COVID-19: Considering the potential business impacts for Indonesia

The COVID-19 outbreak has been declared a pandemic by the World Health Organization, causing huge impact on people's lives, families and communities.

The global economy has also taken a big hit, with sharp falls in stock markets all around the world, and volatility in exchange rates and commodity prices, forcing monetary authorities to adjust their predictions for economic growth in 2020, and governments to look at stimulus packages.

As the international response continues to develop, we know that organisations are facing potentially significant challenges to which they need to respond rapidly. Organisations are required to operate at a minimum operation level, execute with agility and prioritise investments, while staying focused on protecting their people. 

In Indonesia, the economic impact is evident through the fall in the IHSG and the Rupiah. The rapid spread of COVID-19 has affected at least 500 people in 16 provinces (as of 24 March 2020). Meanwhile, the government has already followed countermeasures implemented by other affected countries: social distancing and strong encouragement of work from home policies. This has caused a lot of businesses to turn to online platforms to survive.

With the global and national crisis ahead and challenges that require both immediate and long-term actions, the key is to prepare for action. Below we  provide guidance on how to set rules, update policies, construct contingency plans and provide responses in order to protect organisations. The guidance will cover both general steps and specific steps related to common business issues that organisations in Indonesia are struggling with due to the COVID-19 outbreak.

Five key steps to mitigate the impact of COVID-19 outbreak on your business

Identify Critical Business Functions and Develop Recovery Strategy

  • Companies need to identify which of their business functions are essential to their continuing operations
  • Companies needs to develop a clear and concise strategy and plan on how to recover any critical business function which goes down  in a  reasonable time
  • If those critical functions are supported by third parties, companies should contact them to ensure appropriate contingency plans are in place and to make further arrangements as necessary

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Review existing Policies, Procedures and response plan

  • Ensuring the relevancy of your current Crisis and Business Continuity policies, procedures and response plan given the recent developments
  • Continuously review and monitor the policies, procedures and response plan and the supporting infrastructure (e.g. technology support to enable work from home,  alternate business site, etc.)
  • Revisit and strengthen Internal Control Process and Procedures to adjust with the new strategy and response plan

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Establish a crisis management structure

  • Lean crisis management structure with ability to make fast decision making
  • Crisis management structure must be filled with personnel with appropriate authority and competencies
  • The crisis management structure must also be agile and adaptive due to the nature of disasters which can dynamically change from moment to moment

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Determine trigger points to activate the “Business Continuity Plan” and monitor the implementation

  • Companies need to determine certain trigger points to serve as leading indicators along with applicable thresholds
  • Several trigger points needs to be considered as during the pandemic period, each critical point (social distancing, lockdown, or recovery phase) needs to be addressed appropriately with different strategies
  • When the threshold is breached, it will provide a  signal to execute the  relevant phase of the business continuity plan
  • During plan implementation, companies need to continuously monitor and evaluate its effectiveness 

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Have an agile and responsive communications function

  • An agile, responsive and fast communication function is very critical during times of crisis as many decisions need to be made without delay
  • Companies must develop this communication function in alignment with the crisis management structure
  • Strong public communication to keep customers and media informed
  • Ensure sufficient arrangements with third parties, authorities and emergency services 

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Key areas of focus

Crisis response and management

  • Establish a crisis response structure with established workstreams, clear responsibilities and accountabilities.
  • Develop likely and reasonable worst case scenarios and their potential impact to support crisis and response planning.

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Operations and supply chain

  • Perform an operational risk assessment and  consider and plan for the impact of disruption on  critical business functions.
  • Understand your COVID-19 supply chain risks  and impacts, including third party suppliers.

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Workforce

  • Assess potential impact and develop options  to support, move or evacuate, using employee  location/profile and emerging intelligence data.
  • Adjust HR policies to align with local  regulations (e.g entitlement to continued pay  during quarantine).

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Focus on data

  • Identify data needs and develop protocols for  data extraction, preparation and analysis.
  • Model the impact of scenarios on industry sector or business-level commercial performance, and stress test commercial revenues against downside economic scenarios.

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Communications strategy

  • Develop a rapid communications plan and  approach to build and maintain trust and  reputation during the crisis for key stakeholders.
  • Tailor best practice templates and  communications materials such as emails,  FAQs and intranet.

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Head office functions

  • Legal, IT, Commercial and Insurance: review  existing insurance coverage, IT infrastructure and  resilience, force majeure, contract clauses.
  • Finance, Treasury and Tax: financing, restructuring and cash-flow
  • Investor relation market disclosure
  • Process refinement to adjust to current development
  • Robotics Process Assurance

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Customers and revenue

  • Revise your sales strategy to deal with the  evolving customer behaviours and competitive  environment (risks and opportunities).
  • Prioritise actions to protect customer  relationships and commercial interests.
  • Model customer behavioural change.

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Earnings, liquidity and working capital

  • Assess earnings and liquidity impacts
  • Model multiple scenarios and develop implementation plans to use as required
  • Understand and manage potential liquidity, debt & capital implications
  • Product gross margin analysis

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Contact PwC Indonesia Crisis Centre Services

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Contact us

Julian Smith

Advisor, Government & Public Services, PwC Indonesia

Tel: +62 811 194 1177

Subianto

Partner, Risk Assurance Leader, PwC Indonesia

Tel: +62 812 993 5018

Lenita Tobing

Partner, Strategy Consulting, PwC Indonesia

Tel: +62 811 109 4481

Joshua R Wahyudi

Partner, Restructuring and Distressed M&A, PwC Indonesia

Tel: +62 811 180 0115

Melli Darsa

Partner, Legal Services Leader, PwC Indonesia

Tel: +62 815 1755 5385

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