faculty speak

Covid-19: Managing an Unknown

The Covid-19 Challenge: The Crux!

‘Think the unthinkable’ has become a new mantra in organizations across, in the 21st century essentials of management, and now you have a real problem in hand to test your mettle. The Corona virus or Covid-19, within a short span of about three months, has done enough to disrupt the global supply chains, investor sentiments, financial markets and the economic activity on a massive scale and in a manner unparalleled in global financial history. The global economy of the entire world has been hamstrung and lies in tatters. Global stock market indices jumping off the skyscrapers and the mountain cliffs. No one is travelling anywhere, planes stranded, and cruise ships have become floating junk in sea waters. And not to mention hundreds of millions of workers being locked up in homes and facing pay-cuts and lay-offs, there is no respite in the fear of this pandemic. The viral wave moving across continents has taken a massive toll as governments fight an unfamiliar and an unanticipated war against the virus, companies shutting operations and normal life coming to a screeching halt.

The clue lies in untested waters and the problem mainly being biological in nature rather than the predictable man-made disasters like the Credit Crisis of 1772, the Great Depression of 1930s, the OPEC Oil Price Shock of 1973, the Black Monday of 1987, the Asian Crisis of 1997 and the recent period’s Global Financial Crisis (GFC) of 2007.  The Covid-19 crisis is catastrophic as we are unequipped to deal with the magnitude of the challenges thrown at us and severe time constraints to get equipped with the medical machinery to fight it. The puzzled governments globally initiated rapid action but failed to have any bearing on the financial markets or ameliorate the situation in any way, except the lock-downs that potentially scuttle any efforts in ramping up capacities to effectively tackle the lethal virus, apart from colossal economic and societal costs.

Impending Threat: Potential Economic, Financial and Societal Fallout

The spreading new virus could make the world economy shrink this quarter for the first time since the Global Financial Crisis of 2007 and the looming recession can be as bad as or even worse, according to various international agencies and think tanks including International Monetary Fund(IMF). Further, the Organization for Economic Cooperation and Development (OECD) predicts that the international economy still estimated to grow overall this year and possibly rebound in 2021. However, OECD lowered its forecasts for global growth in 2020 by a half a percent and cautioned this figure could go as low as 1.5 percent if virus last long and spreads widely. 

Apart from considerable human calamity the virus has wrought, with reported deaths crossing 25000 and infected reaching half a million mark worldwide, the global economic prospects remain subdued and turned very complex to ascertain. The last time the global economy declined on quarter-on-quarter basis was at the end of 2008 and in 2009 when a shock to the global financial system and the melt-down caused mayhem for businesses across the world triggering corporate bankruptcies, mass lay-offs and job losses. 

The second largest market China’s reduced production is hitting hard on the Asian economies particularly India and more so the businesses around the world that depend on this global manufacturing behemoth. The impact of Covid-19 bound to be much higher than past outbreaks of Severe Acute Respiratory Syndrome (SARS-CoV) with high fatality rate that affected almost 17 nations and mostly mainland China and Hong Kong. Because the global economy now has become substantially inter-connected and obviously, China plays a far greater role in global GDP, merchandise, tourism and commodity markets including those of metals and demand for crude oil globally.  

The EU estimates shows that the virus has already cost the Europe billions in Euros this year in tourism revenue alone mainly due to the drop in the number of Chinese tourists. Further, given the severity of the impact in Italy, France, Spain, UK and the rest of Europe and most importantly now U.S. leading the worst affected, it’s quite possible things can only get worse.

India, with more than 1000 Covid-19 cases and 21 day lockdown, is already feeling the heat with production disruption in many sectors, loss of income and fall in exports as international borders shutdown. Now experts say that expectations of shallow recovery in 2020 from 2019 slow-down has been now dashed. We only bet our hopes on recent Union Government and RBI stimulus to salvage the economic fall-out.

The Fight: Unprecedented welfare stimulus globally in the last one-and-a-half century

The response from the leadership across the continents – Europe, USA, China, India and the whole host of countries around the globe – has been proactive running into tens of trillions of dollars trying to shore up markets and medical infrastructure, spending capacity and to help support the worst affected sectors, industries and MSMEs. The magnitude of these interventions speak volumes about the problem in hand and the uncertainty around – something unparalleled as compared to the Financial Melt-down in 2009. Globally, central banks including Fed and RBI have unleashed their arsenal in full throttle way beyond market expectations! So, it’s obvious that the virus represents an unprecedented shock to the socio-economic fabric of nations. The only respite appears to be a global slump in crude oil prices for now and of course, significantly reduced pollution levels globally giving another chance for mother earth and our life-supporting ozone layer to heal.

No doubt, economy and businesses can be worked on after dealing with the virus-related health crisis in a systematic manner. Economies and market sentiment recover given India’s strong macroeconomic fundamentals, once we start gradually gaining control on virus. Certainly it’s not social distance or isolation what is needed, but physical distance and social cooperation for every one’s survival and a hygiene of highest order as we need to maintain the societal fabric and bond intact we certainly fight the virus effectively. But till that time, 12 to 18 months away, to have vaccine arsenal in our medical ammunition machinery to fight the virus we need to work with aggressive positive spirits and the resolve of utmost order.

In the meanwhile define your role and priorities constructively – Hazard & Opportunity are always very much part of every challenge

As India boosts capacity for tougher challenges ahead, as a management guru I have few tips as to how you can sail through these times with joy, wisdom and resolve:

  • Use this time to understand yourself well, work on deficiencies and bring distinctive meaning to these times.
  • Make every moment highly productive by honing new skills and expertise – an insurance against VUCA or uncertain times.
  • Contribute maximum possible to your Institution and its brand equity in these difficult time – this is when your organization expect the most from you.
  • Do what the 99% are not doing – Be ingenious and innovative in your ideas, goal-setting and achievements to build that competitive edge.
  • Think and learn from new start-ups including those of social businesses and the way they are capitalizing on the crisis by being innovative and help providing solutions in specific spaces. See how firms are leveraging the unique ability of non-profit sector to serve hard-to-reach populations during disasters like these and why social businesses become the future thrust for even government policies.
  • Last but not the least, it’s essential that you stay fit while staying home; sweat it out in home quarantine. Most importantly adhere to health directives on physical distance and hygiene. It is a big challenge for a country of 1.3 billion Indians and you are one among them – ensure you make this health challenge easier for this great nation and for all fellow Indians in your own way.   

It’s always during times of crisis when it is important to put your best foot forward. Post-virus, China is back to work, but it takes time to bring that normalcy. Here in India too, upside is certainly in our hands and could only come from how effectively we contain the virus and its spread. Government and its agencies are doing their best to handle the situation and challenges of looming lay-offs and crashing markets. The situation warrants personal care against the virus, but this is a challenging time and we will certainly win the Covid-19 fight if we all work together. 

The struggle you’re in today is developing the strength you need tomorrow.” – Robert Tew

Dr Gajavelli V S
Professor
Economics & General Management