One Year of COVID-19: How the Business World Has Evolved & Adapted

March 11, 2021  |  By Joseph Nappi  |  5 Minute Read

It’s been one year since COVID-19 arrived in the U.S. and changed all aspects of life as we know it—especially for businesses and the economy. There were many challenges as the year progressed, and organizations have had to pivot constantly to mitigate the effects of the pandemic on their operations.

As 2021 begins, let’s take a look back at the past year and recap what we’ve learned during these challenging and uncertain times—and look forward to what a future post-COVID might look like.

What We’ve Learned

The COVID-19 pandemic took the world by surprise and proved that many businesses were unprepared for a rapid shift to a digital mode of operation. While the U.S. first declared COVID-19 a public health emergency on Feb. 3, 2020, the wide-sweeping implications for businesses of the virus were not seen until the third week of March when states began issuing “stay at home” orders, and quarantines began. “Non-essential” businesses like beauty salons, retail stores, movie theaters, theme parks, and some restaurants were forced to temporarily close. Any business that could operate with a work from home policy was instructed to do so.

With the closures of non-essential businesses, many organizations were forced to lay off workers and shut down operations—some temporarily and some permanently. Most industries were hit hard, and even with government help thousands of organizations failed to stay afloat for an entire year of uncertainty and restrictions.

The COVID-19 pandemic and lockdowns lead to a worldwide economic recession—in the first three months of 2020 the G20 economies fell 3.4% year-on-year. Between April and June 2020, 400 million full-time jobs were lost around the world.

COVID-19’s Impact on Various Industries

COVID-19 caused a large disruption to business, and most organizations experienced negative fallout from the pandemic. In the U.S., 43% of small and medium businesses closed between January and April 2020. The pandemic’s border closures, lockdowns, and export restrictions impacted many supply chains, slowing work down and forcing companies to focus on more self-sufficiency. This greatly affected their workflow and manufacturing processes, and caused prices to rise.

After short-term closures at the start of the pandemic, businesses began to reopen during Q2 and Q3 of 2020. Certain industries were able to recover somewhat quickly, while others still continue to struggle into 2021. Let’s take a closer look at COVID-19’s impact on certain industries:

  • Retail

    Retail was one of the hardest-hit industries by the COVID-19 crisis. Many closures and layoffs took place, and some small businesses and non-essential retail stores were unable to survive the lengthy shutdowns. Early in the pandemic, retail, arts & entertainment, personal services, food services, and hospitality businesses reported the greatest effect from COVID-19, with employment declines exceeding 50%.

    As a result of temporary shutdowns, many consumers have embraced online shopping—a trend that is predicted to continue even beyond the pandemic. Around 75% of buyers and sellers now prefer digital purchasing options over face-to-face due to greater safety, quicker checkouts, and more convenience. Ecommerce grew 20% in 2020 and consumers’ interactions with companies are now 60% online/40% offline. The rise of digital is not new for retail, but it has been propelled by the pandemic. According to a McKinsey survey of executives, companies have accelerated the digitization of their customer and supply-chain interactions by three to four years.

    With restrictions still in place in many areas, retail’s climb back to normalcy has been slow, particularly for brick-and-mortar stores. Those that have survived the last year have often taken an omnichannel approach that blends the in person and online experience.
  • Manufacturing

    COVID-19 greatly affected manufacturing, resulting in reduced demand and a significant disruption to many supply chains. Even manufacturers of products that were hot commodities at the start of the pandemic—such as PPE or toilet paper—struggled to meet a dramatic shift in consumer demand. The virus originated in China, which is the location of many factories that supply raw materials to manufacturers across the world. In fact, more than 75% of businesses have “one or more direct or Tier 1 supplier[s]” from China, and 938 of the Fortune 1000 companies have Tier 2 suppliers there. Slowdowns ensued as borders were closed and manufacturers couldn’t access the materials they needed.

    The disruption of the manufacturing supply chain resulted in a decline in global FDI inflows, and an economic downturn in many countries. But since border reopenings, manufacturing has started to rebound. In the future, however, companies are likely to look at restructuring their supply chains and reevaluating where products are manufactured and how inventory is managed. This may result in a shift in the near-term toward more local supply chains.
  • Real Estate

    The pandemic directly impacted the demand for real estate space because of shutdowns, quarantines, supply chain disruptions, employment loss, poor business revenue, and lower consumer confidence. However, commercial real estate is now ramping back up as new businesses open in the place of those that closed during the pandemic. Real estate for data centers, R&D labs, and the industrial sector are predicted to emerge strongly in a post-pandemic world, but offices and retail spaces may take longer.

    Services like property management, construction, appraisals, and analytics are becoming more important as the economy recovers, and brokerage will yield to consultative advice and strategic planning. Building values will likely decrease because of the impairment of rent rolls. The movement of capitalization rates is asset-dependent. Business interruption and contingency claims are continuing to unfold for general insurers, potentially resulting in reduced available capital in the market.
  • Finance/Banking

    The banking and finance sector was not hit quite as hard as other industries. The re-regulation after the 2008 global financial crisis helped banks when the COVID-19 pandemic began. With the ability to work remotely from home, many finance professionals found that their workflow wasn’t hindered by stay at home orders.

    However, large declines in bank equity prices suggest investors are becoming more concerned about profitability and prospects. Regulators had to adjust their supervisory approach and expectations in 2020. The Federal Reserve Board (FRB), Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) granted flexibility with implementing new regulatory requirements and adjusting priorities to allow banks to focus on COVID-19-related issues and affected customers.

    For 2021, financial services should monitor their distribution of profits or losses, and revisit relevant benchmarking studies to assess the impact COVID-19 has on the return on equity.

PPP Loans Didn’t Have as Positive an Impact as Anticipated—But Some Businesses Were Helped

One large part of the COVID-19 pandemic was the government’s response to it—and to businesses and workers. In the spring of 2020, the Paycheck Protection Program (PPP) was launched to help affected businesses retain or rehire employees, with the loans deemed forgiven if certain requirements were met.

But according to The New York Times, economists concluded that the program has saved relatively few jobs—just 1.4 million to 3.2 million—and that, at a cost of more than half a trillion dollars, it’s been far less efficient than other government efforts to help the economy.

As of Jan. 31, 2021, the Small Business Administration (SBA) had disbursed $596 billion of the $796 billion appropriated by Congress to the program. And in February 2021, the SBA announced it had taken steps to improve the PPP loan process after receiving criticism about the program’s flaws. The SBA said it would now allow lenders to directly certify the small-business borrowers’ eligibility for first- and second-draw loans that had received validation errors. Lenders will also be able to upload supporting documentation for small businesses with validation errors during the forgiveness process.

Many businesses didn’t receive PPP loans at all—and small business closures throughout 2020 will continue to have a significant impact on unemployment levels. Before COVID-19, small businesses accounted for half of private-sector jobs and two-thirds of new jobs created between 2000 and 2017. The permanent closures of small businesses are generating longer lasting unemployment than temporary furloughs or layoffs.

However, some companies—fortunately—were able to successfully take advantage of the Paycheck Protection Program as it was intended. Phoenix Management was able to advise 21 clients in obtaining approximately $70 million+ in PPP loans, which preserved more than 4,000 jobs in a wide range of industries.

Post-Pandemic Business Recovery Outlook: Slow but Steady

Recovery from the COVID-19 pandemic will be a slow process. However, industry experts agree that 2022 is looking to be a more typical year for business.

With increased vaccine distribution, falling COVID-19 case numbers, and the coming warmer months, businesses will be able to start to return to pre-pandemic behaviors, with some adjustments. Outdoor dining and sidewalk sales will help the food and beverage and retail industries, and better weather can improve manufacturing and real estate operations.

Overall, the post-pandemic recovery will look different for each industry, but they all have one thing in common—their business recovery must be handled correctly and planned effectively in order to find future success and move on from 2020’s difficulties. A professional organization like Phoenix with many years of experience in business recovery and turnaround can help organizations in various sectors bounce back from COVID-19. Contact Phoenix Management for more information.

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