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COVID-19 and the Technology Industry


The COVID-19 pandemic has caused great concern and financial difficulties for businesses, consumers, and communities all over the world. We have put together some basic guidelines on COVID-19: What business leaders in the UK ought to know, covering the crucial areas of crisis management, workforce, supply chain, tax and trade, and financial reporting.

Many companies had already adopted business continuity plans and set up systems such as hosted telephony and other outsourced work; however, these plans may fail to fully address the fast-changing and unknown variables of a health crisis such as COVID-19. Usually, contingency plans are meant to uphold operations’ effectiveness in the aftermath of events such as natural catastrophes, cyber-attacks, and power outages, etc. However, they normally don’t consider worldwide quarantines, extended school shutdowns, and heightened restrictions on travel that can happen in case of global health emergencies.

This particular crisis has brought forth numerous unprecedented issues. In PwC’s inaugural COVID-19 CFO Pulse Survey, US, and Mexico, business leaders presented their primary concerns.

Crisis management and response
Complications that the technology industry may be faced with:

– Business continuity plans don’t take into account the uncertain variables of a global health crisis.
– The wide-scale cancellation of industry events leads to fewer business development opportunities
– Increased travel restrictions means fewer client engagements for businesses

Workforce
Complications that the technology industry may be faced with:

– Staffing worries increase for full-time employees, and also gig workers such as drivers, retail staff, and delivery workers that often work as contractors
– A reduction in the rate of recruitment caused by the crisis can affect the future supply of skilled labor
– Due to more people working remotely, there is an increased risk of cybersecurity threats

Operations and supply chain
Complications that the technology industry may be faced with:
– A reduction in production due to disruption in the global supply chain

Undercapitalised companies will face significant cash-flow challenges and may need alternative funding sources or subsidisation during the crisis to be prepared for what’s to come.
With an increased number of companies seeking business solutions to effectively take up remote working, social distancing, and the need for in-store alternatives, there is a potential increase in the demand for developer and engineering talent. It will be crucial to retain companies to retain top talent.

Anticipate the smartphone industry to be significantly affected due to the labor-intensiveness of its supply chain. The production of smartphones is expected to reduce by 12% year on year in the first quarter of 2020; server revenue is expected to reduce by 16% year on year in the first quarter of 2020.

Disinformation rapidly increases on digital platforms
Sharing economy inventory suffers
Some manufacturers of smartphone components rely on one or two primary suppliers
Increased containment zones all over the world lead to more shipping and delivery gridlock

Financial reporting
Complications that the technology industry may be faced with:

Disruptions in the workforce, operations, and supply chain will set off financial reporting implications in current and future reporting periods.
Public companies will have to deal with increased pressure to reveal revised guidance in regards to the impact of COVID-19.

Tax and trade
Complications that the technology industry may face:

New local and state tax implications come about for workers that are now remote thanks to the crisis.
Lagging of tax compliance operations as employees that are now remote don’t have timely access to information.
Adjustments to income statements, for example, short-term losses, will affect forecasts in the short-term.
The reconfiguration of the supply chain will have tax implication.

Strategy
Complications that the technology industry may face:

The rapid and extended economic decline will make companies consider major budget cuts that do away with discretionary spending.
Social distancing, online education, and remote work will trigger an increase in demand for products/services delivered by the technology industry.
The crisis will emphasise the need for flexible and resilient business models; this includes more attention to cash-flow forecasting and impacts on commercial-channel and supply-chain partners.
Company valuations can become more appealing for acquisition by financially strong companies that have been silently watching while keeping targets in mind.




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