ACCA: Business continuity plans ineffective against Covid-19


LOCAL businesses are not prepared to face a crisis like the Covid-19 pandemic and may not survive more than a year, according to a global survey by the Association of Chartered Certified Accountants (ACCA).

Less than half (47%) of Malaysian businesses had implemented a business continuity plan (BCP), while 33% had none at all.

“One in five businesses has BCP, but they are ineffective against a crisis at the scale of the Covid-19 outbreak,” the study read.

It suggested that nearly half (49%) of businesses may not survive in 12 months due to cash-flow problems, with a quarter stating difficulties in lasting for six months.

The damage is further compounded by lower future cash inflows because of lower revenue due to customers stopping or reducing purchases, inability to fulfil customers’ orders and deferred launching of new products or services.

“Negative employee productivity has been identified as the biggest impact to companies, but its effect is not as devastating as the other factors,” the study said.

ACCA professional insights portfolio lead Jamie Lyon, who also authored the report, said the survey results showed that local and global businesses shared broad consistent challenges.

“Everyone’s hurting, but particularly the smaller organisations. Financing and cashflow are concerns to everyone across all the countries polled,” he said in a recent statement.

Further findings were that difficulties with cashflow could cause almost a quarter (24%) of businesses to fold within six months and almost half (49%) within 12 months.

Nearly half of the respondents also predict losses in 2020, while 66% expect revenue and profit to decline by at least 10% year-on-year (YoY), 64% anticipate the worst case being a reduction of at least 25% YoY and 40% expect a plunge of over 50%.

Despite the circumstances however, 80% of respondents have made efforts to ensure the health and safety of employees.

About 58% of local business leaders have completed a financial reforecast of their organisation’s revenue and profit outlook for 2020, indicating that uncertainty over the impact of the Covid-19 outbreak was the most significant barrier to a reasonable forecast.

ACCA Malaysia country head Edward Ling said as businesses face the uncertainties that affect organisations’ ability to plan, react and forecast, they are urged to consider every opportunity and option available to keep their businesses afloat.

The professional accounting body recommends firms to “Act, Analyse and Anticipate”. Under the Act component, businesses are expected to “think people first”, accept the short-term focus and communicate regularly with investors while ensuring compliance with immediate and evolving legal requirements.

Businesses are also recommended to recognise the needs of customers and stakeholders, to gauge and monitor demand patterns and following that, to use a crisis-management team or skills to establish a plan.

Next is to Analyse, which involves assessing scenarios and planning for resumption, and to review government and fiscal policies that may benefit the organisation.

Companies should review their credit lines and renegotiate debt financing obligations.

To Anticipate is to prepare for business impact and future trends, in which businesses are recommended to look for innovation opportunities, review ways of working or learning and explore how technology can lend support, as well as consider partnering.

Company strategies are also recommended for review, in which investment priorities may require examination or future skill needs. Firms should also be prepared to identify new risks and appropriate mitigation strategies.