Feb 28, 2020 | Markets, News | North America | Blueback Global

The Business Impact of the Coronavirus

The business impact of the coronavirus is only starting to become apparent. According to a New York Times estimate, residential lockdowns had restricted at least 760 million people in China as of February 20. As a result, it isn’t business as usual in the country.

Many foreign businesses can’t operate within the country and countless multinationals can’t access goods and services vital to their operations.

Supply Chain Disruptions

China’s factories account for a quarter of the world’s manufacturing output. Consequently, many companies rely exclusively or heavily on China for the manufacture of goods.

For instance, Apple issued a press release highlighting how seriously the coronavirus has already affected their operation. Slower than expected return to normal conditions and constrained worldwide iPhone supply will significantly reduce their revenue estimate for the quarter. The company also closed all 42 stores in China and is only re-opening slowly, which also reduced local customer traffic and sales.

General Motors, Fiat Chrysler and Toyota Motors all halted production due to parts shortages and/or labor issues. They are slowly re-opening after a lengthy break, but at a significant cost.

The business impact of the coronavirus is far-reaching. A Dunn & Bradstreet whitepaper estimates at least 51,000 companies worldwide have one or more direct or “tier 1” suppliers in the affected regions.

These suppliers offer the most advanced processes in the supply chain and when they’re not available the entire chain’s disrupted. Unfortunately, this affects many SMEs as well large corporations. Wholesalers in these affected areas are also finding it difficult to get their product to customers.

Contractual Implications

Businesses contracting work with Chinese companies need to review their commercial contracts for force majeure clauses. These clauses free both parties from liability when they can’t fulfill the contract due to unforeseen circumstances, such as the coronavirus.

However, to benefit from these clauses a company sometimes has to serve a contractual notice or has a duty to mitigate the impact of the event. A close review of business contracts is vital in these troubled times.

Business Travel & Employment Implications

On February 1, 2020, President Trump signed an executive order banning all foreign nationals from entering the US who had been in China. Until this order is modified or terminated, regular business travelers who’ve recently visited China can’t enter the country. This includes foreign nationals who hold a work visa in the US.

Additionally, the US Department of State issued a Level 4 “Do Not Travel” advisory recommending US citizens in China stay home. Employers should encourage employee work from home, when possible. However, in some cases this might not be possible making operations difficult without alternate employment options.

Companies should also review the terms of employment to ensure HR compliance. Workers absent through illness may be entitled to sick pay. Companies may also need to pay salaries and benefits to employees in some jurisdictions, even if they suspend operations.

Immigration Implications

Companies that want to recruit Chinese nationals from overseas should know that visa application centers in China are currently closed. These closures could significantly delay the processing of visa applications and travel bans will also affect the hiring process. It may be necessary to find contract employees in the meantime.

US Occupational Safety and Health Law

The US government issued official emergency warnings for the evacuation of American civilians yet some Americans chose to remain, sometimes with their employer’s encouragement.

However, repatriating workers from China comes with risks. Employers have a legal duty to protect the health and safety of all their employees including those returning for China and others that may be exposed to risks.

Even though health authorities are conducting tests on travelers, all employers need to conduct risk assessments to determine the likelihood and consequences of an employee’s exposure to the coronavirus should an employee repatriate.

The CDC has issued interim measures for controlling the spread of the virus, with useful suggestions for employers. Companies are responsible for the implementation of control measures to minimize these risks.

Managing Supply Chain Disruptions

The coronavirus has highlighted the need for supply chain agility. Global companies should be prepared for supply chain disruptions, but often aren’t.

When multinational corporations suddenly find huge gaps in their procurement and manufacturing chain, they scramble and feel the full impact of the disruption. Instead, your business needs a contingency plan and alternative sources for all key resources to ensure resiliency.

Unfortunately, many companies don’t have access to multiple, competitive suppliers. They rely too heavily on a single supplier. Regrettably, a single supply chain leaves any company very exposed.

Fortunately, this needn’t be the case. Partnering with an international supply chain leader can tap you into a global supply network that offers more choices. If political unrest, strikes, climate or disease interrupts your supply chain, you can strategically decouple and connect to a new source.

Through a comprehensive review of data, your business can create an agile supply chain system, uncover insights and respond quickly to change to minimize the impact of disruptions.

Managing Travel, Employment & Immigration

Staying on top of travel, employment and immigration is time-consuming and requires expertise. Most companies don’t have the resources to access current information, the know-how to process the needed paperwork or an available network of employment alternatives.

Luckily, a seasoned global business partner can simplify processes, clarify grey areas and provide accurate, timely advice so your business can accomplish its goals. Conducting business in a foreign market can be complicated in itself, but even more so when faced with extenuating circumstances.

Reliable International Partner

In these extraordinary times, it’s more important than ever to rely on a highly-experienced international partner. The seasoned professionals at Blueback Global can help you establish an agile supply chain and offer a wide range of additional services. These include statutory and HR compliance, in-country contractual advice, immigration support, recruitment, hiring and more.

Let us help your business overcome your global business challenges. Contact us for a free consultation and minimize the business impact of the coronavirus on your company. We can help you create a better future and a stronger, more agile company.