Companies in China are gradually resuming work after an extended Spring Festival. Several cities are allowing offices and certain production plants to open, provided that they fulfil required health measures. Transport restrictions combined with self-isolation requirements after travelling, and a general caution to avoid crowded areas, are making working-from-home arrangements common. With businesses starting up, the initial impact is being felt and mitigation measures are being put in place. In order to understand how Swedish companies perceive the impact on their business, and what actions they are taking, Business Sweden and the Swedish Chamber of Commerce conducted a survey among Swedish companies operating in China, with an equal proportion of small, medium and large enterprises.
Clear negative business impact
A vast majority of the respondents have already felt a negative or very negative short-term impact on production (88%) and sales (90%). The strongest impact is within industrial sectors, where supply chain issues and lack of labour has put a complete halt to many activities. These sectors are closely followed by consumer and professional services industries, which are dependent on a steady demand among consumers and customers for products and services, , and are also hit by labour shortages, even though some services companies have been able to quickly reopen thanks to digital ways of working.
Looking ahead, many companies also expect a negative impact over the coming three to six months, even though fewer of them believe it will be very negative compared to the short-term impact. The number of companies with a projected negative or very negative impact is slightly lower for production (82%) than for sales (90%), indicating that they expect their operations to resume faster than the rate of demand recovery.
Mitigation measures are focusing on health and safety
When asked which measures are being put in place as a result of the virus outbreak, most companies respond that they have taken a number of health and safety precautions. The most common ones are:
- alternative working arrangements (86%)
- self-isolation for people who have travelled (81%), and
- limited travelling (76%).
Actual relocation or repatriation of employees to less affected areas is less common at 14%.
Some of the companies have also started looking at measures addressing the economic impact, where increasing sales and production plans for the second quarter of the year is the most common (38%) followed by supply chain diversification (33%). It is likely that more measures will be put in place in a near future, once the more urgent safety matters are fully addressed.
Good support from home
There seems to be a good understanding of the situation in China from the colleagues back in Sweden. A majority (82%) feel that the headquarters understand their situation, and that they have received some (29%) or full (63%) support from headquarters. It is likely that risk management procedures will be reviewed as a result of the learnings from the handling of the outbreak, but the high level of understanding and support is a good foundation for improved response and mitigation plans.
An active approach is required
The abnormal situation caused by Covid-19 is not yet over, and how companies manage to deal with the consequences of the virus will have an impact on their longer term performance. It will be critical to continue monitoring the development of the situation and its business impact, as well as the policies from authorities being applied in the areas where companies are active. It will also be important to find solutions for doing business in times of limited travelling and physical meetings, and leverage digital tools wherever possible, while considering potential cybersecurity risks. And, most important of it all, to keep the wellbeing of employees as a top priority.
On top of this, companies need to plan ahead to enable fast recovery once business gets back to normal. When business infrastructure opens up, there will be many companies competing for limited resources and logistics networks to operate, and demand might not necessarily match the increased supply. The businesses that are best prepared, will be most likely to succeed and bounce back without further delay.