{"id":7182,"date":"2020-04-30T18:13:19","date_gmt":"2020-04-30T12:43:19","guid":{"rendered":"https:\/\/itatonline.org\/articles_new\/?p=7182"},"modified":"2020-04-30T18:32:00","modified_gmt":"2020-04-30T13:02:00","slug":"the-survival-instinct-covid-19","status":"publish","type":"post","link":"https:\/\/itatonline.org\/articles_new\/the-survival-instinct-covid-19\/","title":{"rendered":"The Survival Instinct – COVID-19"},"content":{"rendered":"

\"\"<\/a>CAs Naresh Kumar Kabra and Ankit Modi have provided valuable guidance on how businesses will have to adapt to survive the disruption caused by Covid-19. The authors have given pointers on how the cash crisis can be met through orthodox methods of cost cutting. They have also provided practical insights as to ‘What Comes After’ the lockdown and how to prepare for it. A pdf copy of the article is available for download<\/strong><\/p>\n

Overview <\/h2>\n

The Indian economy has declared its 6 years’ lowest real GDP in the third quarter of 2019-20, and the outbreak of COVID-19 has posed enormous challenges. The situation forced the government to impose 40 days (initially 21 daysand then extended by further 19 days) nation-wide restrictions and a complete lockdown to curtail the lethal impact of the outbreak. It has led the economic activities of the nation to a standstill and could impact both the demand & supply side of the economy.The lower reliance on intermediate imports, can possibly insulate the businesses from the global supply chain disruption.However, the deteriorating economy have forced the businessmen to think about their survival.<\/p>\n

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Impact on the Fund Flow Management:<\/u><\/h2>\n

\"\"<\/a>The lockdown has resulted in a shutdown of the industrial and commercial establishments and the supply chain in the economy. This has adversely impacted the cash flows as the inflows are curtailed to its lowest and outflows are difficult to be compromised. The industrial sector of India was already suffering from a slow-down phase and the exhausting liquid funds may lead to failure in satisfying the payment obligations or may lead to insolvency in some cases. A situation of liquidity crunch is highly expected the reason being that the falling or zero revenues that aren’t compensated by measures such as loan forbearance.<\/p>\n

Impact on the Supply Chain:<\/u><\/h2>\n

China is the largest source of imports for India. Shutdown of factories in China might result in shortage of raw material for firms who are largely dependent on them. However, the common practice of stockpiling in Indian firms might insulate them from facing the shortages or price hikes.<\/p>\n

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There is also an emotional shift among the people towards Chinese products or towards companies use Chinese products. The resulting impact of Government actions against China and consumer’s dislike are factors that need to be kept in mind.\n <\/p>\n

Barring few industries, the economy is not expected to get effected significantly as continuous incentives under “Make in India Scheme” reduced its reliance on imports from other nations.<\/p>\n

Impact on Customer Demands:<\/u><\/h2>\n

Considering the need of hour, the demand of non-essential goods may lead to a steep fall as the consumers are expecting an extension in lockdown period. Demands forEuropean & American countries export oriented businesses are supposed to get more effected in comparison to domestic supply-oriented units.  Demands for essential goods like food and non-alcoholic beverages is expecting a sudden rise but situation may get uncontrolled in case of domestic supply chain disruption due to lockdown. Demands in case of restaurants, hotels, multiplex etc. industries isaffected severely, no rise in demand is expected in the upcoming 3 months.\n <\/p>\n

To minimize the impact of this once in a decade disaster and reincarnate your business, we would like to discuss a phased plan with you in the rest part of this article.<\/p>\n

Phase 1 – How to deal with the current scenario<\/strong> <\/strong>\n <\/p>\n

The increasing rate of cash outflows together with the decreasing cash inflows urges the organizations to review their cash flow management planning in order to cope up with the upcoming situation. Although, a situation of liquidity crunch is prevailing in the market but the businessman is advised to pay off staff salary & debts as this will help the organization gain employee’s confidence and increase its creditability & Goodwill. Following are some suggestions which might be considered in accordance with the need of hour:<\/p>\n

PAY Now or PAY Later:<\/u><\/span><\/h2>\n