As the flood crisis continues to dominate headlines here in Thailand, forward-looking companies are on the move to seek growth opportunities that will emerge in post-crisis business.
In this article, we examine reactions and post-crisis strategies of winning companies that have successfully weathered other disasters.
There are lessons to be learned from these strategies that can be adopted by companies in Thailand.
The current flood crisis has been called Thailand's worst, in terms of both water volume and the number of people affected.
Half of the country has been affected. Over 600 fatalities have been reported to date. Views of just how bad it is vary. Some estimate that the cost of direct damage is over 150 billion Baht ($5 billion). Other executives believe this estimate could be significantly understated.
By comparison, in the case of the crisis from the tsunami in Japan, direct damage resulting from the destruction of highways and buildings was around $120 billion to $300 billion.
Secondary damage from rolling electricity blackouts, declines in production due to disrupted supply chains, and revenue losses has been estimated to add another $50 billion to $180 billion. The cost of more than 12,000 lives is immeasurable.
By comparison, the current Thai flood crisis is less extreme. But it is complex in its own way with potentially significant ripple effects on almost every socioeconomic class and multiple industries.
The impact of the flood on the Thai economy is likely to be both negative and positive. In the former, we have the immediate impact on production disruption, property loss, and insurance & banking losses. However, moving forward the clean-up may actually have stimulatory effects for two reasons.
Firstly, demand for lower skilled labour and all the compensation paid are likely to have an immediate stimulatory impact. Secondly, investments made in infrastructure and potential changes to trade tariffs/policies to encourage foreign investors to stay may offer the potential to change the growth trajectory of the economy in the long run.
The question then is how companies _ big and small _ can take advantage of the situation.
We have observed that in the wake of Japan's tsunami disaster, forward-looking companies in Japan moved meticulously through their emergency backup plans and returned to business quickly.
At the same time, they actively sought growth opportunities presented by the post-crisis business environment. Several common themes emerged:
- Create a separate disaster-management team Managers will be fully occupied addressing day-to-day business operations in the aftermath of the crisis.
So it is critical that companies set up a separate disaster-management team _ similar to a project management office _ to focus on business recovery and communications.
Communicating frequently clearly and often to all stakeholders, employees and customers is also a critical role that this team should play. Companies in Thailand can get ahead by setting up such team while waiting for water to subside.
- Segment businesses and products according to risk and opportunity Of course, some lines of business will be negatively affected by the flood. But the impact on others will be neutral, or even positive.
For each business line, companies should develop an action plan that is based on both risk and future post-crisis outlook. This will allow companies to think through potential negative impacts and identify how to best seize opportunities.
Rethink current activities It is critical that companies analyse how the disaster may change demand and consumption patterns, or otherwise alter the business landscape.
This analysis must be done holistically, by looking not only at the immediate supply chain but also several steps away from the immediate goods.
For example, automakers should consider the supply and price of steel post-flood, given that there will likely be an increase in construction activities to rebuild and recover affected areas.
Identify and position to capture business opportunities In addition to taking defensive measures, smart companies also went on the offensive and sought new opportunities for growth.
Certain businesses _ for example, those focusing on infrastructure investment or consumer products that address home, convenience, or safety concerns _ can expect to expand in the wake of a disaster.
On the consumer side, Japanese consumers modified their daily routines in response to the increased stress they faced. They engaged more frequently in activities such as "cocooning" at home and reading.
They also scaled back on other activities _ most notably, making purchases related to travel, real estate, automobiles, and other durable goods.
Thinking through probable changes to consumer behaviour will likely identify new business opportunities.
When companies seize these opportunities, more winners will emerge after the storm.
In our next few articles, we will discuss how government and businesses can respond to the crisis. We will cover concrete ideas for how companies can turn the crisis into real business opportunities, as well as potential government responses _ short- and long-term measures.
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