3 actions for business to prepare for a post-pandemic future

The ambitious vaccine rollout programmes that are underway in many parts of the world are finally bringing hope that we may be turning the tide against COVID-19 and we can begin to open society and economies more broadly. These past 12 months have been an incredibly difficult period, for both individuals and businesses.

Nevertheless, it does seem sentiment is beginning to turn. Society and commerce have changed enormously since the outbreak of COVID-19 and few expect an automatic reset to pre-COVID times. Businesses now need to respond to trends that have either emerged from, or been accelerated by, the pandemic. Here are three key considerations:

1. The enlarged role of the state

Over the past year or so, the role of the state has dramatically expanded in many economies around the world. Governments have helped to manage and oversee vaccination programmes, created generous fiscal packages to support their economies and re-designated specific industries as “strategic”.

Government-sponsored economic activity is likely to remain in a number of places in the short to medium-term. For example, we expect to see significant growth in government and healthcare-related industries as buyers of services, especially technology services, globally.

Vaccine programmes have highlighted the power of public-private partnerships and multilateralism, and we can expect to see similar ecosystems coming together in the future to provide new services and address other societal challenges. Businesses should be thinking now about how they may be able to capitalize on these opportunities. They should also be more conscious about where their supply chains are, especially if they provide what are now deemed to be “essential” or “strategic” services by governments. A drive to more local or regional sourcing seems inevitable.

In certain industries, governments will also end up as significant “economic” actors through the investments they made to support certain businesses during the pandemic. Businesses may find that governments are now shareholders of some of their biggest local or international competitors. This will impact a myriad of strategic decisions, from investments, divestments, restructuring and consumer pricing. And this in turn may have implications for individual businesses on the broader economic and political landscape.

2. The green agenda takes centre stage

COVID-19 has not lessened the increased international sense of urgency around climate change. If anything, it has highlighted the importance of anticipating and mitigating major threats to human well-being. The COP26 UN Climate Change Conference, which takes place in Glasgow later this year, is the focus of much political attention and may result in world leaders making ambitious commitments to reduce emissions at a faster rate.

Against this backdrop, many economies are likely to prioritize further decarbonization – driving demand for specialized technologies. Businesses will come under even greater regulatory and reputational pressure than they are today to operate more sustainably. They will also be expected to report on their environmental targets and progress. This will require the use of common metrics. This is where collaboration is most powerful. Take the World Economic Forum’s Stakeholder Capitalism Metrics, which saw a group of about 120 of the world’s largest organizations, including EY and its Big Four counterparts, come together to develop common metrics and consistent reporting in service of this goal.

The push for decarbonization will create long-term funding and transition challenges for many industries – particularly carbon-intensive ones; but it will also create opportunities. Greater transparency around sustainability initiatives should help companies attract investment, given investors’ increasingly strong appetites for sustainable assets. Regulatory intervention and guidance around ESG in the financial services industry will accelerate the drive towards greater transparency as the public and private capital markets increasingly demand progress.

3. Winning in the turn

Commentators are expecting a significant economic bounce-back in many of the major economies, driven by government fiscal stimulus, pent up consumer spending fuelled by unprecedented levels of consumer saving and business investment. The US fiscal stimulus of $1.9 trillion on its own is estimated to add 1% to world GDP output.

Many businesses responded to the crisis by controlling costs and reviewing business portfolios to preserve cashflow. We’re now seeing business focus shifting to assess how they can “win in the turn”. Research from Gartner shows that the top 8% of the world’s largest publicly-listed companies dramatically outperformed their peer group in the years following the financial crisis. Winning in the turn is all about making the right bold investment to drive expansion and growth.

The recent EY Global Capital Confidence Barometer of C-suite executives found that nearly half of respondents are planning acquisitions in the next 12 months. Notably, the majority of would-be dealmakers (65%) are looking for assets internationally rather than domestically, with innovative start-ups and tech-enabled competitors particularly highly sought after.

This anticipated buying surge will result in fierce competition for talent and assets, driving up prices and increasing the risk that companies overpay for acquisitions. That said, an M&A boom could be an opportunity for businesses to divest non-core assets and free up valuable capital that can be put toward strategic investments, including digital capabilities and green solutions.

Reframing the future

This period has been characterized by some jarring realities; the impact of the pandemic has not been symmetrical across society nor businesses. For industries like retail, travel, hospitality and live entertainment, the pandemic has been an existential threat to their survival. While other industries, such as healthcare, life sciences or technology, have seen their growth turbo-charged during the pandemic.

The dramatic expansion of digital service delivery and the acceleration of digital payments in this period will open up the potential for new and exciting business models. Paradoxically, the pandemic has given a huge boost to government attempts to clamp down on the untaxed part of the economy – with the near collapse of cash payments and the shift to e-government services, including improved tax collection. Additionally, 12 months of enforced remote working is challenging many service-based businesses to think very differently about skills, working practices and the deployment of people – opening up new and more diverse talent pools.

The opportunity right now for businesses is to begin reframing for the future. They should be thinking about how they can capitalize on that bounce-back and avoid being left behind by competitors or being unprepared for new regulatory developments, particularly in relation to green policies. By taking action now, they can set themselves up for success in the post-pandemic world.