Assessing your business risk profile for COVID-19

In a pandemic like COVID-19, every company is affected. Small businesses, which often operate on thin margins and lack the access to capital markets and deep reserves of public companies, have a particularly tough time.

In many states and cities, “nonessential” businesses have been forced to shut their doors for weeks, and the bans could be extended. Other businesses are struggling to create a safe workspace, rejigger supply chains and manage employee absences. All of these factors have a tremendous impact on your top and bottom lines.

To get a handle on how the COVID-19 pandemic is influencing your operations and your future, you should conduct an ongoing assessment of your risks and costs. Be sure to put these six factors at the top of your checklist.

1. Cost of COVID-related supplies and equipment

If your business still has physical operations, you are doubtlessly spending more on sanitizing and janitorial services. Project these costs out for two weeks, a month, two months and more to be prepared.

Even with precautions, employees might get sick from the virus, forcing you to shut down temporarily for a deep clean. As the epidemic spreads and local lawmakers respond, you might have to close your site completely, a huge business disruption. In Aon’s 2019 Global Risk Management Survey, executives rated business interruption as fourth on a list of top-10 risk factors.

If your teams can work remotely, determine how much you need to spend on laptops, headsets and other equipment to keep work flowing. Don’t forget to factor in extra IT support for newly-remote workers.

Switching to remote work also carries productivity costs while employees and managers adjust. The bright side is that once they do, they might become more productive than they were before — though probably not enough to offset the cost of the disruption.

2. Cost of employee absence

Some workers will get sick, while others will need to care for sick family members or supervise children whose schools have closed. Monitor absenteeism costs while you develop a plan to deal with them. That includes cross-training workers to cover for those who perform essential services. If you don’t have adequate staff to manage in the event of absences, look into the cost of outsourcing and line up reliable providers to step in as soon as you need them.

3. Consequences of breaching employment laws

No one wants to furlough or lay off staff. But small companies — especially those in public-facing sectors like hotels, restaurants, boutiques, travel and entertainment — might have no choice.

On the other end of the scale, some sectors — including grocery stories, healthcare providers, as well as makers of sanitary equipment and emergency supplies — are experiencing an unprecedented boom. These businesses need to make sure they properly compensate workers for overtime and provide legally-mandated breaks. 

A trend has recently emerged in cities and states requiring smaller businesses to pay sick leave, family leave, medical leave and disability benefits. However, many municipalities are reconsidering enforcement during the epidemic. Do your best to stay on top of the situation in your area.

Before you make any significant staffing decisions, consult with an employment attorney to make sure your actions comply with state and local laws, as well as the federal Fair Labor Standards Act.

4. Supply chain reliability

To evaluate your supply chain exposure, don’t just consider the risks of providers you deal with directly. Look at the companies that supply them, and the ones beyond that. The supply picture is constantly changing. Some shippers are unable to cross borders. Some materials are flying off the shelves while others are accumulating in warehouses. What is the impact likely to be for your business in the short- and long-term?

Develop a Plan B for all of your suppliers, and a Plan B, C and D for the most critical. Examine your customer contracts to see if they protect you from liability if you are unable to make deliveries. Also review contracts with suppliers to see whether a “force majeure” clause exempts them from liability to you.

5. Cybersecurity

As more people work from home and worry about the virus, cybercriminals are taking advantage of new opportunities to try to break into businesses through the back door. More than a third of executives in a CNBC survey said cyberthreats have increased during the epidemic.

Hackers send phishing emails purporting to be COVID updates from reliable authorities, including the World Health Organization (WHO). They try to get users to click links to malicious software or log onto fake sites, from which the hackers steal credentials and try to worm their way into business systems. Other scammers hawk fake cures or prevention measures.

This is an excellent time to hold employee training sessions on cybersecurity and phishing. You might also want to consider purchasing cyber insurance.

6. Balance sheet risk

How you react to the crisis depends on your company’s size, nature and resources. But there’s one thing every business should do during this uncertain time: Shore up your balance sheet. Many economists are predicting a recession, and increasing your cash reserves could help tide you through a prolonged downturn. With the Fed’s new zero interest rates, there’s never been a better time to refinance.

If you’re a small business, you might also want to consider an SBA low-interest, long-term disaster loan, available to small businesses adversely affected by the coronavirus.

Plan and prepare

Doing a thorough risk assessment and keeping it updated during the crisis can help you make better-informed decisions about all aspects of your operations and finances. At a time when the life of your business might be at stake, you can’t afford not to do it.

Need more help with COVID-19 issues?

We’re here to help you navigate the uncertainty of the COVID-19 pandemic and its impact on your people, finances and business. We have developed a library of resources in our COVID-19 resource center to help you stabilize today and prepare for tomorrow.

See our articles on:

Talent and strategy
Business finance
Legislation and regulation
Cybersecurity
Technology
Personal finance