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RIMAN’s COVID-19 Risk Analysis of The Manufacturing Sector
Risk Management Association of Nigeria (RIMAN) have outline the effect of the COVID-19 pandemic on the manufacturing sector in Nigeria with focus on its potential impacts and strategies to consider in mitigating likely threats.
As at the 20th of April 2020, based on COVID-19 Dashboard by John Hopkins University, about 2,531,804 cases had been detected worldwide, with 665,458 people recovered, and 174,336 deaths recorded. On the same date in Nigeria, 665 cases with 188 recovery cases and 22 deaths were recorded. The rate of infection and number of deaths recorded have been on the rise since then.
The need for organizations to strategically respond to COVID-19, remains key to their survival. This paper attempts to provide the needed guidance for the Manufacturing sector in Nigeria.
The Manufacturing Association of Nigeria (MAN) was established to promote and protect manufacturers’ collective interests. The Association is yet to formally release any COVID-19 guidelines for her members. It is worthy to note that key organizations reviewed in the Fast-Moving Consumer Goods (FMCG) sector, have taken a proactive approach at identifying precautionary measures to combat COVID-19 and tailored these initiatives to their business models. To this end, press statements were issued on the websites and social media channels of these organizations to enlighten the general public on their COVID-19 preventive and containment plans alongside their respective business continuity plans. Examples of such companies include: Lafarge Cement, Unilever, Nigerian Breweries, Flour Mills of Nigeria, Olam Group, BUA Group, Guinness group, Honey well, Dangote Group amongst others
In general, the measures adopted were in line with the guidelines provided by the World Health Organization (WHO), Nigerian Centre for Disease Control (NCDC), the Federal and State Governments. Areas of focus in these COVID-19 response plans include:
Scaling up of Detective Surveillance System at site locations; Workforce welfare and safety by ensuring physical distancing, remote working and immediate medical attention where necessary; Infection prevention and control measures such as temperature checking, frequent deep cleaning and use of hand sanitizers; Emergency preparedness; and Security and logistics procedures amongst others.
Some companies rolled out robust Corporate Social Responsibility (CSR) strategies to complement ongoing efforts by Government through donation of funds and mobilizing resources in support of the National COVID-19 Pandemic Response Plan.
IMPACT OF COVID-19 ON THE INDUSTRY
This analysis would leverage the five prong impacts postulated by Dr. Lukman AbdurRaheem, a lecturer of Entrepreneurship at the Yaba College of Technology which include Political, Economic. Social, Technological, Environmental and Legal factors resulting from COVID-19 Management in Nigeria.
Political Impact considerations include: a. Weakened governance capacity especially as the industry is not regulated and players adopt different strategies for remaining competitive; and b. Slow resumption to normal business activities by supporting government agencies.
Economic Impact considerations include
Loss of revenue and increased budget deficits due to government lockdown imposition; b. Increased inflation and hike in prices due to limited supply of goods; c. Challenges with supply chain management; d. Close of business activities for some small boutique companies; e. Devaluation of the naira resulting from the fall in oil prices; f. Reduced government income from taxes including VAT; and g. Temporary unemployment for some, and permanent loss of jobs and incomes for others.
Social Impact considerations include
Shutdown of places of worship, social events and recreation centres which impact the demand of some products and services; b. Compulsory observance of social distancing including self-isolation for some which is likely to be the new normal for a long time, and this may result in reduced productivity as most companies might not run on full capacity for a while; and c. Higher dependence of remote communication and interactions in which if emotional intelligence in managing workforce is not employed, may result in a near robotic clime and higher frustration levels of employees.
Technological Impact considerations
High dependence on electronic channels for managing business activities such as eCommerce, e-Governance, e-Learning, etc which would stretch the IT infrastructure available in Nigeria and ultimately result in faster and heightened development of the IT Industry; b. Increased requirement for bandwidth; c. Increased relevance of network security and cybersecurity as IT related frauds are likely to increase; d. Need for proper classification of information by organizations to ensure that all employees know information types that are Secret, Confidential, and Public; and e. Increased requirement for cloud computing which manage virtual meetings, software as a service (SAS) and cloud storage facilities.
Environmental Impact considerations include: Increased awareness and need for health, safety and environmental awareness of all players in the industry; Heightened incidence of community outcries and protests over poor environment management by companies and increased requests for Corporate Social Responsibility; and Need for proper Sustainability Management by companies.
Legal Impact considerations include:
Delayed dispensation of justice as courts are closed and the judiciary may not be as effective under the remote working regime; Inability to conduct due diligence on legal aspects of businesses; and Increased incidence of litigations resulting from breached service delivery by suppliers and to customers.
To remain competitive and maintain competitive advantage in the short, medium and long term, the following should be considered:Hedging of all foreign exchange risk exposures and keeping funds in foreign currency; • Review of contracts especially those for import based supplies or procurements; Investment in technology and developing more electronic based business and operational activities including the use of robots for production; Maintaining a culture of remote working for less critical business functions to cut back on overhead expenses in maintaining offices; Developing and deploying a robust business continuity management system that would ensure organizations put in place the resilience required to support any prolonged business disruption with minimal or no loss to the organisation; Best in place Health, Safety, Social and Environmental standards that would ensure no or minimal health or safety hazard with the organization’s premises or that of the community it operates in; and Invest in best in class quality control strategies, experts and procedures to reduce the incidence of consumer complaints that would result in litigations.
Organizations should keenly consider these points
The devaluation of the Naira and increased exposure to foreign exchange risk; Less demand of goods and services as a result of the lockdown and its resulting change in lifestyle; Reduced investment in stocks as people desert the stock exchange for more predictable and accessible investment options; Keeping funds in foreign currency as a foreign exchange hedging option; and Buying government bonds as a risk-free investment option which in turn provides government with the needed funds.
As the crisis continues, companies need to develop dynamic fit-for-purpose response plans to the evolving COVID-19 situation to ensure prevalent and emerging risks are adequately mitigated and business disruptions minimized.
There is no doubt that we will get through this pandemic, but it will take dynamic COVID-19 strategy setting and close monitoring of same with continued support of government initiatives for the industry to come out of this experience unscathed.