COVID-19 : What do we do next? Rethinking & Rebuilding Business Models - Version 3rd May 2020 - 27 Advisory
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COVID-19 : What do we do next? Rethinking & Rebuilding Business Models Version 3rd May 2020
It’s a quadruple
shock.
We cannot predict the eventual impact on
Malaysia of a global pandemia coupled with
low oil prices, high household debt and low
economic density.
I urge MDs, CEOs and public sector leaders
to use this time to rethink and rebuild your
business models. Seize this opportunity to
transform your organisations by embracing
technologies of the fourth industrial revolution.
I also call for more Malaysian entrepreneurs to
brainstorm and create more jobs in digital eco-
systems. We see opportunities in this crisis.
GIRISH RAMACHANDRAN
Executive Director
27Group
COVID-19
Objectives of this paper
The COVID-19 pandemic, since its first reported case in November
2019, has brought unprecedented impact on governments, businesses
and societies around the world. As of 3rd May 2020, it has infected
more than 3.4 million people worldwide, causing more than 240,000
fatalities.¹
Started-off as a health crisis, it is now turning into a global financial
crisis as the various public health measures such as movement
control, travel restriction and social distancing to break the infection
chain are affecting the continuity of economic activities across all
sectors.
This document is meant to provide a systematic framework for
government, industry groups and companies to examine the impact of
COVID-19 in their own environment, and formulate the necessary
steps that will help them to navigate through the crisis.
1. World Health Organization (3rd May 2020)
3
Updated as of 3rd May 2020
Executive Summary
What is the situation now?
• Public healthcare measure such as movement controls have shown improvement on the
number of cases and slowly reducing the infection rates in Malaysia
• The businesses are suffering from major revenue drop and lacking of cash buffer that can
help them to weather the crisis Both the Government &
• The reduced household expenditure and shrinking businesses cash flow will create a private sector companies
Domino effect that would bring devastating impact and cripple the economy
will need a framework for
What would be the potential pathways moving forward? strategy development
• The extended movement control is giving more pressure to economic activities, and both with sufficient “breadth”
government & businesses will need to start thinking about the post-crisis recovery options
(coverage of area)
• Economic shock is unavoidable, but the future is yet concluded. The government’s policy
response to curb the virus & revitalise economy will be instrumental to the recovery path & “depth” (level of
• Both government & businesses will need to make difficult decisions to survive in the New practicality) in
Normal, a nationwide digital transformation could be the answer in the post-crisis world
“chronological order”
What should the governments and businesses do now? (time-phased) to navigate
• It is imperative to lift the MCO to prevent major business failure, but it has to be done in a through the crisis
right way with strict protocol & enforcement for different economic sectors
• Businesses will need to be ready for the New Normal by being proactive in scenario
planning and recalibrating business model by leveraging on digital technologies
• Both government & private companies need to be ready for the continuously changing
ecosystem and prepared for rapid adjustment
4
What is the current
situation of the
COVID-19 pandemic
in Malaysia’s context?
Updated as of 3rd May 2020
How is the current global situation?
COVID-19 became a global pandemic with most of the countries imposed travel restriction
and limited business operations to essential services only
Daily no. of confirmed cases Daily no. of recovered & death cases
COVID-19 is a
(Thousands) (Thousands)
respiratory virus
4,000 1,200 spreads primarily
through droplets
3,500
(1st March – 2nd May) generated when an infected
USA
1,000 person coughs or sneezes.
Spain
3,000 There are no specific vaccines or
Italy
800
treatments for COVID-19 as of
France now.
2,500
Germany
2,000 600 UK 3,481,349
Iran Global Cases
1,500 Turkey
400
Belgium
1,000 244,663 (7%)
Other Countries
200 China
Death
500
Recovered Cases
0 - Deaths Cases
1,120,908 (32%)
1-Mar
16-Mar
31-Mar
15-Apr
30-Apr
Recovered
(Daily data, updated as of 3rd May 2020) 1. Worldometers
6
Updated as of 3rd May 2020
How is the pandemic situation in Malaysia?
The growth of cases in Malaysia has seen a reducing trend soon after the Movement
Control Order (MCO) was introduced in mid-march, suppressing the spreading of the virus
Total Cumulative Confirmed Cases in Malaysia Daily Growth Rate of Cases in Malaysia
(number of people) (7-day CAGR, %)
MCO Phase 1 MCO Phase 2 MCO Phase 3
7,000 40%
(18 Mar – 31 Mar) (1 Apr – 14 Apr) (15 Apr – 28 Apr)
6,000
5,000 30%
4,000 Total Cases
Total Death 20%
3,000
Growth Rate (7-day CAGR)
2,000 10%
1,000
- 0%
0 10 20 30 40 50
Number of Days since 100 confirmed cases in Malaysia
# of days to double the COVID cases in Malaysia
The longer the time
required to double
the number of case, 4 5 9 13 20 38 66
the slower is the
pandemic spreading
15 Mar 22 Mar 29 Mar 5 Apr 12 Apr 19 Apr 26 Apr
(Extracted on 3rd May 2020) 1. Wordometers; 2.Our world in data; 3. Qithub; 4. Johns Hopkins CSSE; 5. Outbreak.my
7
Updated as of 3rd May 2020
How is Malaysia responding to the pandemic so far?
Following the lockdown in Wuhan, Malaysia has responded quickly enough with the MCO
since mid-March, coupled with several economic stimulus packages & recovery plan
Timeline of major events in relation to the COVID-19 outbreak & situation in Malaysia
Dec 31 Jan 11 Jan 23 Jan 25 Jan 30 Feb 11 Feb 27
First case of China Wuhan, China Malaysia’s Health WHO declares WHO names virus Interim PM Tun M
pneumonia detected announced declares Minister confirmed first outbreak a Public SARS-CoVs & the announced RM 20
in Wuhan, China 1st death lockdown case of COVID-19 Health Emergency disease COVID-19 billion Economic
Stimulus Package
Apr 10 Apr 8 Apr 6 Mar 27 Mar 25 Mar 18 Mar 11
Announcement Wuhan, China Additional Prihatin PM Tan Sri Muhyiddin Announcement on PM Tan Sri Muhyiddin WHO declares
on MCO extension lifted the lockdown SME Economic Yassin announced MCO extension to Yassin announced COVID-19 a
to Phase 3 (76-day) Stimulus Package Economic Stimulus Phase 2 14-day Movement pandemic
(15 Apr – 28 Apr) (RM 10 billion) Package (RM 250 billion) (1 Apr - April 14) Control Order (MCO)
(18 Mar – 31 Mar)
Apr 21 Apr 24 Apr 25 May 1
The Ministry of Finance (MoF)
Malaysia has announced that an
U.S. Oil Prices Announcement on MoF announced that PM Tan Sri Muhyiddin
Plunge Into Negative MCO extension to together with EPU, they Yassin announced the
Economic Recovery Plan is in the
Territory, affecting Phase 4 are formulating an decision to reopen the pipeline, targeting to revitalise
global sentiment (29 Apr - May 12) Economic Recovery economy under Malaysia’s economy through various
Plan for the short, Conditional Movement short, medium & long term plans
medium & long term Control Order (CMCO)
starting 4th May 2020
(Extracted on 26th April 2020) 1. NewStraitTimes; 2. Treasury.gov.my; 3. New Malaysia Times; 4. New York Times; 5. Channel News Asia
8
What is the current situation of businesses in Malaysia?
The low cash buffer of consumers has led to reduced household expenditure & shrinking
businesses cash flow which creating a Domino effect that would cripple the economy
Cash Buffer of Malaysian Workers by Employment Status Significant drop in household
(%) expenditures after MCO is imposed
Average Monthly Household Expenditure
in Malaysia
Self-Employed 43% 28% 18% 5% 3%2% (Before & After MCO imposed, RM/month)
Employers 22% 27% 28% 10% 7% 6%
Private Employees 27% 31% 25% 8% 5% 4% 55%
GLC Staff 14% 25% 28% 12% 11% 10% 6,317
MNC Staff 12% 20% 28% 16% 14% 11% 2,813
0% 20% 40% 60% 80% 100%
Pre MCO During MCO
< 2 weeks 2-4 weeks 1-2 months 3-4 months 5-6 months > 6 months
Source: DOSM’s Special Survey on Effects of COVID-19 on Economy & Individual ROUND 1 (N = 168,182)
> 50% of Companies 44% of Companies 43% Self-employed ≈ 2.1 Million
Surveyed suffer > 50% Surveyed only have personnels only have savings workers have lost
revenue drop within the first enough cash buffer for 3 enough for 2 weeks¹ source of income¹
week of MCO (N = 15,627)² months (N = 419)³
(Extracted on 26th April 2020) 1. DOSM; 2. SME Malaysia & Bizsphere & Marketing Group; 3. Survey done by the Federation of Malaysian Manufacturers; 4. The Edge Markets;
5. Malay Mail; 6. Recommend.my; 7. The Malaysian Reserve
9
What are the other implications of the pandemic?
The income of oil producing countries such as Malaysia will get a direct hit from the
reducing oil demand & on-going price war, affecting the government budgeting & planning
Government’s oil-related revenue proportionate to oil price movements Daily Brent Oil Futures Price
($US/Barrel)
Malaysia Government’s Brent Crude Oil
Revenue By Source (RM Billion) Price ($US/Barrel) 160 Oil peaked above $US 100/barrel
300.0 80.0 Non-renenue Receipts & on the back of rapid world’s
Revenue from Federal 140 economic growth led by China Oil dropped below $US
70.0 Territories 20/barrel after US crude oil
250.0 Non-Tax Revenue prices turned negative
(Others) 120
60.0
200.0 Non-Tax Revenue 100
50.0 (Petronas Dividends)
Direct Tax - Petroleum 80
150.0 40.0
60
30.0 Direct Taxes Oil crashed as the marker
100.0
40 flooded with oil due to the
20.0
boom of shale oil in the US
50.0 Indirect Tax
10.0 20
- - Brent Price ($US/Barrel) 0
2016 2017 2018 2019* 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Malaysia as a net oil and gas exporting country, is highly vulnerable to If the oil price declines significantly
price fluctuations in the global crude oil market. As of 2018, the oil-
below our annual average estimates,
related revenue contributed ≈ 20% of the federal government’s
the government will reprioritise
revenue. AmBank Research estimated that, for every US$1 per barrel
drop in oil price, it will reduce the oil revenue by RM300 million. expenditures to meet the fall in
revenue.
With the on-going price war between Saudi Arabia & Russia, coupled
YB Senator Tengku Dato' Sri
with lower oil demand due to the COVID-19, the oil producing countries
such as Malaysia is expected to lose billions of ringgit in oil revenue. Zafrul bin Tengku Abdul Aziz,
Minister of Finance
Note: 2019 revenue figures are extrapolated based on data from Q1 to Q3.
(Extracted on 3rd May 2020) 1. Accountant General’s Department; 2. BNM 3. AmBank Research; 4. Investing.com; 5. 27Advisory Analysis
10What are the other implications of the pandemic? (cont.)
The elevating household debts is already burdening the people, the MCO cutting off
income source to most people, intensifying the situation especially for vulnerable groups
Malaysia Household Debt/ GDP Annual Change of Household
Higher impaired loan growth for residential properties
(% of GDP, 2013-2019) Debt & Financial Assets
Household Sector – Annual Growth of Impaired Loans
(%, 2013-2019) (%,2017-2019)
10
“The elevated household debt could pose a 6.9 7
87.0 risk to macroeconomic and financial stability 12 5 3.4 2.4
while the Covid-19 pandemic will likely impact -0.1
2.9
the finances of households.” 0 2.7
86.0 Extracted from BNM (3 Apr 2020) -0.3
10 -5
-10
85.0
8 -15 -11.8 -11.4
8.4 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19
6.5
84.0 Housing Debt Overall Housing Debt
5.4 6
4.9 5.1
• Demand for residential property loans in 2H of 2019 was
83.0 5.3
bolstered by the Home Ownership Campaign launched
5.4 by the government.
4.7 4 • This was largely attributed to lending by development
82.0 financial institutions to civil servants, according to BNM.
Risks from pandemic:
2
81.0 MCO has imposed huge burden for many in the bottom 40
(B40) and medium (M40) segment with loss of income during
86.5 82.7 82.0 82.7 the period which results in lack of financial buffers to meet debt
80.0 0 obligations.
2016 2017 2018 2019
Moving forward:
Household Debt/ GDP Growth of household debt Growth of Household Financial Assets Over the long term, it is important to secure financial resilience
by ensuring further debt accumulation is undertaken prudently,
(Extracted on 28th April 2020) 1. BNM; 2. Various news especially those in vulnerable segment.
11What are the other implications of the pandemic? (cont.)
The economic density in Malaysia is relatively lower as compared to other countries & it is
more challenging now in view of the pandemic
Economic Density for Selected Countries in Asia
(USD Million per km², 2018)
16.6
13.6 Country Level
11.8
Malaysia’s economic density is at similar
level with its peer countries in Asia.
However, it is still lagging behind the
2.2 1.4 1.1 1.1 developed countries
1.0 0.9 0.6
Korea Japan UK US China Phillipines Malaysia Thailand India Indonesia
Cities & City-States Level:
Similarly, Kuala Lumpur as the capital
state is having an economic density that
is within the range of other peer cities in
Asia, but only about 25 – 40% of other
Economic Density for Selected Cities and City-States in Asia top cities around the World
(USD Million per km², 2018)
908.3 According to BNM’s forecast, Malaysia’s
economy could shrink up to 2% this year
513.6 due to the covid-19 outbreak, giving
387.4 more pressure for the government to
345.4
255.8 209.5 207.4 uplift the national’s GDP
105.9 61.5
New York Singapore London Hong Kong Jakarta Manila Kuala Lumpur Bangkok New Delhi
Note: Economy density is calculated as GDP in USD
Million divided by land area in square kilometer.
(Extracted on 29th April 2020) 1. DOSM; 2. World Bank
12What are the other implications of the pandemic? (cont.)
The over-reliance on foreign workers has been a persistent issue in Malaysia, and this
could potentially be an obstacle for Malaysia’s economic recovery route
Share of Workers By Industry in Malaysia¹ Post-pandemic, the nation will be in a recovery mode where the
(Percentage of workers, 2019) government will be focusing on revitalising the economy. It is
crucial to provide the necessary job opportunities for Malaysian
Agriculture 68% 32%
by reducing reliance on foreign workers. The overall
Construction 77% 23% productivity level could also be improved with the adoption of
Manufacturing 79% 21% 4IR technologies especially in the 3D jobs segment.
Administrative & Support Services 85% 15%
Increasing foreign workers’ remittance in recent years
Wholesale & Retail 89% 11%
ICT 90% 10% Total Foreign Workers’ Remittances
(RM billion, 2016-2019)
Tourism 91% 9% 14.4% CAGR
Arts, Entertainment & Recreation 91% 9% 30
Mining & Quarrying 94% 6% 20
23.3 29.2
Transportation & Logistics 97% 3% 10 22.3
Professional, Scientific & Technical 97% 3% 0
Finance, Insurance/ Takaful Activities 97% 3% 2016 2017 2018
Healthcare 97% 3%
Real Estate Services 98% 2% RM 29.2 Billion The high number of foreign workers has caused
Energy/ Utilities 98% 2% significant value leakages & capital outflow in
Registered Foreign
the form of outward worker’s remittance
Education 99% 1% Worker Remittances
Malaysian Worker Foreign Worker ≈ 2.1 Million The 2.1 million jobs undertaken by foreign
Registered Foreign workers are potential employment
Foreign worker contributed to a large chunk of the labour force in Worker opportunities for the Malaysian
Malaysia, made up about 14% of the total labour force, across all ≈ 4.0 Million Furthermore, the Immigration Department
industry sectors. They mainly work on the 3D (Dirty, Dangerous, estimated that there could be about 4 million
Est. Illegal
Difficult) jobs which are not preferred by the Malaysian due to social illegal foreign workers working in various
recognition and pay scale. Foreign Worker² industries. Indicating a much larger outward
remittance & value leakage in reality
(Extracted on 26th April 2020) 1. DOSM; 2. Ministry of Higher Education World Bank; 3. Immigration Department; 4. World Bank 5. BNM
13What are the other implications of the pandemic? (cont.)
The other side of the coin: A rare opportunity for family bonding & reprioritising lifestyle
habit that would have a long lasting impact on the people
Family wellbeing & bonding Reprioritising eating habits
% of Respondents who said they would eat at home
86% more post-pandemic (selected Asia countries only)
77%
62% 62% 62% 56% 54% 50%
30% 30% 37% 38% 37%39%
26% 23%
7% 14%
Singapore
Phillipines
Korea
Hong Kong
Vietnam
China
Taiwan
Malaysia
Thailand
South
Source: Nielsen’s “COVID-19 Where consumers are heading” Study
There are always two-side to a coin. (N = 500 – 1,000 per market, for 74 markets)
The movement control measures have also A recent consumer study suggests that the pandemic might change the
caused positive changes in the cultural & consumers’ eating habit permanently.²
social habits among the society.¹
There is evidence that a “safe in-home consumption” trend is emerging and
Working adults who usually spent most of the time consumers in the markets surveyed are slowly shifting away from “on-the-go
earning a livings are now forced to stay for longer lifestyle”. A number of Asian markets have seen an uplift of 20%-25% in sales
hours at home, giving them opportunity to spend across Fast Moving Consumer Goods (FMCG) in the first quarter of 2020.
quality time together.
Health & Technology factors have growing importance in influencing the
spending behavior, where technologies such as AI, blockchain, augmented
reality are revolutionising the industry landscape.
(Extracted on 26th April 2020) 1. Institute of Family Studies; 2. Nielsen Research
14What are the other implications of the pandemic? (cont.)
The lockdown or movement control as a measure to break the chain of infection has
reduced the anthropogenic activities which could potentially decrease the level of pollution
Air Pollution Level in China Natural environment improvement in other parts of the world
Klang River free from Endangered sea turtles laying eggs
floating garbage & waste in India, Beach of Odisha
Endangered sea turtle eggs Pink jellyfish sunbathing in the
hatched in Brazil, Paulista shoreline Philippine, Palawan Island
There is evidence that the massive lockdown in China There has been reports that show the natural environment are slowly healing,
has led to significant drop in air pollution level, thanks to the reduced human activities during the movement control period.
mainly due to the slowdown of economic activities.
(Extracted on 26th April 2020) 1. NASA, Earth Observatory; 2. Sin Chew Daily; 3. The Sun Daily; 4. The Rakyat Post
15What does this mean to the government?
The pandemic has urged companies to go digital, reducing human contact and this is
strongly encouraged as it will improve Malaysia’s labour productivity growth
Labour Productivity of Selected Countries¹ Labour Productivity Growth
(USD per Person Employed, 2018) (%, 2018)
160,000 Labour Productivity per Person Employed 8.0%
Productivity Growth 145,864
140,000 7.5% 7.0%
126,979
6.0%
120,000
101,875 5.0%
100,000
The business community needs to 80,571 4.5% 4.0%
76,850
adapt to the “new normal” and 80,000
68,321 3.8% 3.7%
rely less on the labour force when 3.0%
reopening businesses. Companies 60,000 2.8%
need to focus more on automation 2.0%
2.2%
and use of technology in these times 40,000 2.0% 33,839 32,848
1.5% 28,057 1.0%
when the country is facing Covid-19. 21,300
1.1%
20,000 -0.4% 0.0%
Digitisation is not a choice now
but a need to ensure continuity of - -1.0%
businesses for a long period. USA Australia Korea Japan Singapore Malaysia Thailand China Indonesia Philipines
Companies need to speed up their
digitalisation process in reducing • Malaysia’s productivity remained very much ahead when compared with selected Asian countries such as
human contact. Thailand, China, Indonesia and Philippines. However, its productivity remained low compared to other
developed countries like the US, Australia and Japan.
• It is observed that labour productivity growth in selected Asian countries is accelerating with China
YB Dato’ Seri Mohamed Azmin Ali,
experienced the highest productivity of 7.5% in 2018. On the other hand Malaysia only recorded a growth
Senior Minister and Minister of
of 2.8% in 2018.
International Trade & Industry
• Malaysia’s labour productivity can be improved by tapping into the advantage of technology.
(Extracted on 3rd May 2020) 1. Malaysia Productivity Report 2018/2019, MPC
16What does this mean to the government? (cont.)
The unpredictability of disease dynamic has made the decision making challenging,
a greater scale of fourth industrial revolution might happen sooner than we think
Key decisions to make Some of the key challenges to be considered now Factors in play
• How to ensure the government administration is functioning well amid the crisis?
• Is there a need to expand healthcare capacity? How much to increase? • Public’s health & safety
Public healthcare • How to “flatten the curve” without overwhelming the healthcare system? • Government’s cost to
measures to contain the • When will there be a “successful” vaccine to contain this pandemic? implement healthcare &
pandemic • What if the healthcare measure is not effective? What to change? economic stimulus
• What if there is new cluster of infections due to imported transmission? measure
• How to fund for the on-going healthcare measure & digitisation of government administration?
• Post-crisis economy
system recovery
• What need to be done to rescue the private sector companies?
• How to helps the companies to embrace technology revolutions & continue their businesses? • Employment market &
Economic stimulus • How to retain jobs while not putting too much burden to companies? people income
measures to revitalise the • How to encourage digitisation in private sector without laying off manual workers? • The cost of
national economy • Which industry sectors should be allowed for operation first? transformation to the
• What if there is resurgence of virus after movement control is lifted? New Normal
• What if the prolonged movement control crippled the economy system?
While COVID-19 has caused an unprecedented impact
The process of digitalisation in government
on the whole economic system, the digital tools and
administration, business matters, our daily platforms have been playing their parts to keep the
lives will be the trend in our future and I government administration & business world running.
think the impact will be huge.
There is an imperative need for both public & private
YAB Tan Sri Muhyiddin Yassin, sectors to embrace the 4th Industrial Revolution in
every facet of the economy that would cushion the
Malaysia Prime Minister
damage of such crisis towards the national economy
17How will COVID-19 impact the Malaysian businesses going forward? This pandemic potentially changes everything. But where will it take us? How will the landscape of economic and social life change in months and years ahead?
COVID-19 will bring various degrees of impact on different industries
Most of the industry sectors are expecting a declining revenue and demand in view of the
economic slowdown & changing consumers’ sentiment
Airlines’ Revenue ¾ of Companies The impact on
estimated to drop by RM 14bil Surveyed considering to
for 2020 with passenger demand layoff up to 30% of workforce
Malaysia’s industries
reduced by 39% Some preliminary views
International Air Transport Federation of
Association (IATA) Manufacturers (FMM)
Hotel Occupancy Tourism Receipt estimated Vehicle sales dropped
estimated to be ≤ 25% in the to drop RM 50bil–RM 60bil, 26.22% for the period from Jan
coming months, after the MCO while Tourism Arrival to Mar as compared to last year
decline 60% for 2020
Malaysian Association Malaysian Automotive
Affin Hwang Capital
of Hotels (MAH) Association (MAA)
Property Sentiment Lost in Crops estimated at Retail Sales Growth Rubber Industry estimated
Index dropped to 42 points RM 430Mil (500k tonnes) estimated at – 5.5% for 2020, to grow by 5%–25% in 2020,
from 44 points for the same from 14-day closure first time in 22 years due to higher demand on gloves
period last year
RGM’s Preliminary report on
PropertyGuru’s Malaysia Malaysian Palm Oil Malaysia retail industry Malaysian Rubber
Consumer Sentiment Study Association (MPOB) during Covid-19 pandemic Board (MRB)
(Extracted on 29th April 2020) 1. Various news
19How would this play out for Malaysia?
The level of recovery will largely depend on government’s policy response & public health
measures
Hypothetical Scenarios for Malaysia’s Gross Domestic Product (GDP) Level
(RM Billion, 2015¹ – 2025² F)
2,250 ILLUSTRATIVE
Three (3) of the possible scenarios for
A global economy slowdown and potential recession
is foreseeable but the level of severity would very
1 Malaysia economic level post-COVID 19, two
2,000 of which are extreme cases where the GDP
much dependent on the individual government’s
recovered to pre-crisis level (ideal case), and
measures to suppress the pandemic and reduce the
1,750
overall economic shock to local economy. 2 a prolonged recession which bring a long
lasting impact on the nation’s output (worst
1,500 possible case).
1,250
3
Malaysia economic recovery path will
1,000
likely fall somewhere in between the
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 extreme scenario 1 and 3.
U SHAPE: Stabilise and grow at a L SHAPE: Prolonged recession at
V SHAPE: Speedy recovery to
1 original output level 2 rate similar to pre-crisis level but 3 lower GDP growth rate & lower
lower overall output output level
❑ GDP dropped initially but rebound greatly ❑ GDP dropped and eventually stabilised, ❑ GDP dropped and followed by
right after the recession, and eventually followed by a growth rate that is similar to insignificant growth over short- to mid-
recovered to pre-crisis level. pre-crisis level. terms.
❑ This will require a speedy policy response ❑ Government’s policy response and public ❑ Ineffective government policy
and effective public health measure from health measures are somewhat response and public health measures
the government to contain the pandemic effective. However, there are certain which lead to virus resurgence and
from resurgence & revitalise the national level of virus resurgence, causing structural damages in economy, in the
economy through effective stimulus prolonged movement control which forms of massive business failure,
packages that can resolve companies’ slowdown the recovery of economy. unemployment and long-lasting
financial stress & retain jobs. recession.
1. DOSM; 2. 27Advisory Analysis
20The lifecycle of the pandemic will be depending on various factors
It will take a right combination of government policies and society response to effectively
suppress the pandemic & revitalise economy
Pandemic Containment measures kick in and decelerate the Recovery is slowly taking place &
outbreak spreading of virus the New Normal is emerging
MCO Phase 1 MCO Phase 2 MCO Phase 3 MCO Phase 4
(18 Mar 2020) (1 Apr 2020) (15 Apr 2020) (28 Apr 2020)
3.5
How long will
the MCO last?
3
Economic
2.5
Activity Business Restricted business Progressive uplift of MCO uplift, business activities resume
as Usual activities and social business activities ✓ Customer preferences and perceptions will shift
distancing restriction ✓ Maintain social distancing
2
Uncontrollable Protective measures keep ✓ Travel restriction
pandemic our healthcare system from
spread being overwhelmed
1.5
1
0.5
Economic stimulus packages
Growth of to revitalise the national economy
COVID-cases0
Illustrative 01-3 months2 4 6 months 8
2-4 10 12 14 6-12+ months
16 18 20
1. Bursa Malaysia; 2. 27Advisory Analysis
21COVID-19 will bring various degrees of impact on different industries
In Malaysia, Energy, Construction and Financial Services are the most badly hit industries
over the last two months while Healthcare and Transport & Logistics show increasing trend
Containment Malaysia: Market Recovery
Pandemic measures kick in Recovery is slowly Capitalisation Phase
Selected Industries
outbreak and decelerate the taking place Change (%) (Future
(Jan to Apr 2020) Impact)
spreading of virus
Illustrative Healthcare Est 12%
Healthcare
The graph is produced based on the selected Possible trend Real Estate Est 8%
stocks in each industry in Bursa Malaysia.
3.5
This is illustrative only and does not represent Technology Utilities Est 14%
any market forecast on the real situation.
Healthcare & Logistics seen with an Consumer Products Transport & Logistics Est 15%
3 obvious growing trend, mainly due to
the increasing demand on healthcare Transportation & Consumer Products Est 21%
supplies & e-commerce downstream Logistics
Malaysia Telecommunication & Media Est 22%
Economic2.5 Malaysia Average
Activity Industrial Products
Utilities
Property Est 27%
Plantation
2 Telecommunication Technology Est 27%
Real Estate
Property Financial Services Est 29%
Construction
1.5
Financial Services Plantation Est 34%
Energy
Construction Est 34%
1
Industrial Products Est 36%
Energy Est 42%
0.5
01-3 months 5 2-4 months10 6-12+15
months 20
Speedy recovery of Slow recovery of
(Extracted on 26th April 2020) 1. Bursa Malaysia; 2. 27Advisory Analysis economic activities economic activities
22How will this change the business models?
Samples of innovative business models under the New Normal using 4IR technologies
Government Office: Bluetooth & Cryptography use Real estate agents
for Privacy-Preserving Contact go virtual to sell properties
New Normal needs a Tracing A navigable 3D “doll’s house” view
more comprehensive
digitalisation system
I’m told that the current e-
government system is probably at
30-40 percent. So, I have directed
that we speed up the process of
digitalization in government and
accelerate it so that in any societal
Food delivery
Apple and Google partner on Notification will be sent to
situation, if the government is with drivers’
COVID-19 contact tracing technology, buyer to inform on health
ahead, then the people will adjust. body
focusing on Privacy, Transparency & status of driver and pick up
YAB Tan Sri Muhyiddin Yassin, Consent location of food temperature
Malaysia Prime Minister tracked
4IR technologies such as IoT,
artificial intelligence, big data or
Executive dashboards to E-commerce platform for farm
blockchain are best deployed on display business status update products direct sale to customers
the cloud as they rely on the cloud Accounting and
computing capabilities to provide Sustainable
financials dashboard
the required computing resources farming, low-cost
KPI dashboard &
to analyse tremendous amount of and cost-saving
Sales performance
data to solve complex problems.
dashboard
1. Apple; 2. Financial Times; 3. Agriculture.com; 4. 27Advisory Analysis
23How the industry can improve their productivity with technologies?
Samples of 4IR technologies use case in selected industries in near future
Healthcare Construction Consumer Products
Digital technology could help Construction technology helps
transform unsustainable healthcare improve productivity, reduce workplace Tourism
systems into sustainable ones injuries and digitise the industry IoT and Big Data AI
Improve • Chatbot with
Artificial intelligence (AI) AI & Machine personalisation from rapid response
Redesign healthcare by designing Building hotel bookings, food time to queries
new drugs, disrupting medical
Learning Information discoveries as well • Hotels draw
Improve job site safety as travelling routes insights on biz
imaging and medical records mining Modelling
via field observation and planning & highlight performance
help in bid prepare, (BIM)
Virtual Reality (VR) / Augmented
estimation and project Drawing and
Reality (AR) planning software Food & Beverages
management
Train future & actual surgeons to that contains
practice operations to be faster and Blockchain Service
actionable
more accurate AR / VR information in the
Rising demand for food Robots &
Used in training workers transparency & traceability Restaurant
model with time encouraged the use of
on the required skillsets Digitisation
Robotics and costs blockchain to provide fast
to reduce risks of getting E-restaurant
Surgical robots, pharmabotics, management data integration &
injured with online
disinfectant robots or exoskeletons identification of quality services
Drones
Nanotechnology Accurate land surveying,
Autonomous Fashion/ Lifestyle
Nanoparticles and nanodevices use for footage captured used to Equipment
precise drug delivery systems, cancer Construction VR Sensors and AI
improve job site safety
treatment tools or tiny surgeons vehicles operated Enable consumers Sensor wearables
to “attend” fashion measure fitness level
Robots without human on
3D-printing the site to survey shows, adding a and AI can learn the
Supplement human
Print biotissues, artificial limbs, pills, depth of experience health status and
labourers on repetitive and capture
blood vessels to benefit patients as to a brand or advise suitable
motions that often hurt videos/ photos
well as pharmaceutical industry product fitness package
human workers
1. Medical Futurist; 2. 27Advisory Analysis
24What does this mean to the businesses?
The only thing certain in business world is the uncertainty. The pandemic has started a
new revolution of business models, and there is no guarantee outcome in the New Normal
Key decisions to make Some of the key challenges to be considered now Factors in play
• Should employees be instructed to work-from-home immediately?
• What to do with employees who need to be physically on-site?
Immediate actions • What are the digital technologies required for the employees to operate as usual? • Employees’ health &
required to address the • How to deal with the inventory, production line, suppliers & agents etc.? safety
business interruptions • Does the company has sufficient cash flow for the fixed expenditures?
• How should the company approach shareholders / investors? • Business continuity
• How to secure the capital required for the next 30 days / 3 months? during the pandemic
• Post-crisis business
• How would the COVID-19 transforms the consumer markets? recovery
• Is there a need to re-adjust business models & services delivery channel? • Adapting the business to
Business planning for • What is the “best” business model in the New Normal? Is full digitisation a must? the New Normal
post-crisis scenarios to • Can the company survive a second hit if the virus resurgence?
ensure business continuity • What will the competitors do to survive and overtake us? • Cost of transformation
• How to revitalise the business and return to scale soonest?
• What would be the cost to transform my business for the mid- & long-term?
Due to the unpredictability of disease dynamic and lack of prior
experience, a series of difficult choices need to be made and there
are a series of “what if” scenarios to be considered. Trade-offs will
need to be made between ideal outcomes and the multiple
constraints in order to craft sensible goals during the crisis.
Businesses are in need of a systematic framework that would
navigate them though the crisis, helping them to transform
the business models and adapt the New Normal, leveraging
on the next generation technologies & digital tools.
25If you are a Corporate Leader or Government Agency … What do you need to do in responding to the impact of COVID-19 on your organisation?
Crisis Response Scenario Planning & Actions Navigator
A framework for strategy development with sufficient “breadth” (coverage of area) & “depth”
(level of practicality) in “chronological order” (time-phased) to navigate through the crisis
Review the impact on business Recalibrate the ways of working Reassess the mid- to long-term Roll-out the viable strategies &
and examine the magnitude of based on the latest market strategies under different deploy necessary resources.
impact on key areas including dynamics & New Normal, and scenarios by simulating the new Frequent monitoring & rolling
cash flow, supply chain & strategise to get the business business models and test with forecast to prepare for rapid
operations back on track internal & external stakeholders adjustment
Review Recalibrate Reassess Roll-out
For urgent matters which demand
for immediate decision may skip
Establish Cross- Identify immediate the reassessment & syndications
1 functional Crisis 4 actions to ensure
Response Taskforce business continuity
Simulate new business
7 models & perform cash
flow stress-test
Review employees’ Understand market Execution & progress
2 health & safety 5 dynamics & simulate 9 monitoring for
conditions possible crisis scenarios continuous calibration
Engage external parties
8 (i.e. lenders, suppliers,
clients) for idea testing
Develop mid- to long-
Examine COVID-19
3 impact on business 6 term strategy for
different crisis scenarios
Now more than ever, the top executives need to rethink their business models and formulate a crisis coping
mechanism that will adjust their organisation to a more resilient state and prepare for the New NormalReview Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (1 of 9)
Review the impact on business and examine the magnitude of impact on key areas
Review including cash flow, supply chain & operations
1 Establish Cross- 01
Set-up a dedicated cross-functional crisis response team (PMO) to follow through
the situation
functional Crisis
Response
Set-up & mobilise “War Room” as the centralised command & control centre with
Taskforce 02 the company’s key info (i.e. cash flow, operations, supply chain) on a live
dashboard
03 Conduct daily review & update the impact on business
Facilitate two-way communication with internal stakeholders (employees,
04 management, shareholders) & external stakeholders (suppliers, clients, investors,
business partners)
05
Provide clear direction & set accountabilities for all crisis response strategies to
prevent confusion
06
Establish digital workplaces to ensure essential business units (i.e. payroll, IT,
marketing) can continue with their operations
28Review Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (2 of 9)
Review the impact on business and examine the magnitude of impact on key areas
Review including cash flow, supply chain & operations
2 Review employees’ 01 Perform sanitisation & hygiene check at all workplaces
health & safety
condition
02
Conduct corporate-wide health-check for all employees at workplaces & provide
guidance on healthcare assistance for those in need
Establish & enforce policies on Work-From-Home (WFM), Travel & Quarantines
03 matters and ensure employees have clear understanding on operational protocols
under the new environment
04
Provide the necessary technology/infrastructure with sufficient guidance on usage
& other support
05
Ensure proactive communications across all levels of the organisation to manage
anxiety & confusion
29Review Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (3 of 9)
Review the impact on business and examine the magnitude of impact on key areas
Review including cash flow, supply chain & operations
Cash flow – assess the liquidity position & working capital available, examine the
3 Examine COVID-19 01 impact on short-term cash flow, assess ability to service short-term debts and fixed
impact on cost, identify funding shortfall
business
Operations – review operation & production capacity, develop new protocol & line
02 of command for essential business units, develop contingency plan for units which
need to cease operations
Suppliers – assess the production capacities & financial health of suppliers,
03 review vendors & partner agreements
Inventory & purchase order – proper management of inventory especially for
04 perishable products to maximise salvage value, review purchase order made &
make cancellation where necessary
Marketing & client management – proactive communication with customer,
05 gauge the consumer sentiment, understand expectations and needs on service
level, review marketing operations, media utilisation, improve marketing efficiency
Contractual obligation – review the short-term contractual obligation in the form
06 of production, interest, dividend etc., examine the ability to meet the obligation &
ascertain the potential impact
30Review Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (4 of 9)
Recalibrate the ways of working based on the latest market dynamics & New Normal,
Recalibrate and strategise to get the business back on track
4 Identify immediate 01
Review the pre-crisis targets / KPIs at corporate & business unit level and adjust
where necessary
actions to ensure
business continuity
02
Develop prioritisation mechanism to identify areas which need immediate actions
to ensure business continuity
03
Individual business unit leaders to conduct self-assessment & prioritisation
exercise
Devise action plan on the top-priority areas with clear accountability for adjustment
04 to address the immediate challenges (workforces, clients, technologies, partners
etc.) and stabilise the business
05 Reallocate budgets & resources available for the execution of action plan
31Review Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (5 of 9)
Recalibrate the ways of working based on the latest market dynamics & New Normal,
Recalibrate and strategise to get the business back on track
5 Understand market 01
Scenarios modelling for the macroeconomic, potential impact & risk on specific
industry segments
dynamics &
simulate possible
crisis scenarios 02
Observe competitors’ situation & strategic actions undertaken (i.e. operations,
financial, products) to establish new market landscape
Observe the customers’ sentiment and potential shifts in spending behavior &
03 preference
Conduct sectoral analysis and identify critical constraints (internal & external) on
04 each value chain element in your industry and re-prioritise revenue generation
activities
05
Actively look for opportunities in organic growth (output optimisation) and inorganic
growth (M&A)
Determine the strategic posture:
06 ✓ As Leader to drive change that will shape the New Normal; or
✓ As Follower to adapt to the changes as it emerged; or
✓ As Observer to reserve resources while building up capacity to response in a much later stage
32Review Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (6 of 9)
Recalibrate the ways of working based on the latest market dynamics & New Normal,
Recalibrate and strategise to get the business back on track
6 Develop mid- to 01
Develop scenarios for multiple possible New Normal with reasonable assumptions
on the post-crisis impact & recovery situation towards the business
long- term strategy
for different crisis
scenarios Consider possible changes in the business dynamics & develop corresponding
02 strategic moves to revitalise the business and return to the scale. Some key areas
to consider (non-exhaustive):
✓ Liquidity position – reduce short-term outflow, divestment strategy, unlock
working capital
✓ Customers segment – changing customers’ demand/preference & emerging
customer groups
✓ Marketing & Branding – emerging channels to reach customer & re-evaluate
branding strategy
✓ Capital expenditure – consider to postpone CAPEX & reduce unnecessary
spending/investment
✓ Organic growth – needs for new products/services to preserve revenue in the
New Normal
✓ Inorganic growth – potential strategic collaboration and M&A opportunities
03 Setting trigger points for deployment & executions of the strategies
33Review Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (7 of 9)
Reassess the mid- to long-term strategies under different scenarios by simulating the
Reassess new business models and test with internal & external stakeholders
7 Simulate new 01
Develop multiple scenarios for strategy adoption based on the possible
macroeconomic scenarios
business models &
perform cash flow
Identify the necessary technologies & digital infrastructures to implement the
stress-test 02 strategies and transform the existing business model into the New Normal
business models
03
Evaluate the options on technology & digital infrastructure in the New Normal
business model, in particular the functionality & practicality aspects
Estimate the cost required for each strategy (i.e. hard & soft infrastructure,
04 upskilling & reskilling training) and potential value creation in the form of
revenue/profit generation, cost savings, capital unlocked etc.
05
Build a dynamic financial model for rolling forecast and stress testing on the
liquidity position & funding shortfall based on different scenario (on-going process)
06
Build a live Cash Flow Management Dashboard to visualise financial position for
effective management reporting & strategic decision-making
34Review Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (8 of 9)
Reassess the mid- to long-term strategies under different scenarios by simulating the
Reassess new business models and test with internal & external stakeholders
8 Engage external 01
Engage external parties for idea testing & terms negotiation.
This shall include but not limited to:
parties for idea ✓ Technology providers – syndication with providers for technology or digital
infrastructure, short-term partnership to test new business delivery model,
testing specifications for digital infrastructure
✓ Creditors – facilities draw down, repayment term, loan moratorium / deferment,
refinance
✓ Suppliers – deferment or cancellation of purchase order made, defer payment
terms
✓ Investors / Shareholders – expectations on business performance, capital
injection
✓ Business partners – strategic collaboration for value optimisation
✓ Clients – installment terms, demand on new products / services
02 Formalisation of new terms agreed in written formats
35Review Recalibrate Reassess Roll-out
Summary
1 2 3 4 5 6 7 8 9
Key action items (9 of 9)
Roll-out the viable strategies & deploy necessary resources. Frequent monitoring &
Roll-out rolling forecast to prepare for rapid adjustment
Set quantifiable & time-phased performance KPIs, develop communication action
9 Execution & 01 plan & detailed RACI (Responsible, Accountable, Consulted, Informed) Matrix for
progress each strategy
monitoring for
continuous 02
Engage with relevant stakeholders (i.e. shareholders, management, business units
leaders, executives) for briefing on execution plan
calibration
Perform daily checks on the implementation progress & weekly reporting in “War
03 Room” dashboards
04
Identify, evaluate & mitigate or prevent risks pertaining to the strategy
implementation
05
Weekly recalibration review to ascertain the needs to readjust the strategy as the
macroeconomic situation evolves
36Overall Programme (indicative)
Illustrating the Crisis Response Scenario Planning & Actions Navigator framework in a
chronological flow
Overall Programme Management by the cross-functional Crisis Response Taskforce
Review
Set-up Cross-functional Crisis
Response Taskforce
Review employees’ health &
safety conditions
Examine COVID-19 impact on
business
Recalibrate
Identify immediate actions to
ensure business continuity
Understand market dynamics &
simulate possible crisis scenarios
Develop mid- to long- term strategy for
different crisis scenarios
Reassess
Simulate new business models & perform
The above serves as an indicative timeline of the cash flow stress-test
overall programme for the Crisis Response Scenario
Engage external parties
Planning & Actions Navigator.
for idea testing
The actual programme duration might be different on Roll-out
a case to case basis, subject to the company’s scale,
complexity, data availability and other factors. Execution & progress
monitoring
37Disclaimer This document is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. 27Advisory and all its registered subsidiaries does not provide legal, accounting, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals. These materials serve only as the focus for discussion; they are incomplete without the accompanying oral commentary and may not be relied on as a stand-alone document. Further, Third Parties may not, and it is unreasonable for any Third Party to, rely on these materials for any purpose whatsoever. 27Advisory and all its registered subsidiaries made no undertaking to update these materials after the date hereof, notwithstanding that such information may become outdated or inaccurate. To the fullest extent permitted by law (and except to the extent otherwise agreed in a signed writing by 27Advisory), 27Advisory and all its registered subsidiaries shall have no liability whatsoever to any Third Party, and any Third Party hereby waives any rights and claims it may have at any time against 27Advisory and all its registered subsidiaries with regard to the services, this presentation, or other materials, including the accuracy or completeness thereof. 27Advisory and all its registered subsidiaries, as well as all sub-consultants will therefore, assume no responsibility to other readers, or users of this Report. Any other parties, who choose to rely on this report, do so entirely at their own risk. Receipt and review of this document shall be deemed agreement with and consideration for the foregoing. This document is updated as of 3rd May 2020, 3pm.
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