The 2020 Business Crisis – Feel the LUV
The 2020 Business Crisis – Feel the LUV October 2020
We surveyed broad spectrum of Hong Kong CFOs about their expectations on the shape of the recovery post COVID-19 and optimism is in short supply; indeed only 9% see a V-shaped rebound or a quick return business at 2019 levels. There are more pessimists than optimists with 21% of respondents seeing a continued decline to trading conditions. The media sector was notable for the consistency of its gloomy outlook.
Perhaps, not surprisingly, the middle ground was the most common view. 41% expect a U-shaped recovery, representing a slow return to 2019 business levels with strong support from the finance sector. And 29% believe the world is flat, namely an L-shaped outlook with current levels of business being the new norm. The education sector featured strongly in this view.
- L-shaped, meaning that business will remain at current levels – this is the new norm
- U-shaped recovery, meaning a slow return to 2019 levels, the most commonly expected
- V-shaped recovery, meaning a quick return to 2019 levels – the optimists
- \ continued decline, we still have further to fall – the pessimists

So, the obvious next question is how are CFOs reacting to this? Being CFOs, we naturally expect them to be setting an agenda on cost control priorities.
Nearly half of the respondents, 44%, said that their main cost priority is to re-negotiate supplier contracts and this was spread across the various industry sectors surveyed. Perhaps, more surprisingly, 26% do not plan to make changes to their cost base, and those respondent often cited the need to maintain a quality product offering as a key factor. The finance and education sectors were prominent here.
Of the less popular options, to reduce office space (15%) scored highest, and here it seems that the likelihood of more people working from home is offset by the requirement for social distancing when staff are in the office. Moving more staff from full-time to part-time contracts was not at all popular at 9%, and the least chosen option was to outsource more services to cheaper locations with 6% response. This seems counter-intuitive given the pressing need to get the cost base down, but perhaps the drive to maintain quality resonates again here, and the ability to have good oversight of outsourced providers can often be challenging.

What are your cost priorities for 2021?
The COVID-19 crisis has also had a major impact on the ability to travel. Whilst this is a nice cost saver, it has a detrimental effect on engagement with customers. Or does it? We decided to ask, ‘how important is the ability to travel to visit customers in 2021?’ It does appear that CFOs are mostly happy to take the cost savings or save a good chunk of that budget.
53% said that some travel is necessary, a grudging nod to face-to-face interaction with customers, but 24% believe that no travel is required. Whilst the popularity of this response in the educational sector may not be a surprise, this view also received some support from the hotel sector which was an unexpected outcome and one does wonder about the consequences for that industry if that view really played out.
17% believe that travel to visit customers is ‘very important’ with the finance sector a stand-out on this, and 6% have the view that travel is a ‘must’, notably in manufacturing.
To complete the survey, we asked a couple of open-ended questions: ‘what is the main lesson you derive from the crisis?’ and ‘what should your business have done differently in hindsight in response to the crisis?’
On lessons learned, there were three very common themes: planning, flexibility and liquidity, all very sound qualities for a well-managed business especially during a crisis. Planning popped up in two forms: the need to forecast more frequently in a volatile environment, and the need for business continuity plans given the disruption to normal ways of working. As we all know, there is a high correlation between businesses which devote resources to planning and financial performance, so it is encouraging to see companies recognising the need for planning
The question on hindsight revealed that a strong 41% of respondents believe they have done a good job and that they would not, with the benefit of hindsight, have done anything differently. The other responses again mentioned three things: being more flexible, have better IT (to support remote working) and getting the cost base down.
Time will tell whether or not businesses have learned these lessons and made the necessary adjustments.
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