Oct 02, 2020 | Foreign Exchange
The new normal: How social distancing will impact business globally
As lockdown measures are reviewed and economies look to the rebuilding process, the ripple effect of COVID-19 continues to be felt across the world. Social distancing measures, the new normal, are set to change how businesses operate for the foreseeable future.
Nicole Zimmerman, Head of Customer and Marketing, Western Union Business Solutions
To understand the impact of this new landscape on our clients we’ve spent the past few months at Western Union Business Solutions surveying customers about the impact on different sectors, and the opportunities and risks companies see ahead.
As a trusted partner to our clients, we want to understand the global picture during these unprecedented times. We need to listen to the voice of our customers so we can do our best to help them protect their business.
A key output from this analysis has been a social distancing index, which offers guidance on how different sectors may be positioned against ongoing social distancing rules imposed by government regulations. This includes an indication of the ability of businesses to manage employees returning to the workplace while ensuring compliance with social distancing rules.
The index also provides insight on how vulnerable each sector might be to any resurgence of the virus and renewed lockdown measures. From education to travel, through to professional services firms, all the sectors covered in the survey have a very high need to adapt to lockdown, however, it became clear that some of them are more ready than others.
Payment concerns for financial and professional services
While financial and professional services clients transitioned to working from home environments with little disruption, it has become harder to send and receive payments in some currencies due to the closure of some payment corridors under full lockdowns.
In addition to payment challenges, another challenge for the financial services sector has been a significant drop in traffic to branches. One of our Australian customers experienced an 80% drop in traffic, for example. Financial Institutions have had to think about enhancing their digital service offerings and non-interest revenues like payments.
On the professional services side, law firms were able to begin working from home but struggled to manage reliance on manual ‘pen-to-paper’ processes and wet signatures – especially manual checks.
We have supported these firms by providing the ability to make international payments using digital signatures and digital payment solutions. Some firms also found their bottom lines exposed to risk because they work with hard-hit sectors such as the airline industry. We worked closely with these clients to help them strategically manage their currency risk.
No vacation for travel and tourism
With borders closed globally one of the sectors hit hardest by the pandemic has been travel and tourism. Our survey found that while many travel and tourism companies focused on cash flow and liquidity to help their bottom line, many more fully shut down their operations.
Several travel and tourism businesses relied on government support to pay wages for retained staff. We were able to support them through market guidance and updates on cash positions. We also joined government loan schemes such as the United States’ paycheck protection program and the UK’s coronavirus business interruption loan scheme.
Big challenges for retail, hospitality, and food
It is nearly impossible for these industries to pivot to a remote working environment while functioning at the same level. Clients in these areas were naturally very shaken by the pandemic with many high street retailers and restaurants forced to close during lockdown.
Even now, uncertainty remains over the willingness of consumers to return and the possibility of renewed lockdowns. Many of these businesses still have expenses such as rent to contend with despite drastic drops in revenue. As much as possible we are offering support through real-time market insights, and FX and trade analysis to assist risk mitigation and scenario planning.
On the flip side, some food suppliers saw an increase in business. These included businesses supplying goods to hospitals and supermarkets.
Manufacturing concerned about supply chains
Whilst manufacturing was among the first sectors to return to the workplace as lockdowns began to ease, challenges remain on the horizon. The manufacturing clients we surveyed were all concerned about their supply chains. They face potential delays due to continued lockdowns in overseas markets as well as the cash flow challenges this presents.
Incoming check payments now take longer to clear, and there are also potential issues with outgoing wires which are time critical. To counter that, we realised that manufacturers may require more flexibility over credit and currency hedging facilities to help increase certainty around their cash flows. We have been able to help with that through international payment solutions, FX risk management strategies, and insights into post-lockdown scenario planning.