Boston Consulting Group – Critical Business Response

1 MARCH 2020
BCG Solution to Crisis Management
COVID-19: Critical
Business Response

1
Copyright©2020byBostonConsultingGroup.Allrightsreserved.
COVID-19 has led to major interruptions and profit
warnings globally across sectors
Severe business impacts due to COVID-19… …resulting in fastest S&P 500 correction ever
Source: Deutsche Bank, Wall Street Journal, Financial Times, Business Insider, Bloomberg; BHI
150
100
0
200
50
Feb-18
Oct-87
No. of days
Feb-46
Sep-99
Aug81
Nov-07
Mar-60
Jun-69
Feb-20
Mar-68
Jun-53
Aug-98
Apr-62
Feb-84
Jan-90
Apr-73
May-66
Aug-15
Aug-46
Nov-18
Oct-56
Aug-90
Apr-00
Oct-97
Oct-55
Time taken for S&P500 to correct 10% from peak
6 days: Fastest
correction in the
S&P500 on record

2
Responding to the crisis – being
part of the solution

3
Be part of the solution: How to navigate the crisis
Protect your people,
ensure continuity, and
mitigate short-term losses
Pro-actively seize demand
rebound and bring business
back on track
Build advantage by making
strategic enhancements
and building resilience
Now: Tackle immediate
priorities
Near-term: Prepare for
the rebound
Medium-term: Pursue
structural enhancements
Day-to-day agile approach to navigate changing environment

4
Now: Take decisive actions to minimize disruptions (I/II)
Set-up a rapid-response team to take
clear decisions and control of the
situation
Communicate decisively and regularly
to prevent misinformation and
organizational paralysis
Clearly direct your people on what to
do, inform them about business &
health impact
Actively monitor the situation and use
an agile approach to navigate the
changing environment
Update hygiene program (incl.
quarantine requirements) to ensure
safe environment for employees and
customers
Arrange flexible working plans and
provide required infrastructure/
solutions
Observe employees' morale and
performance during crisis period, plan
for relief measures
Take control of the situation Protect people & customers
Categorize your operations by business
criticality (systemic, critical, optional)
Define clear contingency plans for
systemic and critical operations and
put safeguarding measures into place
Stabilize cash flows to ensure
sufficient liquidity, e.g. by mitigating
or redirecting discretionary spend
(such as marketing)
Ensure operational continuity
Note: Non-exhaustive list of actions
Now: Tackle
immediate priorities

5
Now: Take decisive actions to minimize disruptions (II/II)
Reach out to customers/distributors to
understand their needs (e.g. provide
credit line), leveraging your salesforce
in new ways
Shift to online channels to provide
products and services by working with
both O2O & offline partners to cope
with sudden shifts in demand
Optimize pricing and product offering
to meet immediate consumer needs
(e.g. "stocking up" and "home
enjoyment")
Adjust inventory level in real time,
reshuffle to new reality, and avoid
inventory glut
Identify alternative suppliers for
critical components, plan for changing
lead times and re-route logistics
Set up dedicated funding or adjust
trade terms to address cash flow
concerns of suppliers
Serve your customers' needs Ensure a robust supply chain
Live your purpose now to help the
society and economy get back on track
Leverage your resources to make a
difference by providing products and
services to affected people (beyond
monetary donations)
Engage your staff, your customers and
business ecosystem to create tangible
impact
Execute on your purpose
Now: Tackle

6
Executing on
your Purpose:
an example
Now: Tackle
Leading Asian retailer planned crisis relief
in three steps
Step 3: Develop medium
term OB strategy and
advocacy plans
Leverage learnings from
sanitizer's quick
implementation
Prioritise key crisis products
that need development
Develop ways of working for OB
to ensure quick route to market
Develop brands to enhance
customer advocacy
Step 1: Help with sourcing
of key products (incl.
masks & sanitizer)
Investigate demand planning /
supply needed; identify key
products with supply shortage
Identify branded suppliers to
source, leveraging BCG global
contacts
Quickly align with supply chain
and store ops to ensure
shipment and delivery
Set up SWAT PMO
Step 2: Launch market-
wide social impact
campaigns
e.g. Refill stations for free
refills of own brand sanitizers
e.g. Free hand washing stations
in areas with high traffic
Promote hygiene education via
social media ; accompanied
with instore educational
campaign

7
Near-term: Targeted efforts required to achieve rebound
Conduct top-down scenario assessment
on possible “inflection time point” –
when the situation gets stabilized and
consumption confidence returns
Look for new channels and new
disruptive formats that works under
epidemic
Reward innovative ideas and proactive
movements, closely monitor
competitive moves
Re-define budgets and targets monthly
by geography
Closely monitor and
synchronize the team
Maintain ongoing relationship and
extend credit to key distributors to
secure core channels and quickly
replenish after the epidemic
Leverage intelligence (e.g. activate
your salesforce for customer/
distributor reach out or surveys) to
identify "infection point" and ramp up
sales activities, inventory, and trade
support
Deploy resources to jumpstart
social/O2O strategic collaborations,
and pilot test new operation models
Build value chain
preparedness
Explore opportunities to configure
“comeback celebration campaign” in
advance, quickly pick up ad spending
post-epidemic
Avoid removing all ads, cautiously
select marketing channels during
epidemic
Craft new product and service story
and create new selling points
Adjust communication
message
Prepare for the
rebound

8
Rebound:
an example
During the SARS outbreak in 2003, as demand dropped and entertainment venues
were closed, most international beverage brands withdrew ATL/BTL marketing
investment in affected Asian markets
Beverage company focused on mid-term comeback campaign:
• Mobilized sales force to conduct “outlet census” going to all PoS to understand
“which channels/outlets will open, when?”
• Conducted top-down scenario assessment on possible “inflection time point” –
when consumption confidence comes back
• Synchronized marketing, media and sales activities; configured a focused
“bounce-back campaign”
• Prioritized new, more premium, fast growing brands to win in the market
• Preemptively ramped up sales activities, inventory, and trade support when
“inflection time” approached (competitors with "wait & see" approach)
Beverage company captured rebound in
consumption after SARS
Successful preparation for the rebound in 2003 paved way to become the
#1 in the respective segment in China ever since then
Prepare for the
rebound

9
Mid-term: Prepare for the future and build structural advantage
Previous crises show that business positions will change
as industries recover. We foresee game-change demands
shifts in many sectors, e.g.
Boost in e-commerce and online service delivery – accelerated
change in retail and F&B
Significant health care boom in emerging markets (e.g. China),
incl. spill-over effects on related industries (e.g. insurance)
Further diversification of international supply chains – ongoing
contingency planning as new normal
Business leaders need to be alert and
active in understanding shifts, how to
invest and position for this new reality,
and build structural advantage
Medium-term: Pursue

10
Examples: Companies provided support to customers in
exchange of channel advantage; actively built partnerships
Support dealers on cash
flow with funding
Launch joint-logistics
to support distributors
Gain RTM control w/
customer credit ease
Form partnership and
seek sources of growth
2003-SARS: Its customers
suffering from poor cash flow
from people not going out
2003-SARS: More potential
partners with high willingness
to collaborate after SARS
2003-SARS: Car dealers in
trouble with cash flow, as
consumers delayed purchases
COVID-19: logistics capacity
highly constrained, causing
challenges to distributors
Adjusted performance target
on dealers:
• Car manufacturer canceled
performance review to
ease dealers' pressure
Established contingency fund:
• Established 10M fund to
support dealers on
employee salary
Carefully tracking and
targeted supply:
• Contacted distributors
one-by-one during critical
reopening period
Joint-dispatch to support
distributors, using its own
logistics company
Offer credit ease to local key
customer in return for high
data transparency and brand-
led-retail
Take the chance to increase
direct-owned store presence
as well as eCommerce to uplift
business share in DTC
Collaborate with technology
partners and build eco-system
• e.g. introduced Brand Co.+
Sportsband Kit in Apr.
2008, with chip integrated
in shoes
• e.g. Brand Co.+
Sportswatch introduced in
Sep. 2010
Full distribution capacity restored
>50%, matching the 60% store reopen,
leading competition by ~20%1
1. By end of Feb.9th
Source: Press release, expert interviews; BCG analysis
National F&B playerCar manufacturer Int'l apparel retailer Int'l apparel retailer
Medium-term: Pursue

11
We support you through this time of change & uncertainty
Rapid Response Room
Set up and run team to take control of overall
situation, incl. rapid assessment, contingency plans,
communication plans & execution, liquidity forecast
and management, spend rationalization
Commercial Response
Define and execute on optimization levers to mitigate
revenue impact / ensure rapid rebound, incl. digital/
eCommerce push, sales force activation, distribution
relationship mgmt, marketing, inventory planning
Global Coordination
Define and assess global response for multinational
groups, incl. scenario definition and stress testing by
geography, portfolio optimization, situation analysis,
communication strategies
Operations Continuity
Ensure business continuity and stabilize
operations/supply chain, incl. criticality assessment,
contingency planning, inventory recalibration,
alternative supplier sourcing

12
Key steps that will be addressed
Form a central
response team
Address supply chain
and operations
continuity response
• Set-up a rapid-response team with clear decision rights to take control of the situation
• Design a communications mechanism for decisive & accurate information transfer
• Actively monitor the situation and use an agile approach to inform all stakeholders
Take care of your
people
• Update hygiene program to ensure safe environment for employees and customers
• Arrange flexible working plans and provide required infrastructure/ solutions
• Monitor employees' morale & performance during crisis period, plan for relief measures
Address customer and
revenue response
• Create tailored response plans to address the assessed scenarios
• Assess customers/distributors needs (e.g. provide credit line), determine how to best leverage
your salesforce / communications
• Monitor real-time development of financial/operational KPIs (advanced analytics as needed)
• Set up an operational core team to create transparency (e.g. along supply chain)
• Categorize your operations by business criticality (systemic, critical, optional)
• Define clear contingency plans for systemic and critical ops with safeguarding measures
• Stabilize cash flows to ensure sufficient liquidity, e.g. by mitigating discretionary spend
Understand and
evaluate scenarios
• Understand /prioritize range of scenarios and analyze potential evolutions
• Evaluate potential impact on the company's financial performance and operations as well as
other key stakeholders (incl. employees, customers, and suppliers)

13
Response
Contingency planning
Rapid response room: Response to key issues from Day 1
Simultaneous rapid assessment and contingency planning to ensure near- and medium term success
Rapid assessment
Response / execution
Backup
Revenues
• Assessment of 1st order impact on revenues
• Assessment credit risks to current accounts receivable
• Analysis of risks to customer pipeline
Cost, Operations & Supply Chain
• Operational continuity assessment
• Short-term work-around options & medium-term alternative sourcing
• Forecast of impact on inventories and associated cash impact
• Assessment of direct risks production scheduling & committed deliveries
Organization and Governance
• Assessment of hygiene program, communication and response planning
• Assessment of alternative working arrangements
• Review of governance framework
Financial
• Contingency plan to secure sufficient liquidity for a potentially
prolonged impact scenario
• Mitigating discretionary cost actions to build financial flexibility
• Rationalization plan of short/medium-term capital spending
• Detailed assessment of impact on budget and guidance to shareholders
• Review of commitments, MAC clauses and Force Majeure options
• Visibility and plan for 2nd order impact on time sensitive projects,
contractual commitments and customer relationships
Operational
• Revised operations plan based on a risk-based assessment of inbound
supply and customer demand
• Plan & visibility on 2nd order impact on supply base- i.e. what is the
impact on tier 2 suppliers
• Contingency plan for balancing production, supply and inventories
should a critical element of the supply chain be impacted
IllustrativeDay 1: Set-up of team to take immediate action while more
detailed assessment and planning is conducted

14
Advisory expert group
Draft structure for the rapid response team
Rapid Response Leadership
• Has authority for entire response effort and critical decisions
• Oversees overall progress and provides daily guidance
• Reports to Management Team
Situation /
Transparency
Scenario assessment
• Understand and prioritize
scenarios & analyze their
potential evolutions
• Evaluate potential impact
on the company's financials
and operations &
stakeholders (employees,
customers and suppliers)
• Create tailored response
plans to mitigate scenarios
Customer focusOperational continuity
• Monitor real-time
development of key socio-
economic indicators,
operational KPIs, etc.
• Serve as fact base for
company-wide analyses
and scenario assessments
• Design a communications
for decisive & accurate
information exchange
• Categorize ops by business
criticality (systemic,
critical, optional)
• Closely monitor and
maintain operational data
fact base to inform
scenario assessment
• Define clear contingency
plans for systemic and
critical ops
• Reach out and assess
customer needs and
revenue implications
• Develop responses across
channels and leveraging
sales force as appropriate
Team setup:
• Strategy & Finance
• Commercial leaders
• Supply chain leaders
• Economists, data scientists,
analysts
Team setup:
• Economists, health experts
• Financial data analysts
• Human resources
• Marketing communications
• Investor relations
Team setup:
• End-2-end supply chain
leaders & analysts across
regions (incl. procurement,
logistics, manufacturing)
Team setup:
• Sales
• Marketing
• Pricing
• Finance support
• Consists of HR/Legal/Health
care/Crisis Management experts
• Advises on legal, regulatory and
health related matters
Management Team
People / workforce
• Assess potential impact of
virus spread on company
workforce
• Assessment and
development of hygiene
program, communication
and response planning
• Ownership of alternative
working arrangements
Team setup:
• Economists, health experts
• Financial data analysts
• Human resources
• Marketing communications
• Investor relations

15
We can hit the ground running to achieve rapid impact
Proven suite of
tools to
implement from
Day 1
Deep knowledge
in all markets
affected by
COVID-19
Deep, relevant,
sector and
functional
experience
Differentiated
hands-on working
style –
"performance
partners"
Track record of
delivering results
with significant
impact

16
Legal context regarding our support
The situation surrounding COVID-19 is dynamic and rapidly evolving, on a daily basis. Although
we have taken great care prior to producing this deck, it represents BCG’s view at a particular
point in time. This deck is not intended to: (i) constitute medical or safety advice, nor be a
substitute for the same; nor (ii) be seen as a formal endorsement or recommendation of a
particular response. As such you are advised to make your own assessment as to the
appropriate course of action to take, using this deck as guidance. Please carefully consider
local laws and guidance in your area, particularly the most recent advice issued by your local
(and national) health authorities, before making any decision.

17
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Boston Consulting Group – Critical Business Response

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