How are ME private sector leaders faring amid Covid-19?

Nearly 8 in 10 business leaders in the Middle East have been able to preserve business continuity and build enterprise resilience during the Covid-19 pandemic, according to a survey from Sia Partners. 

The management consulting firm surveyed more than a hundred executives between the C-Suite and middle management levels across all six GCC markets – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). The result was a largely positive business outlook, with nearly 80% reporting that their business has survived the worst of the crisis.

Success in business continuity can be attributed to a combination of market factors and government initiatives, not only in the economic sphere but also with respect to containing the virus. As cases soar across the US, the UK, India, and other key markets, Sia Partners used data from the World Bank and World Economic Forum, among other bodies, to point out that GCC countries have been adept at managing the spread of the infection.

Barring the situation in Oman, where cases are on the rise again, the infection curve is being flattened across the region via key strategies such as aggressive testing and travel restrictions during the festive season. The result has been a relatively resilient economic outlook, as markets gradually work through their reopening process.

That being said, the crisis period has been far from smooth for most businesses. Consumer activity nearly came to a standstill across the globe during the crisis, while the handful of purchases that persist are coloured by entirely new patterns and priorities. Not surprisingly then, most respondents to Sia Partners’ survey report that growth and profitability has been hit hard by the pandemic.

As profits shrink, the second biggest challenge has been to cut costs. Businesses have had to dig into their cash reserves to tide over the crisis, and cutting costs has been the only viable option for many to avoid the complete depletion of cash flow. Add to this the fact that spending has actually increased under the crisis for a variety of reasons.

Among these is workforce management. The top priority here has been to keep employees safe and healthy, which entails remote working. Once employees are working virtually, the challenge then is to ensure that they are motivated and engaged. Setting up the infrastructure to facilitate a secure and engaged virtual working arrangement adds up to a substantial cost. 

Lack of virtual working enablers, and managing the added security threats that stem from a stretched IT infrastructure are consequently all factors with which businesses have been grappling. Others report loss of customers and disruptions to global supply chains as key concerns.

In light of these challenges, the question remains how businesses expect to fare in the next year or so. Most respondents to the study expect their revenues and general business activity to shrink to some extent in the wake of the crisis, when compared to revenues last year.

The majority expect a moderate contraction of up to 20%, just over 10% expect a 20% to 40% contraction, while a handful expect a catastrophic shrink of more than 40% when compared to last year. There is also a set of highly optimistic businesses, with more than 10% indicating an expectation that their business will expand when compared to last year.

Nevertheless, the lion’s share of GCC businesses expects a contraction of some sorts, and many are preparing themselves for this change. The top priority in the post pandemic era amongst businesses is to optimise costs in order to wait out the revenue crunch. To the same end the broad-based focus on reviewing business strategies.

Other business priorities, according to Sia Partners, are to improve the long-term future readiness of models, which involves the digitalisation of a large share of operations. Innovation, tech infrastructure, team building, and a focus on customer-centricity are all part of becoming a future ready business.

Plans to develop the workforce, protect against cyber attacks and improve governance mechanisms also feature on the list of priorities, although these remain secondary concerns. For now, businesses are looking to hunker down, cut costs and revise their offerings to meet consumer demands of the future.