What hopes lie for the business world: The storm has bypassed us, TORNADO or TSUNAMI remain

It is the seventh month since the world has been dealing with the coronavirus epidemic, and experts predict that we are in danger of deterioration in the autumn and winter months. The vaccine is not yet in sight and it is not realistic to expect it before next year at best.

One could say that at this moment, the most realistic is a moderately bad scenario, according to which we would be living and working in the coronavirus environment for at least another six months.

When the coronavirus epidemic broke out in spring, entrepreneurs were faced with the ungrateful question: „What now?“. Should we reduce salaries, lay off workers, look for new sources of income, stop projects and postpone investments? Or continue according to plans, adjusting to the „new normal“?

Every potential decision is a „game changer“. If you lay off workers and stop investments, and corona turns out to be a temporary obstacle, the competition will overtake you and such decision can cost you the very company.

On the other hand, if you leave everything as it was, and the situation gets out of control, the investments in which you are engaging can prove to be a failure and unprofitable, and then it the same scenario would ensue – end of a company.

Storm, Tornado and Tsunami

During the quarantine, the auditing and consulting company Deloitte created three scenarios of how the situation might develop and called them Storm, Tornado and Tsunami.

As a best-case scenario, Storm predicts an end to the pandemic in 2 to 3 months, medium-term changes when it comes to demand and supply with a reduction in temporary labor force. This scenario did not happen.

A moderately bad scenario in which the virus becomes chronic and returns in the autumn is called a Tornado. Economy wise, it means that incentive measures are not sufficient, thus there is a long-lasting crisis when it comes to demand and supply.

For companies, the Tornado means the need for a new business impact assessment in the next 12 months, stopping important capital projects, blocked regions and borders, crises due to illness and absence from work. When it comes to finances, extremely negative cash flow, the end of certain types of business and the partial discharge of employees.

The worst-case scenario is the Tsunami. It portrays a picture of the economy in which incentive measures fail to stop the crisis, and the situation with coronavirus is brought under control in a year and a half.

For companies, this means thinking about doing business for the next three years, failing to cover fixed costs, the need to sell assets and suspend certain activities, as well as a complete turning point in business.

Although such a scenario has (currently) only a 5 percent chance of becoming a reality, it is not bad to have it in preparation because only a year ago we would not have given the coronavirus pandemic a single percent of probability, as a possible scenario for life and business.

Izvor: Poslovni dnevnik

Foto: Pixabay