It has been evident that the COVID pandemic has impacted all businesses globally. However, a review of the economy’s major sectors reflects the disparity between companies that have benefited and those being left behind. Although the pandemic may forever alter whole industries, overall economic activity has been staging a remarkable comeback. US GDP grew by an annualized rate of over 33.1% in the 3rd quarter, followed by a 4% rate in the fourth quarter of 2020.
Despite these promising numbers, this will not be a short-term, full recovery event but rather one that will take some time to address resulting changes in customer behavior, the impact on global supply chains and financial markets. Companies will be forced to develop new business models to become more efficient and profitable than their current situations. A company’s demand for cash will also have to adapt to the new normal. Greater focus will be required for planning, budgeting, and forecasting to react to the impact of change more quickly.
Economic volatility from public policy measures put in place to contain the spread of COVID-19, as well as more recent ones, will impact specific industries rather than affecting the general economy. With the election over, we will see a tidal wave of cash back into the market, a reversal from last year. The International Monetary Fund (IMF) estimates that global GDP will climb 5.2% in 2021. But risks to recovery remain, chief among them a resurgence of COVID-19. Secular growth industries such as information technology, e-commerce and healthcare are well-positioned to benefit from long-term economic trends.
The expected upturn in the economy will also benefit Industrial, Energy and Financial companies; however, given the recent policy changes and the resulting moratorium on new oil and gas leasing on federal lands and waters, this shift may have significant implications for investment and production.
Collapsing demand and supply chain disruptions have strained businesses’ cash and working capital position. Suppliers have been unable to deliver critical components, impacting manufacturing, rising rates for global shipping, and increasing inventories due to reduced demand.
Companies have also been challenged in collecting receivables in a timely fashion from customers, while on the other hand, finding it difficult to pay suppliers due to the imbalance in available cash.