The pandemic: An opportunity for small and medium-sized enterprises to transform their business

August 10, 2020
author: Alvarado Celis

Between 30% and 45% of small and medium-sized enterprises (SMEs) in Latin America had to close down during January and May 2020 due to the coronavirus. The negative effect will continue to impact businesses for the next 12 to 16 months. Most of them have undergone significant changes in the wake of the pandemic. However, new opportunities also arise in this scenario; it is an opportunity to transform their production processes and redefine their objectives in order to overcome the crisis.

“The measures to mitigate the effects of COVID-19 have led this productive sector to a delicate situation. These enterprises account for more than 99% of the business fabric and generate about 30% of the Gross Domestic Product (GDP); therefore, it is essential to protect them”, said Ambassador Javier Paulinich, Permanent Secretary of the Latin American and Caribbean Economic System (SELA).

Protecting and strengthening SMEs has been a priority of the Permanent Secretariat and a guideline for SELA. “Since 2010, this regional inter-governmental organization has focused its work on the issue of public-private partnerships for disaster risk reduction; so that they can develop business and operation continuity plans in the face of adverse scenarios in order to minimize costs and losses,” Paulinich said.

Under this premise, SELA has started a cycle of seminars in order to provide SMEs with tools to improve management, direction, control and results, especially in situations of crisis and uncertainty. The first seminar, “Organizational resilience for SMEs in times of pandemic: Practical recommendations for the protection of enterprises”, was attended by three Latin American specialists, who exchanged their opinions about how private organizations have been responding to the different problems caused by the SARS-CoV-2 virus in their operations.

Key aspects for resilience

Organizational resilience is a concept that refers to the capacity and skills that enterprises have to manage and overcome adverse and unfavourable scenarios that negatively affect their business activity, which thanks to certain processes and technical tools allow them to continue operating and fulfil their objectives.

Recent experiences have revealed the need to manage changes and risks, but above all their ability to adapt to such changes. Recognizing the changing environment is vital for organizations with the support of technology. “The pandemic took people and companies out of their comfort zones, but that makes it possible to take advantage of the situation in order to improve certain processes, as well as technical and professional skills involved in remote work,” explained Yves Dávila, Executive Director of Protiviti in Peru.

Dávila, who is also a consultant for South America, noted that there are at least three key aspects to achieve the personal and professional adaptation required in these cases: 1. Ensure physical and mental care and strengthen working skills (improvement courses and languages); 2. Learn other ways of working (short and effective meetings, adaptability to new situations and functions, rely on work teams to meet well-defined goals and objectives); 3. Rediscover communication by means of informal and dynamic contacts through virtual tools. “Culture has changed; from now on we will have to live with work mostly carried out from home. We must learn, and unlearn and relearn permanently,” the expert said.

More productivity, technology and business continuity

The speakers agreed that nothing will ever be the way it was again. “The pandemic has changed everything.” They said that protection measures and social distancing will remain in place for a while, and that such measures “will be reduced based on the behaviour of the virus. Habits and customs have changed forever and the experience lived will serve to make better decisions in the future. It is very likely that remote work will be maintained and combined with face-to-face work.”

“The pandemic took public and private institutions by surprise at the global level. Even though they knew the potential risk, they had no time to properly prepare themselves. This has had a diversity of consequences on economies and societies,” said María Elisa Padilla, Head of Business Continuity and Incident Management at Banco Itaú, in Argentina.

“Hence the importance of anticipating, adapting and preparing ourselves to increase work capacity. From now on, such contexts should be taken into account in business continuity plans. The recommendation is to continue to strengthen such plans, validate and exercise them, as well as defining critical and/or urgent processes, equipment and resources,” she pointed out.

Ms Padilla noted that the bank she represents was able “to increase its work capacity”. She considered that the favourable factor of this unexpected situation, “is that a whole learning process awaits in the future and we have to start to develop such skills, because it will be in just months”.

In turn, Germán Vargas, International Consultant in Best Technological and Business Practices at Claro Colombia, underscored that the technological component “was important, but now it is vital for any company”.

“Some of the actions that are being implemented are: Increase online visibility, use mobile platforms for selling and delivering products, social network advertising, application of collaborative technologies and cybersecurity strategies,” he said.

Vargas also noted that endowment of equipment such as laptops, mobile phones and chairs to staff has worked to counteract digital gaps; and to increase technical support and control to confront hacking or electronic frauds.

Referring to the strategies to increase productivity, the three experts highlighted the need to use and ensure digital tools that allow for visualizing the achievement of goals for remote work, optimize and simplify the processes, create adaptable structures, make optimal use of resources and seek alternative suppliers and substitute inputs. “Trust in human capital is fundamental,” they said.

Turning the crisis into an opportunity

In Latin America and the Caribbean, an estimated 2.6 million small and medium-sized enterprises are at risk of closure. They face day-to-day difficulties, but they can also take advantage of the situation by applying the appropriate measures to transform their production processes and redefine their objectives.

Innovation is an auspicious way to think about products and services during the post-pandemic. In this regard, Germán Vargas and Yves Dávila recommended to adjust production “according to the seasonal needs that have emerged, explore new markets, evaluate and expand sales channels, develop strategies to attract customers and preserve them, promote their inventories and reduce their stock”.

Companies should “review their business model and innovate their value chains, take advantage of their installed capacity and human talent, forge integration strategies and strategic alliances, mergers and acquisitions in order to support their business,” they said.

Finally, they made a call to lower costs and take advantage of financing. “It is important to minimize unnecessary expenses, and manage and design possible strategies to keep positive financial statements as much as possible, thus ensuring access to bank financing after the pandemic, and estimate income and expenses for the next six months on the basis of confirmed and insured sales and income.”

Key topics: pymes