Many companies planning and delivering capital projects have in-depth experience in handling emergencies — but COVID-19 is unprecedented in the speed and breadth of its impact. Capital project delivery teams often have crisis response and project continuity plans at the ready, but companies will have to adapt these plans to tackle COVID-19’s many and fast-moving challenges. It is critical to mobilize a swift, effective crisis response, while also addressing workforce, operations and supply chain, financial reporting, tax and trade challenges, and strategy and brands.
Capital projects & infrastructure (CP&I) companies are not alone in facing these challenges, which have an impact that affects the economy and almost every nation in the world. In PwC’s latest COVID-19 CFO Pulse Survey, finance leaders in every economic sector in the United States and Mexico shared their top concerns. PwC has also prepared general guidance on several key topics in COVID-19: What US business leaders should know.
In addition to industry-agnostic challenges, CP&I companies also have some sector-specific considerations. Below we address some of their most pressing issues related to COVID-19 and offer steps these firms should consider taking — now.
When it comes to disaster preparedness, many companies are experienced. But COVID-19 is unprecedented in its impact, so you may need to adapt and deepen existing plans.
Here is our take on some issues that companies with capital projects may face:
COVID-19 is threatening the health of capital project workers and the continuity of the projects themselves. In some cases, these now-vulnerable projects are critical to companies’ long-term stability, as well as to the quality of life in the communities they serve.
Capital project stakeholders therefore face a dual imperative: They must mitigate the immediate disruption without neglecting the groundwork needed for long-term project continuity.
Some of your employees could face serious health risks. Others may have to be furloughed for a period of time that is impossible to define. Companies will need to protect active employees and make sure that furloughed ones can be reactivated quickly when needed.
Cybersecurity may also be a concern, as a growing number of employees work and handle sensitive data remotely.
Many capital projects face supply shortages, interruptions and delays due to closed factories, logistics challenges, supplier bankruptcies and delayed processing at borders. The need to mitigate health risks for employees may further impact operations.
For those projects that are on hold or soon will be, it is critical to take steps now to prepare to get back up to speed later.
COVID-19’s impact on workforce, supply chains, operations and project continuity — and the resulting impacts on margins, cash flow, and loan repayments and terms — could all have major implications for financial reporting.
Companies experiencing significant disruptions may even struggle to meet required quarterly financial reporting, as well as reporting deadlines for federal, state, and local authorities and related government programs that support many capital projects.
And public companies may face increasing pressure to disclose revised guidance related to COVID-19’s impact.
COVID-19’s current and potential impact on capital projects may have serious tax implications, which may be even more complex for projects that have suppliers in more than one country.
Tax implications will stem from sudden changes on a project’s expectations for costs, suppliers, revenue generation and loan repayments, as well as from the impact on previously existing agreements with government programs and the potential for new government support.
A prolonged economic downturn will likely lead companies to evaluate their entire portfolio of capital projects, making tough choices and strategizing to emerge with stronger capabilities and a more efficient capital process.
Even the most optimistic global and national scenarios for COVID-19 could still lead to severe impacts on many capital projects. But careful planning and execution — under the direction of a tiger team and supported by accurate, continuously updated data — can mitigate the impact and increase the odds that projects will remain viable and on a path to long-term success.