18 Mar 2020

A note to all our Global Team and other independent experts.

We imagine the last thing you want to read is yet another COVID-19 announcement. However we think it is important to keep the ball rolling and share some of our experiences/thoughts in relation to how the virus could affect our global team.

As a global company we have exposure in almost all geographical regions. Thus we are in reactive as well as proactive mode to manage our business and our deal pipeline. Reactive in markets like Asia and Europe as we respond to local situations while governments issue quarantaine orders and businesses are activating their business contingency plans. Proactive in e.g. Australia where we took the decision early to postpone GAS. It seems clear that most outbreaks are following similar patterns.

So, what does that mean for us as external consultants and our business? Well, besides all the health & safety guides and precautions you all hopefully follow, there is another aspect to consider: our individual cash flow and preserving liquidity.

And this may not be that easy to manage as various factors play into it. First and foremost our clients who we contract with have the same challenge. When businesses respond to such an extraordinary situation, then managing finances becomes a delicate matter. Typically they look at all aspects to reduce costs and preserve liquidity. While it is rather difficult to cut fixed costs for office leases, staff on payroll, and other liabilities, you will find that variable costs for non business critical activities are shut down first.

Typically innovation budgets (unless you are in the vaccination business) are repurposed, meaning many non mission critical projects will be shut down and staff sent home. And while there are liabilities with salaries, typically the easiest is to send home external consultants, including time and materials based, expert gig workers like us.

Now, we all have our individual financial and life circumstances, which come with obligations. For some less so, for others with e.g. a mortgage to pay and a family to feed it is harder and time off work can burn through their liquidity buffer very quickly. Thus there are a few things we can take into consideration and apply as we see fit:

  • Priority should be to go over your finances and get a sound understanding of your costs.
  • Subsequently you may want to evaluate all costs for whether and how essential these are.
  • You may build a scoring model and weigh these if you dare to, but should be obvious where we are coming from: In order to preserve your cash you want to identify and action on everything you can suspend, e.g. gym subscription, your private pilates sessions, magazine abonements, even Netflix and the like
  • Point is, cutting overheads and reducing your costs to a bare minimum will help to stretch your liquidity.

If the pandemic is over in two weeks then happy days, but if not and the extraordinary situation remains for months, then you will be happy to have maxed your budgets. And you may also want to check whether you are eligible for the state benefits that are being introduced in many countries. Many governments are issuing programs to secure the working population one way or another.

At the same time every crisis bears an opportunity. We have been talking with all of our clients to assess the situation, negotiate remote work where possible, maintain the deal pipeline and secure the relationship. Point is, there will be the day things will go back to normal and then one wants to be ready to execute right away. Thus circling back to what we said in the beginning: keeping the ball rolling. For us and for our customers.

Those familiar with Taleb’s “Antifragile” theory may already draw a similar analogy when weighing off the crisis against the opportunity: The chance is to improve with the situation as we deal with it. The majority of us are experienced road warriors, happy to work from wherever we find internet access. An advantageous experience many traditional companies currently struggle with. But we expect even these traditional companies to see new opportunities out of this experience and we will reap the benefit of supporting them.

Stay safe and healthy, we will keep going and the deal pipeline growing. Please do not hesitate to reach out to us if you have any concerns or questions. We are happy to help where we can.

Best – Your AlphaZetta Management Team

(credit Alexander Heidl)