The coronavirus outbreak is first and foremost a human tragedy, affecting the health of ever-growing numbers of people. It is also having a growing impact on the global economy. The outbreak is moving quickly, and businesses are having to react and adapt in real-time, having had no ability to plan for the depth of the economic slowdown.
There are multiple scenarios for both the spread of the coronavirus, as well as the impact on businesses. In one scenario, large-scale quarantines, travel restrictions, and social-distancing measures drive a sharp fall in consumer and business spending until the end of Q2, producing a recession. Although the outbreak comes under control in most parts of the world by late in Q2, the self-reinforcing dynamics of a recession kick in and prolong the slump until the end of Q3. Consumers stay home, businesses lose revenue and lay off workers, and unemployment levels rise sharply. Business investment contracts, and corporate bankruptcies rise, putting significant pressure on the banking and financial system. In another scenario, demand suffers as consumers cut spending throughout the year. In the most affected sectors, the number of corporate layoffs and bankruptcies rises throughout 2020, feeding a self-reinforcing downward spiral. Of course, it is also possible that a quick recovery scenario occurs, where the peak in the virus spread and public concern comes relatively soon and the stimulus and aid packages of the Government are sufficient to shore up the short-term needs of affected businesses.
We do not know which of the scenarios will play out in reality, but we do know that businesses need to be planning for each of them, potentially including some of the following steps: