The Lost Year 2020: Focusing on the fundamentals for solutions DURING and POST-COVID-19.

How do you plan for a smooth re-opening and manage increased uncertainty?  

First, as the world continues to struggle and cope with the effects of COVID-19, we hope you and your team are doing well. With the increased possibility of a second wave, precautions to help protect the health and wellbeing of your staff, clients/customers, stakeholders, and your local communities remains a priority.

COVID-19 began as a health pandemic, quickly evolved to a global recession, and continues to create economic challenges disrupting businesses and cause financial hardship to households. While we all wait for an effective medical solution (vaccine and treatment), COVID-19 continues to impact your business—value chains, employees, stakeholders, and customers in different ways.

What remains hard to accept is the rapid pace of change—a reality that is not only difficult to understand, but equally tricky to admit, as we all make the best of 2020. As lockdown restrictions get relaxed and most states and nations struggle re-opening for business, you need to re-evaluate your value-chain, and find solutions to your current customer problems and challenges. It’s time to re-visit the fundamentals and plan for the future.

Eight Value-chain considerations as you plan to re-open



(1) Understand changing customer expectations and shifts in demand. 

a. How is COVID-19 affecting your customers and their supply chains – Volatility, Uncertainty, Complexity, and Ambiguity?

b. What trends have you seen, and how will these continue during and post-COVID-19?

c. What additional solutions can you provide to help your clients/customers during and post-COVID-19?

(2) Construct scenario plans and apply lessons learned (you can’t help your customers if your business is struggling).

a. Think of a “Best-Case” and “Worst-Case” scenario, and apply lessons learned to plan for the next 3 to 6 months. How should your business function during and post-COVID-19? 

b. What decisions must you make to manage cash and credit? 

         c. What cash flow challenges are you and your customers facing, and the impact on receivables?

d. What expenses must you re-negotiate?

(3) Manage uncertainty Few experts can predict an economic and fiscal solution to a health pandemic like COVID-19 unless there is an effective vaccine or treatment.  

a. What must you do to survive in uncertain times?

b. Re-evaluate your customer personas. How would you prioritize your ideal customers during and post-COVID-19?

c. What customers can you afford to lose, and what new customers should you target?

         d. What new skillsets will your team need to address current challenges?

         e. Where can you reduce headcount to save money without exposing your organization to new risk?

         f. What roles are critical towards providing essential services and address current challenges? 

(4) Prepare a contingent plan for your “worst-case” scenario.  

a. Increased economic and geopolitical uncertainties impact visibility and demand planning.  Assuming no revenue, how long can your business survive the next 6 to 12 months? 

b. Does it make sense to pivot into other areas? 

c. Your “best-case” scenario can’t be totally ignored either. Some businesses have struggled to manage unprecedented growth during COVID-19 due to a lack of planning.   

(5) Embrace technology.  Select the right technology and tools to support your employees and clients. 

a. How can you improve your digital presence to connect with and engage customers in ways they see as valuable? 

b. What new technology must you embrace and make it easy for current and new customers to work with you?

(6) Manage health and safety concerns. 

a. What health and safety controls must you implement and communicate to your employees and customers to address their concerns during and post-COVID-19?

b. What additional costs and resources will you need to address all health and safety concerns as your business re-opens?

(7) Stay on top of the changing regulatory and risk environments. 

a. What are the fundamental regulatory changes impacting your industry? 

b. What are some of the emerging and rapidly evolving risks you should be aware of during and post-COVID-19?

(8) Update your critical processes, policies, and procedures and train stakeholders.  

a. What changes must you make to your critical processes during and post-COVID-19 to continue delivering exceptional customer experiences?

b. How will you maintain processes, policies, and procedures and communicate the changes to stakeholders?

While these eight steps are not the totality of items management should consider, your internal audit department or an equivalent function, can provide valuable support to management, and insights in helping the organization create value.  However, adding or creating value is not enough.  As you make changes based on available data and other factors, think of ways your internal audit function should evolve and provide timely assurance, expertise in a consulting capacity, and insights to help your organization succeed.  By supporting management to achieve strategic goals and objectives, perform audits and reviews that matter, your internal audit team can quickly adapt and continue not only to add value, but to help management capture and sustain value over time.

Conclusion

“Get the fundamentals down, and the level of everything you do will rise.” Michael Jordan

The lockdown restrictions could be tightened if the number of COVID-19 infections continues to increase.  Your team can take appropriate steps to get the fundamentals right to ensure your business succeeds.  When our favorite athletes encounter difficulties, they often turn to the fundamentals. As your team struggles to cope and adjust to the COVID-19 challenges, some modifications to your strategy and fundamentals are essential to not only adapt, but to thrive during difficult times, and continue to meet your clients’/customers’ expectations. 

By re-evaluating your current end-to-end customer support process, your team will discover a way to make timely changes to continue providing value-added solutions during and post-COVID-19.  Modernized solutions and processes are needed to deliver exceptional customer experiences, increasing their willingness to pay for your products and services. 

Stay Safe!

Jonathan Ngah, CISA, CIA, CFE, CGFM, is a principal at Synergy Integration Advisors, a professional services firm providing internal audit outsourcing and internal audit co-sourcing services to government institutions, private-sector, and not-for-profit organizations in the US and the Asia Pacific (APAC) regions.

Going back to fundamentals. Why re-evaluate your Current and Post-COVID-19 Strategy?

Why must you re-visit your business fundamentals now?

“You go back to fundamentals when things start to go awry.” Bill Cowher      

We have all seen our favorite athletes, entertainers, leaders, and teachers encounter and overcome challenges. In difficult times, they often turn to the fundamentals.  Your strategic plan is formulated on core business principles—or fundamentals.  As your teams struggle to adapt and cope with the disruptions from COVID-19, early emphasis between February and May 2020 was about surviving.  What immediate changes must management make to survive in uncertain times? 

As things settled, visibility on the impact such as loan defaults, canceled orders, increased refunds, etc., became apparent.  The new reality surrounding your business has changed. COVID-19 has fundamentally impacted your employees and customers in different ways. Now is the time to re-visit the fundamentals—your strategy to understand the following:

  • What went wrong? 
  • How where we blindsided? 
  • What must we do differently to plan and adapt to the new reality?

Unless, in extreme circumstances, COVID-19 did not and will not change your mission. The fundamentals—your business strategy needs to be evaluated.  How you continue executing your strategy should change to help your teams identify and resolve misalignments, plan, and adapt to the current and post-COVID-19 business environment.

How do you get there?

Going back to the fundamentals requires a simple view of your strategic planning, strategy-formulation, and strategy-execution as an ongoing process.  A designated and neutral Point of Contact should coordinate the re-evaluation process and provide support towards accomplishing the following:

  1. analyze the current environment and identify metrics, 
  2. facilitate collaboration with management and stakeholders and learn during strategy formulation, and 
  3. provide tools and support as needed for your management teams to execute the strategy during and post-COVID-19 and improve.

Mistakes to Avoid – Misalignment Misfortune

We’ve all heard the many clichéd ways to describe when multiple components are aligned in their goals or strategy: “We’re all in this together,” “we’re operating on the same wavelength,” “we’re rowing in the same direction.” And there are plenty more. Achieving alignment in a common goal is critical to the success of any group endeavor. Even one person marching to the beat of a different drummer can threaten the success of the entire group. This dynamic plays out in all facets of business activity.  We’ve seen countless examples of when a business unit impacts strategy execution due to different objectives, not in alignment with the enterprise goals.  

  • Such misalignments (strategic misalignments) probably existed across organizations pre-COVID-19.  
  • Strategic misalignments further complicate the ability to develop and implement a plan to respond in the short-term and long-term to the COVID-19 challenges and other future events.

This quote by Sun Tzu, author of the Art of War, captures the difficulty in achieving success without getting what we call in the modern age “buy-in” from all those involved in the endeavor: “Unhappy is the fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise; for the result is a waste of time and general stagnation.”  

  • Why does strategic misalignment exist and remain unresolved? 
  • What is the actual cost if not resolved over time?
  • How will this impact your ability to implement long-term sustainable changes to adapt to the new realities during and post-COVID-19?

There are eight reasons why strategic misalignment occurs and why management and internal auditors fail to resolve those imbalances when they do occur. They include:

  1. Lack of awareness – No one recognized the misalignment.
  2. Management is aware and can’t resolve – Lack of adequate processes and controls with oversight.
  3. Competing and conflicting priorities – Lack of sensitivity towards resource constraints (capacity).
  4. Inappropriate tone and corporate culture at the enterprise or business unit and departmental levels.
  5. Continuous Process Improvement (CPI) projects, internal audits, and reviews performed, are not aligned with strategic goals and objectives.
  6. Inability to identify and mitigate risks – This includes emerging risks and the rapid pace of evolving risks.
  7. Lack of visibility understanding the long-term compliance implications and added cost from regulatory fines.
  8. Inability to execute strategy and meet changing customers’ expectations.
Conclusion

These eight-steps can help your teams identify misalignments between enterprise strategy and business unit priorities, as you re-evaluate and develop a long-term plan to adjust to the new realities during and post-COVID-19.  Strategic misalignments should be identified and resolved as soon as possible to avoid long-term financial losses, reputational damage, and improve responsiveness to the changing business environment.  

Our next post will elaborate on how you can continue re-evaluating your fundamentals, especially in difficult times. The post will provide suggestions on what your teams should focus on as the lockdown restrictions get relaxed, and most states continue re-opening for business.

Jonathan Ngah, CISA, CIA, CFE, CGFM, is a principal at Synergy Integration Advisors, a professional services firm providing internal audit outsourcing and internal audit co-sourcing services to government institutions, private-sector, and not-for-profit organizations in the US and the Asia Pacific (APAC) regions.

Improve risk management and sustain strategy execution by focusing on reviews that matter

What type of reviews should your teams be performing during and post-COVID-19?

COVID-19 has created new realities and unprecedented challenges.  It has also impacted your stakeholders and control environment and how audits and reviews are performed.  The rapid pace of change accelerated the need for the following:

  • new solutions to your customer’s problems (adapt to changing consumer behaviors)
  • changes to the ways your staff perform their jobs (manage health and safety concerns), and 
  • modifications to your strategic goals and objectives (manage increased uncertainties and adapt to a rapidly changing business environment).

Performing audits and reviews that does not directly impact the accomplishment of your strategic goals and objectives adds limited value.  To create, capture, and sustain value, simplicity, flexibility, and agility is critical to the nature of audits and reviews performed.  This is the ideal way for an independent internal audit function to support management solve problems they see as necessary at the current moment, and vital to the long-term survival of your business.

How do you get there?

“Out of intense complexities, intense simplicities emerge.” Winston Churchill

Complexity is the enemy from within that must be avoided.  Begin by adopting a simple framework that provides an enterprise perspective on your resources, processes, technologies, and corporate culture.  These components impact the accomplishment of your strategic goals and improve performance across your value chains.  

Next, agree on your internal audit’s role in the value chain.  This requires understanding the organizations… 

  1. strategic direction and alignment (align with changing customer expectations during and post-COVID-19), 
  2. risk management and monitoring, 
  3. operational efficiencies, 
  4. quality and compliance, 
  5. financial management and governance, and 
  6. responsiveness: to help management create, capture, and sustain value while adapting to the changing business environment.

Ultimately, priorities vary between organizations. The six components of the internal audit value chain (IAVC) should be continuously evaluated during and post-COVID-19 to help management create value, capture value, and sustain value in the context of your organization’s strategic goals.  

To help your management teams focus limited resources planning and executing audits and reviews that matter, confirm your organization has processes in place to achieve the following: 

(a) Prevent misalignments between enterprise strategy and the business unit and departmental priorities.

(b) Identify, prioritize, and mitigate risks impacting the accomplishments of your strategic goals.  This should include emerging risks and the rapid pace of evolving risks such as the COVID-19 pandemic. 

(c) Assist management in capturing and sustaining value by pursuing efficiencies.  This should include initiatives to embrace new technologies to support your clients and employees during and post-COVID-19.

(d) Validate that quality and compliance are baked into the culture of the organization.  The fastest way to frustrate valuable clients in difficult times is to provide products and services they need below their quality expectations.

(e) Continuously add value by improving your financial management and governance and monitor progress.

(f) Creating value is not enough. Assist your teams in capturing and sustaining value by being responsive to internal and external factors timely.

Quick Wins

Evaluate your current capabilities by performing a high-level assessment to accomplish the following:

  1. A “current state” risk-assessment.  The output will provide your organization with an updated risk profile and scorecard that can be used to make decisions towards enhancing your strategic risk-management capabilities. 
  2. Provide insights identifying new and emerging risks impacting the accomplishments of your strategic goals and objectives during and post-COVID-19.
  3. Management can use the output from the risk assessments to evaluate, prioritize, and develop plans to mitigate critical risks—and perform audits and reviews that matter.

Perform a Comprehensive Strategic Risk Assessment

We define strategic risk assessment as a set of policies, procedures, processes, systems, and resources that provide oversight on how an organization identifies and mitigates risks adapting to its changing business environment.    

Benefits of performing a strategic risk assessment include:

  • It provides a simple, flexible, and agile framework that can be customized and used throughout your organization to identify, prioritize, and mitigate current and emerging risks impacting the accomplishment of strategic goals.
  • A guide to implementing an integrated approach to risk-taking, risk oversight, and risk assurance functions eliminating redundancies in work performed.
  • Enable timely and accurate reporting to the Board and Committee’s, Executives, and Stakeholders.
Conclusion

In difficult times, management must often re-visit your business fundamentals and the strategy to make timely changes to ensure the organization continues to add-value, capture, and sustain value. The disruptions from COVID-19, accelerated the need for sound business practices and decisions that are centered around the mission—solving problems customers see as valuable and increasing their willingness to pay for your products and services.  Our next post will elaborate on steps you can take to re-visit your fundamentals, especially in difficult times.

Jonathan Ngah, CISA, CIA, CFE, CGFM, is a principal at Synergy Integration Advisors, a professional services firm providing internal audit outsourcing and internal audit co-sourcing services to government institutions, private-sector, and not-for-profit organizations in the US and the Asia Pacific (APAC) regions.