October 31, 2020

BrandLanes Blog

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The Impact of Covid-19 On Business and The Economy

Covid-19 will bring revolutionary changes in the way the world functions akin to the financial crisis of 2008, the Dot Com bubble, and the Great Depression in its history. Everyone is concerned with the question- when will things get back to normal?

One fact is sure – the next 12 months are going to be tough for the economy in general and business in particular. It is often believed by many that there will be fundamental changes in how business and economies reboot after the pandemic.

The following are some ways in which Covid 19 impact on the economy will manifest:

Local, National and Regional Self-Dependence

The trend of globalization will largely continue. But the pandemic has brought forth the need for self-sufficiency in some core health-related services and products. Though most countries cannot boost manufacturing for matching the mighty Chinese economy, governments, and businesses all over the world will have to bolster emergency reserves for strategic planning. The rise of populist nationalism will be powered by the pandemic. India will try to work out new configurations with friendly countries to reduce any foreign dependence. Businesses have also begun working on models that encourage local supply chains for essential commodities.

Work/Learn from Home

Covid-19 has increased the potential for large scale work from home without compromising efficiency. In the near future, Indian offices will experiment with a reduction in travel and raise work from home. The new normal of Covid 19 impact on business sectors will be work from home. Firms will find work from home employees as productive as normal workers and also save on costs of infrastructure. In the field of education and training, there will be a marked focus on e-learning.

Future of Work and Technology

For many businesses, technology was until now regarded as a support function, used as a means to an end. This is in for a major transformation as technology will be needed as a frontline strategy for most firms. Its importance will be on par with that of revenue-generating functions like business development and sales.

There will be an acceleration of trends. Automation will gain speed as the expenditure on sophisticated IT infrastructure overtakes human resources. There will be limits on job creation with more offers being rolled out on contract rather than permanent basis. This type of gig economy will surface in both emerging markets as well as developed markets. 

Avoid Evil

Businesses that are not environment friendly will be ranked low in terms of business valuations, and stress on ESG (Environmental, Social, Governance) will be the future path. Many cities have begun considering sustainable developmental models. There will be an emergence of compact and agile value chains as non-essential stakeholders will take a back seat. This will also power labour/employee efficiency and productivity.

Brief Death of Debt

Those businesses that are asset-heavy such as the ones related to infrastructure, commodities and oil will move to asset-light models where financing of their activities would take place via public trusts, InvITS like structures, etc. Debt financing would be taken over by equity financing since businesses become averse to take on leverage.

These are all some of the changes in business and economy in the post-Covide-19 era.