1 MARCH 2020

BCG Solution to Crisis Management

COVID-19: Critical Business Response

COVID-19 Rapid Rebound

• Conduct top-down scenario assessment on possible “inflection time point” – when the situation gets stabilized and consumption confidence returns.

• Leverage intelligence (for example, activate your salesforce for customer / distributor contact or surveys) to identify

“inflection point” and ramp up sales activities, inventory and trade support.

• Deploy resources to jumpstart social and online-to-offline strategic collaborations, and pilot test new operation models.

• Explore opportunities to configure “comeback celebration campaign” in advance, quickly pick up marketing spending post-epidemic.

• Avoid removing all ads, social media posts, etc. – cautiously select marketing channels during epidemic.

• Craft new product and service story and create new selling points.

Previous crisis show that business positions will change as industries recover. Business leaders need to be alert and active in understanding shifts and how to invest, position, and build structural advantage for this new reality. Source: Boston Consulting Group

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COVID-19 has led to major interruptions and profit warnings globally across sectors

Severe business impacts due to COVID-19… …resulting in fastest S&P 500 correction ever

Source: Deutsche Bank, Wall Street Journal, Financial Times, Business Insider, Bloomberg; BHI

150

100

0

200

50

Feb-

18

Oct

-87

No. of days

Feb-

46

Sep-

99

Aug

81

Nov

-07

Mar

-60

Jun-

69

Feb-

20

Mar

-68

Jun-

53

Aug-

98

Apr-

62Fe

b-84

Jan-

90Ap

r-73

May

-66

Aug-

15Au

g-46

Nov

-18

Oct

-56

Aug-

90

Apr-

00O

ct-9

7O

ct-5

5

Time taken for S&P500 to correct 10% from peak

6 days: Fastest correction in the S&P500 on record

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Responding to the crisis – being part of the solution

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Be part of the solution: How to navigate the crisis

Protect your people, ensure continuity, and mitigate short-term losses

Pro-actively seize demand rebound and bring business back on track

Build advantage by making strategic enhancements and building resilience

Now: Tackle immediate priorities

Near-term: Prepare for the rebound

Medium-term: Pursue structural enhancements

Day-to-day agile approach to navigate changing environment

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Now: Take decisive actions to minimize disruptions (I/II)

Set-up a rapid-response team to take clear decisions and control of the situation

Communicate decisively and regularly to prevent misinformation and organizational paralysis

Clearly direct your people on what to do, inform them about business & health impact

Actively monitor the situation and use an agile approach to navigate the changing environment

Update hygiene program (incl. quarantine requirements) to ensure safe environment for employees and customers

Arrange flexible working plans and provide required infrastructure/ solutions

Observe employees' morale and performance during crisis period, plan for relief measures

Take control of the situation Protect people & customers Ensure operational continuityCategorize your operations by business criticality (systemic, critical, optional)

Define clear contingency plans for systemic and critical operations and put safeguarding measures into place

Stabilize cash flows to ensure sufficient liquidity

Note: Non-exhaustive list of actions

Now: Tackle immediate priorities

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Now: Take decisive actions to minimize disruptions (II/II)

Reach out to customers/distributors to understand their needs (e.g. provide credit line), leveraging your salesforce in new ways

Shift to online channels to provide products and services by working with both O2O & offline partners to cope with sudden shifts in demand

Optimize pricing and product offering to meet immediate consumer needs (e.g. "stocking up" and "home enjoyment")

Adjust inventory level in real time, reshuffle to new reality, and avoid inventory glut

Identify alternative suppliers for critical components, plan for changing lead times and re-route logistics

Set up dedicated funding or adjust trade terms to address cash flow concerns of suppliers

Serve your customers' needs Ensure a robust supply chainLive your purpose now to help the society and economy get back on track

Leverage your resources to make a difference by providing products and services to affected people (beyond monetary donations)

Engage your staff, your customers and business ecosystem to create tangible impact

Execute on your purpose

Note: Non-exhaustive list of actions

Now: Tackle immediate priorities

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Executing on your Purpose: an example

Now: Tackle immediate priorities

Leading Asian retailer planned crisis relief in three steps

Step 3: Develop medium term OB strategy and advocacy plans

Leverage learnings from sanitizer's quick implementation

Prioritise key crisis products that need development

Develop ways of working for OB to ensure quick route to market

Develop brands to enhance customer advocacy

Step 1: Help with sourcing of key products (incl. masks & sanitizer)

Investigate demand planning / supply needed; identify key products with supply shortage

Identify branded suppliers to source, leveraging BCG global contacts

Quickly align with supply chain and store ops to ensure shipment and delivery

Set up SWAT PMO

Step 2: Launch market-wide social impact campaigns

e.g. Refill stations for free refills of own brand sanitizers

e.g. Free hand washing stations in areas with high traffic

Promote hygiene education via social media ; accompanied with instore educational campaign

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Near-term: Targeted efforts required to achieve rebound

Conduct top-down scenario assessment on possible “inflection time point” –when the situation gets stabilized and consumption confidence returns

Look for new channels and new disruptive formats that works under epidemic

Reward innovative ideas and proactive movements, closely monitor competitive moves

Re-define budgets and targets monthly by geography

Closely monitor and synchronize the team

Maintain ongoing relationship and extend credit to key distributors to secure core channels and quickly replenish after the epidemic

Leverage intelligence (e.g. activate your salesforce for customer/ distributor reach out or surveys) to identify "infection point" and ramp up sales activities, inventory, and trade support

Deploy resources to jumpstart social/O2O strategic collaborations, and pilot test new operation models

Build value chain preparedness

Explore opportunities to configure “comeback celebration campaign” in advance, quickly pick up ad spending post-epidemic

Avoid removing all ads, cautiously select marketing channels during epidemic

Craft new product and service story and create new selling points

Adjust communication message

Note: Non-exhaustive list of actions

Prepare for the rebound

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Rebound:an example

During the SARS outbreak in 2003, as demand dropped and entertainment venues were closed, most international beverage brands withdrew ATL/BTL marketing investment in affected Asian markets

Beverage company focused on mid-term comeback campaign:• Mobilized sales force to conduct “outlet census” going to all PoS to understand

“which channels/outlets will open, when?”• Conducted top-down scenario assessment on possible “inflection time point” –

when consumption confidence comes back • Synchronized marketing, media and sales activities; configured a focused

“bounce-back campaign”• Prioritized new, more premium, fast growing brands to win in the market• Preemptively ramped up sales activities, inventory, and trade support when

“inflection time” approached (competitors with "wait & see" approach)

Beverage company captured rebound in consumption after SARS

Successful preparation for the rebound in 2003 paved way to become the #1 in the respective segment in China ever since then

Prepare for the rebound

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Mid-term: Prepare for the future and build structural advantage

Previous crises show that business positions will change as industries recover. We foresee game-change demands shifts in many sectors, e.g.

Boost in e-commerce and online service delivery – accelerated change in retail and F&B

Significant health care boom in emerging markets (e.g. China), incl. spill-over effects on related industries (e.g. insurance)

Further diversification of international supply chains – ongoing contingency planning as new normal

Note: Non-exhaustive list of actions

Business leaders need to be alert and active in understanding shifts, how to invest and position for this new reality, and build structural advantage

Medium-term: Pursue structural enhancements

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Examples: Companies provided support to customers in exchange of channel advantage; actively built partnerships

Support dealers on cash flow with funding

Launch joint-logistics to support distributors

Gain RTM control w/ customer credit ease

Form partnership and seek sources of growth

2003-SARS: Its customers suffering from poor cash flow from people not going out

2003-SARS: More potential partners with high willingness to collaborate after SARS

2003-SARS: Car dealers in trouble with cash flow, as

consumers delayed purchases

COVID-19: logistics capacity highly constrained, causing challenges to distributors

Adjusted performance target on dealers:

• Car manufacturer canceled performance review to ease dealers' pressure

Established contingency fund:• Established 10M fund to

support dealers on employee salary

Carefully tracking and targeted supply:

• Contacted distributors one-by-one during critical reopening period

Joint-dispatch to support distributors, using its own logistics company

Offer credit ease to local key customer in return for high data transparency and brand-led-retail

Take the chance to increase direct-owned store presence as well as eCommerce to uplift business share in DTC

Collaborate with technology partners and build eco-system

• e.g. introduced Brand Co.+ Sportsband Kit in Apr. 2008, with chip integrated in shoes

• e.g. Brand Co.+ Sportswatch introduced in Sep. 2010

Full distribution capacity restored >50%, matching the 60% store reopen, leading competition by ~20%1

1. By end of Feb.9th

Source: Press release, expert interviews; BCG analysis

National F&B playerCar manufacturer Int'l apparel retailer Int'l apparel retailer

Medium-term: Pursue structural enhancements

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We support you through this time of change & uncertainty

Rapid Response RoomSet up and run team to take control of overall

situation, incl. rapid assessment, contingency plans, communication plans & execution, liquidity forecast

and management, spend rationalization

Commercial ResponseDefine and execute on optimization levers to mitigate revenue impact / ensure rapid rebound, incl. digital/ eCommerce push, sales force activation, distribution

relationship mgmt, marketing, inventory planning

Global CoordinationDefine and assess global response for multinational

groups, incl. scenario definition and stress testing by geography, portfolio optimization, situation analysis,

communication strategies

Operations ContinuityEnsure business continuity and stabilize

operations/supply chain, incl. criticality assessment, contingency planning, inventory recalibration,

alternative supplier sourcing

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Key steps that will be addressed

Form a centralresponse team

Address supply chain and operations continuity response

• Set-up a rapid-response team with clear decision rights to take control of the situation• Design a communications mechanism for decisive & accurate information transfer• Actively monitor the situation and use an agile approach to inform all stakeholders

Take care of your people

• Update hygiene program to ensure safe environment for employees and customers • Arrange flexible working plans and provide required infrastructure/ solutions• Monitor employees' morale & performance during crisis period, plan for relief measures

Address customer and revenue response

• Create tailored response plans to address the assessed scenarios• Assess customers/distributors needs (e.g. provide credit line), determine how to best leverage

your salesforce / communications• Monitor real-time development of financial/operational KPIs (advanced analytics as needed)

• Set up an operational core team to create transparency (e.g. along supply chain)• Categorize your operations by business criticality (systemic, critical, optional)• Define clear contingency plans for systemic and critical ops with safeguarding measures• Stabilize cash flows to ensure sufficient liquidity, e.g. by mitigating discretionary spend

Understand and evaluate scenarios

• Understand /prioritize range of scenarios and analyze potential evolutions• Evaluate potential impact on the company's financial performance and operations as well as

other key stakeholders (incl. employees, customers, and suppliers)

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ResponseContingency planning

Rapid response room: Response to key issues from Day 1 Simultaneous rapid assessment and contingency planning to ensure near- and medium term success

Rapid assessment Response / execution

Backup

Revenues• Assessment of 1st order impact on revenues• Assessment credit risks to current accounts receivable• Analysis of risks to customer pipeline

Cost, Operations & Supply Chain• Operational continuity assessment• Short-term work-around options & medium-term alternative sourcing• Forecast of impact on inventories and associated cash impact• Assessment of direct risks production scheduling & committed deliveries

Organization and Governance• Assessment of hygiene program, communication and response planning• Assessment of alternative working arrangements• Review of governance framework

Financial• Contingency plan to secure sufficient liquidity for a potentially

prolonged impact scenario• Mitigating discretionary cost actions to build financial flexibility• Rationalization plan of short/medium-term capital spending• Detailed assessment of impact on budget and guidance to shareholders• Review of commitments, MAC clauses and Force Majeure options• Visibility and plan for 2nd order impact on time sensitive projects,

contractual commitments and customer relationships

Operational• Revised operations plan based on a risk-based assessment of inbound

supply and customer demand• Plan & visibility on 2nd order impact on supply base- i.e. what is the

impact on tier 2 suppliers• Contingency plan for balancing production, supply and inventories

should a critical element of the supply chain be impacted

IllustrativeDay 1: Set-up of team to take immediate action while more detailed assessment and planning is conducted

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Advisory expert group

Draft structure for the rapid response team

Rapid Response Leadership

• Has authority for entire response effort and critical decisions• Oversees overall progress and provides daily guidance• Reports to Management Team

Situation / Transparency Scenario assessment

• Understand and prioritize scenarios & analyze their potential evolutions

• Evaluate potential impact on the company's financials and operations & stakeholders (employees, customers and suppliers)

• Create tailored response plans to mitigate scenarios

Customer focusOperational continuity

• Monitor real-time development of key socio-economic indicators, operational KPIs, etc.

• Serve as fact base for company-wide analyses and scenario assessments

• Design a communications for decisive & accurate information exchange

• Categorize ops by business criticality (systemic, critical, optional)

• Closely monitor and maintain operational data fact base to inform scenario assessment

• Define clear contingency plans for systemic and critical ops

• Reach out and assess customer needs and revenue implications

• Develop responses across channels and leveraging sales force as appropriate

Team setup:• Strategy & Finance• Commercial leaders• Supply chain leaders • Economists, data scientists,

analysts

Team setup:• Economists, health experts• Financial data analysts• Human resources• Marketing communications• Investor relations

Team setup:• End-2-end supply chain

leaders & analysts across regions (incl. procurement, logistics, manufacturing)

Team setup:• Sales• Marketing• Pricing• Finance support

• Consists of HR/Legal/Health care/Crisis Management experts

• Advises on legal, regulatory and health related matters

Management Team

People / workforce

• Assess potential impact of virus spread on company workforce

• Assessment and development of hygiene program, communication and response planning

• Ownership of alternative working arrangements

Team setup:• Economists, health experts• Financial data analysts• Human resources• Marketing communications• Investor relations

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We can hit the ground running to achieve rapid impact

Proven suite of tools to

implement from Day 1

Deep knowledge in all markets affected by COVID-19

Deep, relevant, sector and functional experience

Differentiated hands-on working

style –"performance

partners"

Track record of delivering results with significant

impact

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Legal context regarding our support

The situation surrounding COVID-19 is dynamic and rapidly evolving, on a daily basis. Although we have taken great care prior to producing this deck, it represents BCG’s view at a particular

point in time. This deck is not intended to: (i) constitute medical or safety advice, nor be a substitute for the same; nor (ii) be seen as a formal endorsement or recommendation of a

particular response. As such you are advised to make your own assessment as to the appropriate course of action to take, using this deck as guidance. Please carefully consider

local laws and guidance in your area, particularly the most recent advice issued by your local (and national) health authorities, before making any decision.

17

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