Pandemic is all over the world and it has adversely affected logistics, manufacturing and distribution, availability of raw materials due to supply chain disruptions, etc.  Mostly, healthy and large enterprises have managed to survive in VUCA but the situation was heart-wrenching for small and medium enterprises (SMEs). Various SMEs have suffered a lot to survive during the pandemic-induced lockdown and still struggling to be on the ground.

VUCA- (Volatility, Uncertainty, Complexity and Ambiguity) is not just an acronym but has become a kind of system which gives a brief understanding of the unpredictable nature of our surroundings and the world. The situation such as Covid-19, which we are dealing with right now, aptly narrates the VUCA condition. Let's see our understanding over Covid-induced VUCA with below mentioned in the figure.

 

Covid-induced UVCA Description

Source- Interlink Knowledge CellCovid-induced UVCA Description

So ultimately, we can say that the pandemic has taken us through the VUCA rollercoaster and not only our personal lives but also various aspects of our society were affected to the greater extent. Such VUCA situation accompanied with global economic recession and drop in global GDP has worsened the overall scenario.

Pandemic is all over the world and it has adversely affected logistics, manufacturing and distribution, availability of raw materials due to supply chain disruptions, etc.  Mostly, healthy and large enterprises have managed to survive in VUCA but the situation was heart-wrenching for small and medium enterprises (SMEs). Various SMEs have suffered a lot to survive during the pandemic-induced lockdown and still struggling to be on the ground.

Following is the brief overview of how numbers of SMEs are affected in pandemic-

1. Effects on the supplies and inventory-Due to the supply chain disruption during pandemic, leading to unavailability or shortage of raw materials and various other goods and parts resulted in a hard time for SMEs in producing their things and services. In addition to this, strict lockdown norms, quarantines reduced the number of labours on duty which in turn adversely affected the production capacity and revenue generation at SMEs. Moreover, SMEs comparatively have access to fewer supplier than larger enterprises which resulted in unwanted consequences of losing existing suppliers by SMEs.

2. Effects of lowered demand- Sudden reduction in consumer spending led to the downfall of revenues for SMEs which in turn pressurised SMEs on liquidity front. Lesser demand resulting in lesser need of labours causing increase in unemployment which is further lowering the purchase capacity of consumers.

3. Effects on credits-The global recession resulted from unwanted effects on global financial market causing trouble for SMEs to secure the credit which is essential for restoring their liquidity.

4. Effects of work environment- Generally having very small infrastructure, work places of SMEs are not designed as per the social distancing norms. This resulted in closure of factories and outmigration of workers from working area. Now, at this moment, it's very uncertain to predict whether these workers will remobilize or not, leaving SMEs in need for labours as the factories are re-opening gradually.

5. Low accessibility toward Emergency support- SMEs rarely draw any support from government and there are very few candidates who take part in government support programmes. This is one of the reasons due to which SMEs have very low accessibility toward emergency support from government and government also find it much difficult to reach to such SMEs.

6. Less adaptivity toward digitalization- lowered revenues during pandemic is not allowing SMEs to adapt the newer technologies and teleworking which further making it difficult for SMEs to survive in this competitive scenario.

SMEs are facing major challenges at liquidity front amidst pandemic. It's very urgent to support such SMEs to restore the critical supply chain and minimize livelihood crisis. Good cash flow, financial stability and security, liquidity, profitability, empowering individual strengths are some critical factors which government should take into consideration in order to support SMEs.

Shutdown, supply-chain disruption, demand depression and recovery is a four-phase process through which SMEs have travelled during pandemic. Being in the last phase, i.e., Recovery, SMEs are now expecting some relief from government in terms of policies and empowerment.

Remedial measures for SMEs to fightback and survive in this VUCA world –

Below discussed are some of the remedies which government can plan to boost the SMEs and make way for profit-

1. Government loans- This can be an effective source of liquidity for SMEs which is very crucial at this point of global recession. While planning such loan policies, government should first target the areas which are majorly affected by shutdowns. Relieving such areas will not only increase the revenues for concerned SMEs but also will boost the standard of living of the society which was badly affected during pandemic. Government can also look into the taxation policies for such SMEs and further empowerment of the sector.

2. Cash flow support-Tax policies could be altered to allow tax benefits to SMEs as well as LLCs. Government also can provide cash flow support by allowing SMEs to deduct more losses through higher losscarrying back amounts.

3. Woking capital funding- Working capital funding by government will increase accessibility of SMEs towards money based on their business size and requirement.

4. Debt fund resolution-It would be a great relief for SMEs if all outstanding loans are treated as a bundle together with principal and interest. Idea of providing 1 year moratorium can also be considered as a good option to empower adversely affected SMEs.

5.Investments in SMEs-Indian SMEs have lost equity during pandemic. Supplying this SMEs with fresh equity will boost the manufacturing capacity and help India to become next manufacturing hub as most of the countries are moving out of the famous sourcing countries and moving toward India.

6. Empowering labour workforce- A subsidy package or wages support from government would enable employers to pay salaries to their daily-wages workers and the labours can re-engage themselves with the concerned SMEs.

Announcement of package of Rs. 20 Lakh crores is an applaudable move made by Indian government directly supporting vulnerable groups, MSMEs, agriculture and allied sectors, etc accompanied with policy, regulatory and taxation reforms. This step taken by Indian government would definitely give relief to number of Indian SMEs which are adversely affected by pandemic.

In addition to the government support, SMEs should recognize their individual unique strengths and should apply it to the opportunities. It's very essential at this point of time to look for a unique way to survive when entire economy is struggling to move up through the pandemic-induced recession. Implementation of government policies and deriving benefits out of it is a matter of future. At present, recognizing the flow of market and trying to get with the flow is very essential. Adaptation of new technologies and getting familiar toward digital world is the way which will hold you up in today's VUCA market.

Ultimately government and businesses have to work together in order to protect their workers and manage the risk which can arise in the future.

 

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About Dr R.B Smarta

Dr Smarta is the Founder and Managing Director of Interlink, a Business performance consulting firm operating in the Pharmaceuticals, Nutraceutical and Wellness domain for over 35 years.

As one of the pioneers and thought leaders in the field of Pharma, Nutra and Wellness, he has designed management agendas for profitable growth, expansion, launched new concepts, ideas and projects, helping over 300 clients with effective and sustainable solutions to improve business performance. Dr Smarta's forte lies in his deep understanding of the domain, ability to drive innovation and deliver customized solutions - be they start-ups, national or multinational clients. His advice and guidance have helped clients take their Concepts to Reality and translate Science to Business. He has worked as a Strategic Advisor with some of the best-known companies in the domain and has been incorporated as a service on demand.

Dr Smarta plays a critical role in shaping the Nutraceuticals industry through his associations with various boards, committees and government bodies. He currently serves as a Vice President of HADSA (Health foods and Dietary Supplements Association) and is associated with various Pharmaceutical and Nutraceutical boards and committees such as IPA, CSIR, IDMA and CII.