Additionally, employee health and safety is the top concern among organizational leadership
As the COVID-19 pandemic continues, a majority of C-level executives (72%) foresee a moderate or severe decrease in their 2020 revenue, according to Crowe’s Business Challenges Survey: Part I. Additionally, employee health and safety is the top concern among organizational leadership.
The survey of more than 300 C-suite executives was conducted in three phases between late April and early June 2020. The study compiled responses from leadership spanning industries such as financial services, manufacturing and distribution, construction, healthcare and the public sector. The report analyzes the projected impact of COVID-19 on revenues, organizational strength versus the broader economy, top concerns and responses of leadership to the pandemic, and whether and how companies are leveraging the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Over the course of the survey, respondents became less optimistic about how soon COVID-19’s impact on their organization would lessen. In the first phase of the survey, 32% said that the pandemic’s effect would ease by the fourth quarter of 2020, but that figure dropped to 19% in phase two. Even with uncertainty prevalent across all phases, expectations about the impact on 2020 revenues remained consistent – between 70% and 75% of respondents in each phase predicted a moderate or severe decrease in revenue.
Executives surveyed identified the health and safety of their employees as their top concern across all three phases. Over the course of the survey, that concern increased from 60% in the first phase to 75% in the third, likely due to the severity and staying power of COVID-19 setting in. Other consistent concerns among respondents across the three phases included: Decreased top-line revenue (55%), the effect of lockdowns or shelter-in-place orders (53%) and cost-management and reduction efforts (41%).
“It is encouraging to see that executives across various industries are prioritizing their employees’ safety over profits during the COVID-19 pandemic,” said Ann Lathrop, chief marketing officer at Crowe. “People are the very core of organizations, so taking action to ensure they are safe and healthy is essential.”
In response to the concern for employee safety, an overwhelming majority of leaders surveyed said that they implemented a remote workforce (82%) or formed a centralized COVID-19 response team (72%). Further underlining their commitment to the well-being of their employees, only a few companies reduced staff (27%) or salaries (15%).
Other key survey findings include:
- While only a few companies were aiming to reduce staff, the majority had implemented (49%) or were considering implementing (15%) a hiring freeze as a means to weather a downturn. Additionally, 35% of organizations were already delaying investments to reduce costs.
- Modifying M&A strategy was not an immediate reaction to the pandemic with only 16% of organizations reporting they had taken this action and only 20% considering it. Lathrop added that M&A deals are often complicated, so changing course in the early days of the pandemic would be unlikely, but this strategy may shift as the economic toll continues.
- When scoring the economy on a scale of 0-100, the current view improved from 33 in the first phase to 40 in the third. A continued six-month forecast of the economy among respondents was more hopeful with an average score of 56.
- In no survey phase or industry segment did more than 50% of respondents express confidence in the government’s ability to meaningfully help the economy over the following six months.
- The Paycheck Protection Program (PPP) was the most popular government assistance program with 79% of respondents applying for PPP or considering it.
Survey respondents did not generally express confidence in the broader economy, but they had a more positive outlook on the strength of their organizations with current and six-month forecast overall scores between 63 and 69 on a scale of 0-100. “It’s not surprising that respondents scored their individual organizations higher than the broader economy,” added Lathrop. “We expect that many take comfort in what they know and what they can control.”
The report also specifically looked at the financial services industry, comprising banks, credit unions and other financial organizations. Financial services executives were slightly more pessimistic than respondents in other industries about the six-month forecast of the economy but remained optimistic about their organizational strength, with a six-month average score of 70 across the three phases. Overall, 59% of financial services respondents predicted their revenues would drop moderately but only 11% said they would drop severely.
“Memories of the Great Recession are still top of mind for executives working in the financial services industry and because of that, they likely have a more cautious view of the economy’s ability to weather the downturn,” said Mike Percy, managing partner of the financial services group at Crowe. “On the flipside, they have more faith in their organizations because of the robust models they’re required to have in place to manage unexpected risks.”