A Study on the Linage Between Business Continuity Plans and Corporate Finance During COVID-19

Introduction

The coronavirus pandemic took the world by storm, affected every walks of life and impacted economies worldwide. The severe acute respiratory syndrome (SARS-2) and COVID -19, the disease it causes, was first identified in Wuhan, China, in December 2019. Since the World Health Organization (WHO) declared a public health emergency at the end of 2020, severe measures, including a complete lockdown, were imposed by many governments to prevent the spread of the virus. Severe disruptions occurred in economic activities, labor force movements, supply chain, and production and distribution of goods and services. Unlike the previous global financial crisis of 2008-09, the pandemic has shaken the global economy from both the demand and supply sides. Most of the previous financial crises were rooted in financial institutions and affected specific sectors of the economy. The precautionary lockdown measures adversely affected the production of goods and services (the supply side) and customers' income and earnings, resulting in declining household wealth and consumer spending(the demand side). In addition, the supply chain disruptions affected the movement of goods and services and resulted in the closure of business activities.

A crisis refers to an inherently abnormal, unstable and complex situation threatening an organization's strategic objectives, reputation or existence (PAS 200:2011). The relevant question is; How did the corporates respond to the crisis that had an overarching impact on all elements in the value chain? What critical activities did they focus on that enabled them to continue and sustain their business performance? What core competencies of corporates helped them to be resilient to the crisis? Since the COVID-19 pandemic was reported in China in December 2019, businesses have initiated several plans to respond to the crisis. However, as economies initiated strict measures such as lockdowns and closure of activities to reduce the virus spread, businesses realized the significant stress the pandemic has on revenue shortfalls, liquidity and business operations. Several corporates failed to be resilient during the crisis; however, examples of successful business continuity plans also exist. Though all elements of business continuity plans and strategies deployed are relevant, this chapter doesn't focus on them entirely. Instead, the focus vests on the role of corporate finance in enabling business continuity plans and organizational resilience.

Literature on the impact of the pandemic on organizational performance sheds light on a common conclusion. The basic premise of this chapter is that COVID-19 exerted a significant negative jolt on the demand and supply side of business operations. The extant literature supports the basic premise. For instance, Shafi et al. (2020) researched the performance of Pakistan's micro, small and medium-sized enterprises (MSME) and found that MSMEs were severely affected by financial, supply chain disruption, decrease in demand, and reduction in sales and profit. Xu and Abbasov (2021) reported a similar finding in their study on Azerbaijans' small and medium enterprises (SMEs). Although Thukal (2021) offered an analogous finding on SMEs, the author further emphasized the relevance of creativity and innovation to seize opportunities during a crisis. Given this inference, the empirical reviews strongly recommended government interventions to support SMEs in recovering from the crisis and revitalizing the entrepreneurship ecosystem.