There hasn’t been a single industry in the world that hasn’t felt the effects of COVID-19. Despite the media attention on consumer uncertainty and production disruption, the greatest impact has been felt by organizations that must learn to handle financial risks and implement new crisis management strategies.
In times of crisis, how leaders respond to production disruptions and operational changes will affect the future of the company as a whole. In the article below, we’ve outlined the impact on three key industries, which should provide a solid roadmap for leaders of all industries as they continue to cope with sustained disruption and provide the operational visibility to fully understand where and how you need to act.
Before reading, it’s important to note the rapidly changing responses to the crisis, which currently include government-provided grants and low-interest loans. We recommend checking the websites for IRS and CDC for updates prior to making any major decisions.
Manufacturing and Transportation
In light of the effects on supply chains and consumer demand, it can be assumed that the output of manufacturing and mobility will decline.
From end-user demand to supply-chain disruptions and plant closures, companies in each of these sectors need to be prepared for long-term impacts on their business, due to the effects of COVID-19. The automotive sector is facing disruption in production, global supply chain, and customer demand — from a drop in new vehicle sales in China to supply-chain stoppages and plant closures.
Industrial-products and chemical-products companies are facing deferred demand, supply disruptions, and potential plant closures, impacting retail and purchasing prices. Finally, airlines and transportation companies globally are impacted by the significant drop in demand for freight and passenger transport, as well as the cancellation of events.
Consumer-facing businesses
As people change the way they shop for goods and services, no industry has been forced to adjust more rapidly—and likely for a longer period of time—than consumer-facing businesses like retail stores and restaurants.
In the short term, the global spread of COVID-19 has led to a third of consumers experiencing some sort of lockdown, and significant supply and demand volatility. Consumer staples companies are struggling to keep up with demand from panic buying, but non-essential stores are closing either voluntarily or due to containment measures that have disrupted supply chains, production, and consumption.
Companies are adjusting quickly to ensure the supply of essentials while suspending activities for discretionary goods. Many are increasingly having to balance liquidity needs with the physical and financial well-being of employees, while also navigating emergency regulation and proactively building brand integrity by being part of the solution.
Energy and resources
Companies must prepare for a period of intense disruption and increased risks.
As the demand for both oil and natural gas decreases, energy groups are seeing a massive drop in sales and overall output. Because of the enforced lockdowns caused by COVID-19, many people are staying at home for months at a time, which has led to a drop in demand for gas of nearly 20% and the lowest gas prices we’ve seen in the United States since 2001. Mineral and metals demand forecasts have been revised downward based on the impact on the Chinese economy, and the global spread will only broaden and deepen those impacts.
Many regional power markets are increasingly likely to be affected by a long-term drop in demand, which has led to industry-wide fears of liquidity issues, especially for energy retailers. Due to the rapidly-moving nature of the outbreak and the subsequent panic from consumers, energy and resource companies should consider how best to respond to these challenges now, which actions to put in place over the near term and how to plan for recovery over the long term.
Overall, every industry across the world will feel some effects of COVID-19, but some will be more impacted by others. If you have concerns about filing taxes or applying for loans to endure the difficult times caused by the outbreak, please contact us at Milikowsky Tax Law today!