deloitte ined series workshop #32 resilience and recovery ... · his areas of specialities include...

7 May 2020

Deloitte INED Series Workshop #32 Resilience and recovery in the wake of COVID-19 pandemic

2© 2020. For information, contact Deloitte China.

Deloitte INED ClubOpening

Eric Tong

Chair of Deloitte INED Club

Partner, Global Financial Services Industry Group

Deloitte China, Southern Region

Tel: +852 2852 6690

Email: [email protected]

mailto:[email protected]

China: Green shoot & policy responses

Xu Sitao, Chief Economist, Deloitte ChinaMay 7, 2020


Xu Sitao is Chief Economist and Partner of Deloitte China, spearheading Deloitte's economic and industry research. Prior to Deloitte, he was Chief Representative of China and EIU forecasting director at The Economist Group from 2004 to 2014.

Sitao worked for MMS International of Standard and Poor’s Group in Singapore as the Economist for Indonesia, Korea and Thailand in 1995. He joined Standard Chartered Bank as Regional Treasury Economist in 1996. From 2000 to 2002, he was Société Générale's Chief Economist for Asia. In 2003, he became the Head of Economics of ICBC (Asia).

He is often invited by leading MNCs to their board rooms, to present key issues on China.

Deloitte speaker

Xu SitaoChief Economist Deloitte China

© 2020 Deloitte Consulting, S.L.U. 5

A few observations of COVID-19

China: “first in and first out”

Policymakers are “ahead of curve”

What will be the New Normal?


Asia likely to bounce back first, but growth forecasts can be moving targets

2020

GDP growth

(%)

2020

CA/GDP (%)

Revised outlook in the wake of Covid-19

Source: Deloitte, Bloomberg

-3.9

3.5

-4

3.3 2.60.3 0.8

-2.2

0.4 0.8

-4.7

3.14.6

-6-4-202468

Austr

alia

Chin

a

Hong K

ong

India

Indonesia

Japan

Mala

ysia

Sin

gapore

South

Kore

a

Taiw

an

Thailand

The

Philip

pin

es

Vie

tnam

GDP growth est. in Jan 2020 GDP growth est. in Apr 2020

Est. in Jan

Est. in Apr

0 0.3 3.5 -2.1 -3 3.5 3.5 17.9 3.8 12 5.5 -2 2.2

Barclays EM USD Aggregate: CorporateBarclays Asia USD Inv Grade Bond Index

• Chinese policymakers increasingly prioritize business resumption

• Policy responses have become more decisive throughout Asia but more could be done

• External environment has seen vast improvement since March 2020 (financial market and the boon from low oil prices)

Jan Feb Mar AprJan Feb Mar Apr


Share of exportsto China (%)

Share of tourists from China (%)

China's share of inward FDI (%)

Australia

Hong Kong

India

Indonesia

Japan

Korea

Malaysia

Philippines

Singapore

Taiwan

Thailand

Vietnam

31.0

27.9

34.9

9.0

55.2

19.5

19.1

13.9

12.9

24.3

11.8

17.3

78.3

30.1

15.2

16.3

2.6

13.5

31.2

11.4

18.4

24.4

27.6

32.0

1.8

31.9

15.0

0.0

38.1

3.1

12.4

5.8

13.0

20.7

18.5

31.4

Recovery: trajectory, opportunities and risks

• Dollar’s strength remains a concern

• Worsening US-China relations

• Rising nationalism and populism

China’s recovery is a welcome boost for Asia

Source: CEIC, Wind, Centennial Asia Advisors

Asia’s economic outlook

Recovery is

likely as…

Certainly,

downside risks still remain …

• Given the assumptions that the worst phase of virus will be over by early Q3 in major economies

• Oil price slump, a one-off boost to most Asian economies’ current account balance


How long can HKSAR buy growth?

-200

0

200

400

600

800

1,000

1,200

1,400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

(HKD, billion)

Fiscal reverse Fiscal revenue Fiscal expenditure Fiscal balance

Hong Kong’s fiscal situation

Source: Wind, Deloitte


The Chinese economy: green shoots & challenges

Source: Wind, Deloitte

Interest rates have more room to fall

-90.00-80.00-70.00-60.00-50.00-40.00-30.00-20.00-10.000.0010.00

0.00

0.50

1.00

1.50

2.00

2.50

(%)(Million)

Passenger car sales Passenger car sales: YoY (right)

Green shoots of China in the midst of outbreak Auto sales reinforced consumption upgrade theme

-30

-25

-20

-15

-10

-5

0

5

10

15

20

(%)

GDP: YoY Industrial added value: YoY

Retail sales: YoY Investment: cumulative YoY

Exports: YoY

8.50

9.00

9.50

10.00

10.50

11.00

11.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2020-01 2020-02 2020-03 2020-04 2020-05

(%)(%)

7D reverse repo 1Y MLF 1Y LPR RRR: small & rural banks (right)

105

110

115

120

125

130

USD index

A strong US dollar tightens monetary conditions


2020 US presidential election

INED Workshop

Marco Liu | Risk Advisory

Resilience and Recovery After COVID-19

Information Classification: Confidential


Marco is an advisory partner specialising in strategic, brand and reputation and operational risks. He has more than 26 years advisory, auditing and consulting experience in Canada, Mainland and Hong Kong, managing professional teams and delivering services in a wide range of business and environmental sectors. His areas of specialities include strategic risk, food safety advisory, supply chain risk advisory and crisis management.

Marco is also the Business Security Leader of Deloitte China and Asia Pacific. In these roles, Marco is responsible for managing the security risks associated with confidentiality, privacy, cyber security and general security in China and Asia Pacific.

Deloitte speaker

Marco LiuPartner, Risk AdvisoryDeloitte China

INED Workshop – Resilience and Recovery After COVID-19© 2020. For information, contact Deloitte China. 13

Deloitte China’s COVID-19 Response Model

Text

Text

Text

Text

TextText

Text

Text

Text

Text

10 Aspects

People Protection

Education & Awareness

Internal & External Communication

Clients & Markets

Government Liaison

Virus Monitoring & Tracking

Hygiene & Safety

Travel Alert & Advisory

Human Resources

Technology & Operations


Four main areas you should focus on

Talent Mobility Risk Management

Managing the threat on the locations where an organization’s employees located

Supply Chain Management

Managing supply chain risk and disruption, eliminating vulnerabilities such as over reliance

Scenario Planning and Crisis Management

Foreseeing and preparing for the worst, surviving through the storm

Review/Revamp of Businesses & Operations

Adopting to the “New Normal” (e.g. alternative working arrangements, automation, etc.)

e


Supply chain management – the challenges

1

Customers Manufacturer

Warehouse and distribution

Retail & Wholesale

Supplier 1

Supplier 2

Supplier 3

ERP and other systems

e

2

3

4

Demand forecasts have shifted significantly

• What are the forward demand scenarios that require a response and create opportunity?

1

Some suppliers will fail to meet demand

• Which suppliers are at risk and what the alternatively sources of supply now and into the future?

2

Inventory choices will be critical to business survival

• What inventory is essential and what can be rationalised to save working capital and operating costs?

3

Cash flows are essential for all

• How we balance flexibility and speed with financial control in the procure to pay process?

4

There are four key challenges that need to be addressed in many supply chains in order for them to recover from the Covid-19 disruption and respond to re-shaped customer demand


Supply chain management – quick tips (1)

Issues identifiedpreviously

Solutions Details

1. Demand forecasts have shifted significantly

Scenario based demand forecasting

• Generating and manage demand scenarios based on both macro and micro analysis of demand:

• Agreeing the ‘at risk’ categories based on market intelligence• Segregating historical demand for ‘at risk’ categories to create a baseline

historical demand profiles (incl. seasonality)• Creating scenarios for each of the demand drivers and modelling a range of

demand scenarios and response strategies against priority categories• Translating expected demand profiles and modelled scenarios into forecasts of

financial impact and opportunity.

2. Some suppliers will fail to meet demand

Supply chain risk assessment

• Increasing the visibility of supply chain, making it more transparent across multiple tiers of the extended supply chain.

• Leveraging big data analytics & augmented intelligence to build supplier network maps and identify opportunities and exposures.

• Translating illuminated exposures into actionable insights that are specific to industry.

• Expanding and increasing focus on geographic exposures including cyber, health security, political stability, and supplier network solvency.


Supply chain management – quick tips (2)

Issues identifiedpreviously

Solutions Descriptions

3. Inventory choices will be critical to business survival

Production, inventory and SKU Optimization

• Undertaking Data Analytics to assess changing demand

• Rapidly identifying inventory optimisation opportunities

• Rationalising and prioritise SKUs to meet demand

• Assessing macro and micro economic changes that they impact SKU, Production and

Inventory allowing clients to make data driven decision making through increased

visibility.

4. Cash flows are essential for all

Rapid supplier mobilization & streamlined procure-to-pay processes

• Quickly assessing procure to pay and processes to improve and mitigate potential points of failure including assessing process controls and risks that arise during an emergency situation

• Ensuring optimum buying channels (POs, Catalogues etc.) and right contractual mechanisms are in place

• Using a risk-based approach, recommending relaxing or improving the financial control landscape to manage the process efficiently and with control

• Utilising established Data Analytics capabilities, software and pre-defined tests creating scalable and customisable interactive dashboards to monitor, manage and facilitate decision making.


Scenario planning and crisis management – managing uncertainties

The COVID-19 is affecting all walks of life, shopping malls and restaurants are deserted, travel and tourism collapsed, manufacturing suspended, and so on. The wide spread impact is considered detrimental to many companies. It is therefore important that businesses are proactive in assessing their capability to withstand disruption from both an operational and a financial standpoint, and that they act decisively to mitigate actual or potential threats. Aspects of volatility during the COVID-19 crisis include:

• Trading volume

• Cash flows

• Borrowings/capitals

• Receivables

Liquidity

• Working capital

• Operations

• Suppliers

• Inventory

• Customers

Working capital and supply chain


Scenario planning and crisis management – quick tips

To understand an organization’s vulnerability to uncertainties, it is always good to have an effective scenario planning exercise in identifying the limit and set priorities for remedies. Our approach consists of the following work steps:

Work through the most likely scenarios and worst case

(war game techniques may be appropriate) to assess

the impact on business and evaluate the dependencies

(asking the ‘what if’ questions)

Co

mp

on

en

ts

Determine pain points and level of tolerance

Unfold the impacts on business in critical aspects

Set strategic business priorities in each scenario

Identify and assess opportunities/ vulnerabilities

Develop assumptions, scenarios and the worst case

Anticipate situations that may affect the company

Prepare contingency arrangements for business

Put early warning systems in place & escalation protocols

Implement mitigation and contingency strategies

Prepare contingency plans to mitigate predictable and

known threats, and practicing and hardening of contingency arrangements

Prioritise the highest impact work streams and business critical activities to focus

effort and investment Acti

on

s

Assess Analyse Mitigate


Business Impact Analysis Sample


Are you prepared for Wave 2, 3 or more?

Text

Text

Text

Text

TextText

Text

Text

Text

Text

10 Aspects

People Protection

Work arrangements that cut the virus transmission chain

Education & Awareness

Rising awareness and knowledge of virus prevention

Internal & External Communication

Conveying messages effectively

Clients & Markets

Management of opportunities, pipelines, delivery, etc.

Government Liaison

Liaison with government authorities for compliance

Virus Monitoring & Tracking

News/media updates, government policies

Hygiene & Safety

Clean working environment

Travel Alert & Advisory

Travel ban and restrictions; flight arrangements

Human Resources

Flexible working arrangements, other HR policies

Contactless operations (i.e. virtual meeting)

Technology & Operations


Adopting to the “New Normal”

Review crisis plans, processes and competency

• Did processes work? • Did information flow well? • Was communication with stakeholders

adequate and timely? • If not, why not, and what can be done to

improve?

Take a deeper dive—ask the difficult questions

• Why did it come to this? • What cultural traits across the

organization exacerbated the situation?• What is the long-term plan to achieve a

more crisis ready culture?

Broaden the learning

• Is the board providing enough support to the move to a new normal by working with the executive team?

• What are the favourable outcomes? • How they could be achieved?• How peers responded to and addressed a

crisis?

Find the opportunity

• Is there competitive advantage to be gained in making a change?

• What strategies, decisions and directions are now on the table for discussion that perhaps were not before?

• Is the board ready to support change, and direct the implementation?

To conclude, the below illustrates questions that you should ask yourself when facilitating the process of reviewing/revamping businesses and operations in adopting to the “New Normal”:

1 2

4 3


Deloitte INED ClubClosing

Edward Au

Managing Partner, Southern Region, Deloitte China

Co-Leader, National Public Offering Group

Tel: +852 2852 1266

Email: [email protected]

mailto:[email protected]


Polling questions for webinar


Thank you!

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