and Real Estate and Rental/Leasing
  • Phase Three: Restaurants, Hospitality, and Food Services
  • Phase Four: Arts and Entertainment, Recreation (including sporting venues), and Education

It is believed that the phased reopening will be a safer and more successful approach to regaining some level of normalcy and stimulating economic activity as we look to get people back to work and rebuild our economy.

Starting Fresh

As much as everyone would like, we cannot just press start and resume as if nothing has happened. It’s time to set priorities, assess where we are, and even consider the opportunities (yes, opportunities) presented by the challenges of reopening our cities. As the popular idiom “learn to walk before you run” indicates, businesses need to assess and prioritize their operations, focusing on the parts of their businesses that are essential to reopening and getting employees back to work, but also adapting or adjusting other parts to keep people safe and support efforts being made to avoid a spike in COVID-19 infections. Some considerations business owners may build into their reopening plans include:

  • Appointing a team to manage the reopening
  • Determining who the essential employees are within the organization
  • Ensuring adherence to federal state and Human Resource guidelines
  • Developing a plan for visitors

As businesses, or their appointed teams, prepare to take the initial steps to reopen, they should also work to:

Stabilize Cash Flow: Having a strategy to manage cash flow will enable businesses to address immediate expenses, such as rent and other direct costs, and prepare for expected expenses associated with reopening, including costs for new safety measures. Cash flow strategies will vary based on the nature of the business, but it is presumed that a significant number of businesses will, or already have, made temporary and/or permanent workforce reductions or tapped into their lines of credit as a source of cash to help stem the bleeding and provide the capital required to reopen. Even companies that received funds from the PPP loans may eventually need to reduce their workforce as the loan proceeds were only meant to support payroll expenses for eight weeks and unfortunately, the impact the pandemic is having on businesses will likely extend beyond this timeframe.

Additional cash flow strategies that businesses may want to explore include limiting advertising budgets, overtime and other discretionary expenses. If possible, companies should also continue to work with their landlords regarding rent payments and other utility costs as well as their vendors to negotiate payment terms. As in all negotiations, it is important to find ways to meet the interests of all parties.

Leverage Technology: Leveraging the recent transition to a fully remote work force may help businesses operate more efficiently than they did prior to the COVID-19 crisis. As remote working became the sudden norm, businesses have begun to leverage cloud-based technology such as Zoom, Microsoft Teams, and Office 365 to keep employees easily connected to their coworkers and perform their normal tasks. As companies reopen, it is important to determine what was learned during the shut-down. For instance, what work can continue to be performed at home? Have there been new efficiencies or cost and space saving opportunities unveiled by this crisis? Has the enhanced security implemented by a business’ IT department resulted in more secure services for its clients—aiding in the efficiency and value delivered. By leveraging the technological developments that most companies, and their staffs, have implemented and utilized during quarantine, the reopening process may go a bit smoother and can even uncover savings that did not exist prior to COVID-19.

Have a Health and Safety Plan: Employees may be eager to return to work, but most are also concerned about safety. To reassure them, businesses should consider the following measures:

  • Checking employees’ temperature at the entrance of buildings should guidelines allow
  • Requiring mandatory quarantines for impacted employees
  • Encouraging remote working where feasible
  • Limiting business travel
  • Reducing density of workspace by redesigning the office
  • Adjusting work hours/rotating work shifts
  • Introducing hygiene and safety measures, such as physical distancing, providing masks and gloves, equipping public spaces with touchless options and incorporating extensive and comprehensive cleaning/sanitation services daily
  • Installing barriers in high traffic areas/one-way hallways
  • Coordinating elevator use and safety restrictions with landlords and other tenants in the building
  • Asking for employee feedback – listening to their concerns

Communicate the News: The business reopens—that’s good news! Now, it is time to get that message out to all employees, customers and contacts. This messaging needs to be upbeat and positive and should also highlight the various steps the company is taking to promote safety and reduce the risk of exposure to COVID-19 or any future health concerns that may occur. While at it, the communication should radiate confidence in order to remove customer doubt and influence behavior to help stimulate your business. In all communications to your employees, vendors, clients, and other outside contacts, reinforce the message that the company is returning to the marketplace fully prepared to operate in this new environment—having established essential protocols to help ensure long-term safety as well as compliance with the various current and projected government regulations addressing the crisis.

Revisit Service/Product Offering: In effect, you are re-entering the marketplace. It is time to take a hard look at your target customers’/clients’ current situation—their financial status, their state of mind, their purchase behavior and how it may have changed due to the pandemic. Understanding these factors will help a business adjust its operations—specifically its product development, sales and/or service approaches—to effectively meet the needs of its post COVID-19 customer. Given the impact the pandemic has had on local, national and global economies, it will also be important for businesses to rethink their pricing models to ensure that they are not perceived to be out-of-touch with current market conditions. Whether it is offering packaged services or products or providing price incentives based on volume, companies need to consider the best approach to embrace their customers as they reopen. And for businesses that do not believe it is advantageous, or just can’t afford, to adjust their pricing model, enhanced efforts should be made to promote the value of their services and products to help counteract price sensitivity and aggressive strategies implemented by competitors.

The Issues Vary

As the region and world begin to emerge from quarantine, it is important to know that each business sector will encounter unique challenges and opportunities in the short- and long-term. Berdon’s team of professionals understand this and will provide additional content that will address the issues facing various key business sectors as well as suggestions on how companies within those sectors can successfully reopen and sustain operations.

For more information on this or any other matter related to the COVID-19 pandemic, please contact your Berdon advisor.

Berdon LLP New York Accountants

1 https://www.governor.ny.gov/news/amid-ongoing-covid-19-pandemic-governor-cuomo-announces-three-regions-new-york-state-ready

2 https://forward.ny.gov/metrics-guide-reopening-new-york

3 https://www.vitalstrategies.org/

4 https://forward.ny.gov/industries-reopening-phase