BCG Perspectives
Facts, scenarios, and actions for leaders
Publication #6 with a focus on:
Restructuring costs, and managing cash and liquidity
Version: 19 May 2020

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

COVID-19

COVID-19

BCG Perspectives

COVID-19 is a global
societal crisis

Leaders need to drive an integrated
response to navigate the crisis

We at BCG believe that the COVID-19 outbreak isfirst and foremost a societal crisis, threatening
lives and the wellbeing of our global community.
Society now, more than ever, needs to collaborate
to protect people's lives and health, manage midterm implications, and search for lasting solutions.

It is the duty of health, political, societal, and businessleaders to navigate through this crisis. A complex
interplay of epidemic progression, medical response,
government action, sector impact, and company
action is playing out. This document intends to help
leaders find answers and shape opinions to navigate
the crisis in their own environments. It encourages
thinking across the multiple time horizons over which
we see the crisis manifesting itself.

Source: BCG

1

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Objectives of this document

NAVIGATING BUSINESSESTHROUGH THE CRISIS

Establish crisis
management

9

action areas
for businessleaders
Navigatethrough
Flatten, Fight,
and Future

Scenario-Based
1 Develop
Planning Approach toFight

Futurea Rapid Response
2 Createand Transformation(RR&T) teammanage uncertainty

3

Revamp Organization for
the New Reality

6

Restructure Cost,
manage Cash & Liquidity

4

Drive Topline Security
and Customer Trust

7

Emerge Stronger; drive
advantage in adversity

5

Stabilize and restart Supply
Chain, Manufacturing

8

Accelerate Digital andTechnology transformation

9

Help Society during
COVID-19

Note: RR&T = Rapid Response and Transformation Team
Source: BCG

Focus ofthis edition

2

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

FlattenExecutive Summary | COVID-19 BCG Perspectives• COVID-19 crisis has resulted in negative economic and business impact (-3% global GDP1, up to -30% change in world trade, lower revenues, higher risk of default)• With many countries entering the 'Fight' phase, business leaders must move from crisis response to performance transformation• Transformations are by definition holistic and cover the entire company; managing cash and liquidity and driving cost take-out are imperative– Cash and liquidity are top priorities for investors; management can gain control quickly by establishing a high-impact cash management office– Cost take-out is critical to ensure company stability; however leaders must consider current and future requirements, especially on the people side

Across countries, efforts to flatten the curve and ramp-up testing continue; the impact on economy, sectors, and businesses persists
•
•
•
•
•

Globally, 1.6 million patients have recovered from COVID-19 and the case-doubling rate has improved to 33 days
As countries move into the 'Fight' phase, several have started to see a decline in the number of daily cases; ramp-up of testing continues
The testing landscape is changing rapidly and molecular testing continues to be the “gold standard”; efforts focused on improving speed
Vaccine and therapeutics development are moving at rapid pace; seven vaccine candidates in phases I/II; therapeutics availability by Q3 2020 (earliest)
Full-year 2020 economic and employment impact from lockdown measures will be substantial across geographies

We believe during
this crisis leadersneed to think along
two dimensions:
1. Basis IMF forecast for 2020
Source: BCG

1Taking an integrated perspective on
health/medical progression,
governmental responses, societal
reactions, and economic implications
to understand business/sector impacts

2

Thinking multitimescale in a FlattenFight-Future logic

3

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

For the many businesses hit hard by the crisis, it is critical for companies to adapt cash and costs to current and future requirements

COVID-19 will be a journey with three distinct phases, requiring
an integrated perspective
Fight

FutureTypically the initial phase after a pandemic
outbreak–goal is to urgently limit numberof new cases, especially critical care

Finding paths to collectively fight the virus,
restart the economy, and support society inbalancing lives and livelihood

Disease controlled through vaccine/cure/herd immunity, and treatment withinsustainable medical capacities possible

Social distancing (lockdown) and partial businessclosures, lead to economic recession with large
employment impact

Increasing economic activity with recovering
GDP, some business reopenings, and social
distancing on sustainable level

Reactivated economy with strong businessrebound and job growth, social restrictions
limited or completely suspended

1. Disease progression, health care system capacity, and response
2. Government policies and economic stimulus
3. Economic scenarios
4. Business engagement and response
5. Public engagement and response

All of the above five factors result in specific economic and social outcomes in each phase
Source: BCG

4

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Flatten

1

Guide for leaders
Need for performance transformation across companies

2

Updated epidemic, economic, and businessscenarios and impact
Epidemic progression, virus monitoring, health care capacity
Economic impact
Business scenarios and impact

3

Appendix: Further readings
Learnings from successful business leaders
Further readings

5

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

How to restructure cost, and manage cash and liquidity

COVID-19: Impact dashboard
Epidemic Progression

4.5M

1.6M

308K

# of cases# of recoveries# of fatalities# of days of casedoubling1# of reported recoveries
as % of total cases

17 Apr

01 May15 May

16

26

33

25%

32%

36%

# of countries with
1k+ cases

76

87

98

# of tests / case2

10

11

14

16K

24K

# of tests / million2

10k

Business Impact

GDP forecasts (Current outlook, likely to evolve further)

Stock market performance9

IMF
forecast

2020
As of
As of
Jan'20
May'20

As of
Jan'202021
As ofMay'20

US

2.0%

-5.9%

1.7%

4.7%

China

6.0%

1.2%

5.8%

9.2%

Europe

1.3%

-7.5%

1.4%

4.7%

India

5.8%

1.9%

6.5%

7.4%

Japan

0.7%

-5.2%

0.5%

3.0%

Estimated current employment impact7% of employees
Total employment
Employees
impacted
2019 (M)
impacted8 (M)20 Mar vs 21 Feb -31%

-30%

-34%

-10%

15 May vs 21 Feb -14%

-22%

-23%

-6%

S&P500

FTSE100DAX

CHN SSE

Total Shareholder Returns9
First column: 21 Feb to 20 Mar; Second column: 21 Feb to 15 May

Americas

EuropeAsia

Pharma-19% -1%-20% -10%-22% -3%

F&B10-26% -16%-24% -18%-12% -7%

Telecom-17% -13%-20% -21%-14% -13%

Software-30% -12%-32% -19%-28% -16%

US

~159

~36

~23%

Retailing-42% -22%-36% -25%-24% 2%

UK

~33

~8

~25%

Capital goods -38% -27%

-35% -26%-29% -16%

Germany

~45

~10

~23%

Auto

-47% -34%-45% -33%-32% -23%

50

France

~28

~12

~45%

Real Estate-42% -39%-26% -40%-22% -15%

6-24

Italy

~23

~7

~28%

Energy-56% -37%-45% -32%-41% -30%

Spain

~20

~4

~21%

Banks

-41% -40%-44% -48%-26% -21%

VaccineTreatment

Trials in pre-clinicalstage and beyond3

132

122

Trials in Phase 1 andbeyond47

Current est. timeline
for approval & scale-up

12-36

months5

Economic Impact

months6

1. No. of doubling days based on 7 day CAGR 2. Median of values for top 15 countries by nominal GDP (except China) 3. On-going trials including pre-clinical, Phase 1 (first trial in humans), Phase 2, Phase 3, Phase 4 4. On-going trials including Phase 1(first trial in
humans), Phase 2, Phase 3, Phase 4 5. 12 month development "best case", then likely to require time to scale across population 6. Remdesivir is approved now, could be more widely available by Jul '20. For the next wave, estimated timeline is Oct '20 – April '22 (6-24
months). If first round of drugs being tested succeeds – then 6-9 months; if not – substantially longer 7. Available data as of May 15; figures are changing rapidly and often being reported with a lag from the current date 8. Includes increase in unemployment and employees 6
covered by government's wage support programs 9. Performance is tracked for two periods, first from 21 February 2020 (before international acceleration of outbreak) to 20 March 2020 (trough of the market) and from 21 February 2020 through 15 May 2020 10. Food &Beverage Source: WHO, World Bank, JHU CSSE, Our World in Data, IMF, Bloomberg, BCG, Employment data - Eurostat, Trading Economics; Gov't Wage Support figures: Gov.Uk (UK), Reuters (Italy), News Break (Spain), travail-emploi.gouv.fr (France), Barrons (Germany)

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

As of 15 May 2020

COVID-19 resulting in substantial negative economic and business impact
As of 15 May 2020

Supply chaininterruption

Revenue
decline

Sectordistress

Up toMore than

-3.0%

-30%

50%

11

global GDP development
forecasted for 2020;-7.5% Europe; -5.9% USchange in world
trade, interrupting
supply chainsof companies expect
shrinking topline due
to drop in demand

sectors with significant
share of companies athigh risk of default1(IMF)(BCG Trade Finance Model)(BCG Henderson Survey
across 213 companies)(BCG Value Science Center
analysis for S&P Global 1200)

1. Pharma, Telecom, Retailing, Materials, Transport, Media, Capital Goods, Auto, Real Estate, Energy, Hospitality with > 10% of companies with probability of default > 15% as of 15 May 2020
Source: Bloomberg; IMF; UN Comtrade, OECD, IHS, WEF, WTO; BCG COVID-19 Consumer Sentiment Survey; BCG Henderson Institute; S&P Capital IQ; BCG ValueScience® Center; BCG

out of 24

7

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Economic
downturn

Economic downturn | -3.0% global GDP development forecast for 2020;-7.5% in Europe and -5.9% in US
As of 15 May 2020

GDP growth forecast vs. baseline for 2020 [%]-10 -8

-6

-4

-2

-7.5%

0

2

4

6

8

10

-10 -8

1.3%

-6

-9.1%

-2

0

2

4

6

8

10

0.5%

Italy
-5.9%

2.0%

-8.0%

US

1.6%

Spain
-5.2%

0.7%

Japan

-7.2%

1.3%

-7.0%

1.1%

-6.5%

1.4%

France1.2%

6.0%

Germany

China
1.9%

5.8%

UK

India
-3.0%

3.3%

World
Forecast: IMF forecast from April 2020

Baseline : IMF forecast from January 2020

Forecast range (IMF & Banks1)

Note: As of reports dated 12 April 2020 to 12 May 2020, YoY forecasts 1. Range from forecasts (where available) of International Monetary Fond, JP Morgan Chase; Morgan Stanley; Bank of America; Fitch Solutions;Credit Suisse; Danske Bank; ING Group; HSBC Source: Bloomberg; IMF; BCG Analysis
8

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Europe-4

Supply chain interruption | Up to -30% change in world trade expected,
interrupting supply chains
As of 15 May 2020

• ~$18 trillion world trade in 2019
(CAGR of ~4% from 2015-2019)• -10-30% in world trade expected for 2020
due to COVID-19• -4% total imports in Q1 2020
Q1 2020 vs. Q1 2019 in value• -14% automotive imports in Q1 2020
Q1 2020 vs. Q1 2019 in value

Global supply chain
Automotive example (pre Covid-19 crisis)
1

Metals imported from various
countries, rare metals mined in China

2

Aluminum and steel producedin China

3

Components produced in Hubei
and other parts of China (Tier 2+)

4

Engines produced in Hubei andother parts of China (Tier 1)

5
6Cars assembled by OEMs in EU,
Hubei and other parts of China
Finished cars shipped fromEU and China

Source: UN Comtrade, OECD, IHS, WEF, WTO, IMF, BCG Trade Finance Model 2020, BCG Analysis

Illustrative

1

Palladium

5,6

Aluminum,
Steel,
Graphite,
Magnesium(China)

1-6

11

um
in
t
a
Pl

Iron
Ore
1

1

Copper11
Iron Ore,
Copper(Australia)

9

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Global trade impact
COVID-19 recession implications

Revenue decline | Due to drop in demand, 50% or more ofcompanies across sectors expect shrinking topline
As of 20 April 2020

As of 15 April 2020

Consumer sentiment% of companies expecting negative revenue impact in FY20

39%
refrain from large,
planned investments

46%
want to save money incase we enter a recession

51%
are careful and cut backon their overall spending

Expected
impactIndustrials

Information
Consumer Communic.2
1
Discretion.
Services Health Care Technology

-19%

-23%

-23%

-21%

0 to -10%

-22%

-37%

-10 to -20%
-31%

-15%

-52%

-32%

-31%

-26%

-25%

-11%

-11%

-68%

-67%

Consumer
StaplesMaterials

Financialservices

-29%

-25%

-25%

-6%

-20%

-19%

-5%

-55%

-50%

-9%
-13%

< - 20%

∑

-94%

-74%

-74%

-47%

1 Discretionary 2. Communication
Left: Top-2 values (i.e. share of respondents who (strongly) agree to these statements); Question text: “To what extent do the following statements describe the impact the coronavirus crisis has on your income andspending behavior (if any)? Please select one answer for each statement.”; Source: BCG COVID-19 Consumer Sentiment Survey, April 17–20, 2020 (N= 1,584, unweighted, representative within ±3% of German census)
Right: All sectors with >9 responses are listed; Sector classification follows Global Industry Classification Standard; Source: BCG Henderson Institute survey, April 15, 2020 (N= 313 companies)
10

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German example

Sector distress | 11 sectors with more than 10% of companies at highrisk of default

Vulnerable
sectors1

Pressured
sectors1

Healthiersectors1

Sectors
PharmaFood/staples RetailHousehold Products
Health Equipment
Semiconductors
Food & Beverage
Telecom
SoftwareTech Hardware
Retailing
Materials
Prof. Services
Utilities
Transport
Media
Capital Goods
Financials
Auto
Durable Goods
Insurance
Real Estate
EnergyHospitality
Banks

Share of companies withprobability of default > 15%

Median YTD2 Total
shareholder return

16%
0%
0%
0%
0%
0%
15%
0%
0%
47%
17%
0%
5%
36%
21%
12%
0%
33%
5%
0%
17%
29%
43%
6%

0%
-2%
-5%
-6%
-13%
-12%
-9%
-6%
-15%
-20%
-23%
-14%
-14%
-22%
-24%
-24%
-24%
-32%
-29%
-32%
-28%
-41%
-36%
-37%

Key take-away
11 sectors have > 10%
share of companies
with probability ofdefault > 15%
Pre-crisis, no sector
had > 10% of companies
with probabilityof default > 15%

Note: Sectors are based on GICS definitions 1. Sector ranking and division into “healthy”, “pressured”, “vulnerable” based on global TSR between 21 Feb 2020 to 15 May 2020
2020 vs 1 Jan 2020; Source: S&P Capital IQ; BCG ValueScience® Center; BCG

Based on top S&P
Global 1200 companies

Key take-away
Negative medianyear-to-date2
total shareholder
return in all sectors

2. comparing 15 May

11

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As of 15 May 2020

All sectors, even the healthier ones, have players in need ofperformance transformation
As of 15 May 2020

YTD shareholder return in % per sector
40

0
-20
-40

Healthier sectors1
Top 10%Bottom 10%

MedianPressured sectors1

Banks

Hospitality

EnergyReal Estate

Insurance

Durable Goods

Auto

Financials

Capital Goods

Media

Transport

Utilities

Prof. Services

Materials

RetailTech Hardware

SoftwareTelecom

Food & Beverage

Semiconductors

Health Equipment

Household Products

Food/staples Retail-80

Pharma-60

Vulnerable sectors1

Performance spread between bottom and top 10%

Note: Sectors are based on GICS definitions; Companies sampled from S&P Global 1200 1. Sector ranking and division into “healthy”, “pressured”, “vulnerable” based on global TSR between 21 Feb 2020
to 15 May 2020, Source: S&P Capital IQ; BCG ValueScience® Center

12

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20

Companies have started to initiate performance response

How big tech plans to profit
from the pandemic

13

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As of 15 May 2020

1

2

3

4

5

Manage cash
and liquidity

Drive cost
take-out

Ensure topline
security

Stabilize supply chain,manufacturing

Organize people
for the new reality

Monitor cash flow and key
financials (including FC)

Push cost take-out in
non-critical areas; drive
flexibility in personnel costs

Use high frequency indicators
to sense changing demand /supply sentimentManage supply chain
actively; build resilience tolimit risk of interruption

Keep employees safe;
enable new ways of working

Manage spend andinvestments actively

Activate topline levers, e.g.
channel shift, marketing
spend, customer engagement

Prepare for force
majeure claims

Implement balance sheet
measures
Ensure funding (inclulding
government aid)

Steered through a central team

Set-up Rapid Response& Transformation Team

Source: BCG

Build new capabilities andrestructure organization
Build SWAT teams toaddress critical areas

For deep-dive, refer Edition 5

Steer crisis response centrally
Monitor impact along KPIs
Initiate and track counteraction

14

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Five elementsof a holistic performance transformation

Companies need to move from crisis response to driving transformation
as they move into fight phase
FlattenFrom crisis response...
Manage cash
& liquidity

Fight...to driving the transformation

Build liquidity transparency and manage
net working capitalFree internal funds to ensure fundingof strategic moves

Stop non-essential spend/investments,
drive flexibility in personnel costs

Push cost-out; adjust cost structure permanently
Make prudent long-term policy decisions

Ensure topline
security

Protect existing business and align value
proposition to needs

Make structural moves to win in new reality;
Determine how to reactivate customers

Stabilize supply chain,manufacturing

Manage supply chain actively, define'hibernation' plan for underutilized OPS

Build resilient supply chain andmanufacturing to limit the risk of interruption

Organize people forthe new reality

Protect people and enable remote work

Continue to protect people, build new capabilities
and restructure org. to fit go-forward needs

Central crisis response teams provide
top-down direction to businessAccountable line management in the lead,activist RR&T Team supports transformation

Drive cost
take-out

Set-up Rapid Response& Transformation Team
Source: BCG

Future…

15

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Deep-dive on following pages

As of 03 May 2020

Over the next 12 months, it is important to intensely focus
on preserving liquidity, even if it is at the expense ofinvesting to achieve advantage1,2

3%

29%

41%

73%
Companies should access all sources of debt financing
to strengthen cash position and financial resilience, even
if it impacts the balance sheet and credit risk1,3

7%

21%

47%

~68%
want intense
focus on liquidity

27%

26%

55%
For companies with share price decline in line with themarket, significant equity issuance is a reasonable moveto strengthen cash position and financial resilience

Strongly disagree

Somewhat disagree

13%

32%

Somewhat agree

44%

11%

Strongly agree

1. Questions were posed with respect to financially healthy companies 2. Investing to achieve advantage in the business may include digital
and acquisitions, for example 3. Debt financing includes revolvers, bank term loans, asset-backed loans, private placements, for example.
Source: BCG's COVID-19 Investor Pulse Check, May 3, 2020; n = 150

16

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Investors believe it iscritically important forcompanies to ensureliquidity and be
financially resilient;even if it is at theexpense of investing68%

Introduce
cash office

Generatetransparency

Build liquidity
scenarios

Define rules fordiscretionary spent

SecurefinancingCentralize cash
governanceWork at legal entity
level, with clear owners

Set up a cash flow
forecast process

Define clear roles andresponsibilities forspend approval

Map the financing
structure andinstruments

Set up dedicatedCash Team withclear accountability

Map suppliers andclients ("cash impact")

Identify minimum
cash buffer, based on
history and peak levels

Create authorization
gateways and spend
limits

Evaluate andimplement cashpoolingStandardize
process and format
across legal entities

Identify total cash
available vs. trapped
Compare terms tomaximize reliability offorecast
Analyze variances
actual vs. forecast

Source: BCG

Cross-check direct vs.
indirect cash flow

Set up rigorous spend
authorization
processes
Evaluate limitation of
payment timing

17

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Cash & Liquidity | Business leaders can gain control of liquidity
by establishing high-impact cash management

As of 15 May 2020

Cash & Liquidity
Example 1

Stress on liquidity andcash flow due to the crisis

Major distressacross mostof its >10k outlets

Decline inbusiness activity
to ~85%1

Expected decline
in Q1 sales by
50%2

Global footwear andapparel manufacturer
applied effective cash
and liquidity
management tosustain operations
during the crisis

Introduced cash office to drive cash
and liquidity management
Reduced cash requirement from workforce cost by
reducing working hours for over 1,000 workers;
difference of pay to be financed by government aid
package

Reduction in annual management compensation(eliminated short- and long-term bonuses)

Suspended discretionary spend of €1 billion sharebuyback and dividend payments to investors

Impact50K+
Workforce remained employed while
effectively preserving healthy balance
sheet and stabilized cash flow

€1Bn+
Loan from a consortium of banks forfinancial stability as a result of strict
cost cutting and liquidity management

1. In China, compared to the same period last year (Jan 25 – Feb 29); 2. In China, 2020 as compared to 2019
Source: Press search; BCG

18

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Initiatives implemented for
managing cash and liquidity

As of 15 May 2020

Cash & Liquidity
Example 2Stress on liquidity andcash flow due to the crisis

Global reduction
in travel due torestrictions

Domestic flights
reduced to ~5% of
pre-crisis network~70% share pricedecline by mid
March1

Initiatives implemented for
managing cash & liquidity

ImpactSuspended capex expense by shelving plans toorder 10+ aircrafts

Reduced cash requirement from workforce cost by
standing down 25,000+ staff and reducing executive
salary by 30%2, bonuses reduced to zeroCascaded plan to reduce cash burnto ~$25 million a week2

12-15
monthsOf operations possible before
running out of cash~$2 billion
Available cash balance3 with anadditional ~$1 billion undrawn
facility remaining available

Secured ~$1 billion funding against its aircrafts

1. As compared to share price on 1H results announcement in Feb'20; 2. Till end of June; 3. As of Mar'20
Note: All the values in $ are US dollars; Source: Press search; BCG

19

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Global airline
reduced cash
requirements tomanage liquidity for
operations

Streamline personnel costs

Reduce non-personnel costs

Drive efficiency in operations

Identify and pursue valuable andbusiness-critical activities

Bring down budgets and retain
lower in-crisis spend

Determine and stop investing in nonessential tasks

Optimize consumption/behavior
patterns (zero-based mindset)

Optimize number of operational
units (e.g. manufacturing locations,warehouses)

Make use of governmental
programs and special legislations

Rigorously review and renegotiate
all key procurement contracts

Establish appropriate workforce
flexibility to ramp up/downTackle 'other' cost buckets notaddressed yet for savings (e.g., rent)

Adjust FTEs using HR instruments

Establish cost conscious culture
with clear horizontal cost-ownership

Source: BCG

Reduce non-essential factor cost(e.g. overtime balances, leave,
contractors)
Strike insourcing vs. outsourcing
balance (per industry and function)
Drive benchmark cost per FTE
compared with industry standard

20

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Cost take-out | Business leaders must drive cost reduction, while considering
current and future requirements and handling people agenda with empathyAs of 15 May 2020

Stress due tothe crisis

Oil trading prices
fell by ~40%1

Initiatives implemented for driving
cost take-out

Global upstream oil &gas service
andgas service
company
drove workforce
company
drove
flexibility &flexibility
workforceother costsavingandothermeasurescost savingtominimize impact
measurestofrom the crisis
minimize
impactfrom the crisis

Streamlined
personnel costs

20% HQ personnel reduction;over 3,000personnel in alternate
work-week schedule

Reduced nonpersonnel costs

Selective suspension of operations
to optimize operational costs
Cascaded plan to cut ~$1 billion ofannualized overhead and other costs

Restructured
organization

Agile org-restructuring acrossfunctions in North America

Land oil rig count in
US down by 34%2

Global April oil demand
down by ~30mmb/d3

Impact~60%
Estimated cost reduction
in selected areas

6-9 months
Of low prices can be weathered
due to cost savings initiatives

1. WTI oil prices since 01-Mar'20; 2. Since mid-Mar'20; 3. Million Barrels per day as compared to last year
Source: Press search; BCG

21

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Cost take-out
Example 1

As of 15 May 2020

Stress due tothe crisis

Investor and economic pressure
to reduce costs quickly

Initiatives implemented for driving
cost take-out

Growth technology
company accelerated
rapid and radical cost
realignment in crisis
modeDefined vision, and prioritizedcapabilities within first two weeks
Vision, targets,Defined scenarios, targets (FTE andand planbudget), timeline
Kicked off cost PMOUrge to protect the core technology
capabilities for long-term success

Impact~45%
Total cost reduction in six weeks

Reduced 30% of core businessAgile org related costs
design, staffing,
and action Reduced > 60% SG&A costin non-revenue-generating businessStreamlined
remaining costs

Source: Press releases; BCG

Refined org model,
communicated the new focus
Kicked off non-personnel
cost reduction
Developed interim op modeland transition to steady stateCore technology capabilities protectedduring cost-reduction process

22

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Cost take-out
Example 2

Topline security | Companies are sensing demand via high frequency
data and react in agile ways to secure topline
As of 06 May 2020

Traditional forecast methods areless reliable during crises
Use high-frequency indicators
to sense changing demand

Example: Consumer sentiment and web traffic data foresee spend increase
Online grocery
200

2

Securing topline is critical tokeep businesses runningBe agile and creative in
responding to changes

Survey respondents (%)

60
40

Real change in spending
Historical: Confirmation that increase occurredReal change in web traffic
Immediate term: Strong predictor of changes

1000Topline levers

Year-over-year change (%)

20
29 5 12 19 26
Jan Feb

4 11 18 25
Mar

1 8
Apr

15 22 290Consumers expecting to increasespending during next month1
Short term: Signal that the increase may persist

Example: Company responses to customers' increased online activity
Channel shift

Marketing spend

Customer engagement

Beverage producer shiftedsales channel including
loyalty program online andachieved sales uplift of 40%
on e-commerce platform

Fitness studio chain focusedmarketing spend on new member
acquisition for underutilizedstudios resulting in 3-4% higher
lead and trial conversion

Lifestyle player personalized
offers based on member
customer lifetime value andobserved behaviors, increasing
tenure by 8-12% for 75% ofcustomer base

1. Compared with prior year. Source: SimilarWeb; Earnest Research, May 6, 2020; BCG COVID-19 Consumer Sentiment Survey, April 24-27, 2020 (N = 2,783 US), unweighted,
representative within +-3% of census demographics; press releases; BCG

23

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

1

Demand forecast

Time for performance transformation is now | Positional churnof companies highest during crises and increasingly over time
Rate of firms leaving Fortune 500 during the Global Financial Crisis (GFC) was 90% higher than the rate for the ten years that followed

70

67

Avg.
during
GFC (59)

60

54
50

46
+90%

40

37

30

27
Avg. forlast 10
years
(31)

20

10

66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 952 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Year

Recession

1

1. Officially designated by National Bureau of Economic Research. 2. Large change in 1995 list due to change in list-compilation methodology, and is therefore excluded
Source: Fortune 500 Listings; NBER; BCG analysis.

24

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Number of firms dropping out of Fortune 500 list

Learnings from successful transformations | Specific milestones
during each step of the journey

Initial responses
developed in one month(e.g. cash, liquidity, noregret cost out, insured
supply chain, secured
topline)
Data is collected,
scrubbed, and validated
Multi-functional
response team identified
and enabled

Fully Mobilize
Drive Advantage in Adversity

Accelerate Rapid Response Measures

Specific scenarios developed andtrigger points identified

Full organization activated within first
100 days

Performance levers identified,
sized, and prioritized, and firmed
up into a roadmap using
strategic, operational, andfinancial lenses

Initiatives maturing, delivering results

Transformation operating model
established

Leadership committed to plans andtargets; linkage established withincentive schemes

Holistic performance initiatives launched andexecuted with tracking on weekly, monthly,and quarterly basis
Targets aligned on a quarterly basis

Change management program
launched to mobilize leaders andpeopleLeaders activated and organization enabled
Cost leadership embedded into organization

Performance response further
accelerated

1. Supply Chain Management; 2. Artificial Intelligence
Source: BCG

Further initiatives (procurement,
SCM1, etc.) ramped up and launched

New capabilities (e.g. digital, AI2) built and
new ways of working embedded
Wins during transformation shared,
understood, and appreciated in theorganization25

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Initiate Performance
Response

Rapid Assessment to Shape
Transformation Plan

1

Guide for leaders
Need for performance transformation across companies

2

Updated epidemic, economic, and businessscenarios and impact
Epidemic progression, virus monitoring, health care capacity
Economic impact
Business scenarios and impact

3

Appendix: Further readings
Learnings from successful business leaders
Further readings

26

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

How to restructure cost, and manage cash and liquidity

EPIDEMIC PROGRESSION,
VIRUS MONITORING, &HEALTH CARE CAPACITY~36% reported recoveries1 globally so far;case-doubling rate improves to 33 days
As of 15 May 2020

UK

1st May'20

15th May' 20

16
8
days

26
12
days

18
33
days
days

Italy

USA

China
Iran

Japan
South
Korea

India

# of days of doubling2 the cases globally

568k
(25%)

Days of doubling cases:
0-3 days

185
Countries with cases3

1,053k(32%)

1,637k(36%)

Total # of recoveries (as % of confirmed cases)
3-6 days

6-14 days

4.5M[∆2.1%]4

Confirmed cases globally

14-30 days

308k

>30 days
24
55

49

69
67

[∆1.7%]4

Fatalities globally# of countries with community transmission5

Note: Continued cases and fatalities are subject to different testing, propensity, reporting standards and hence are imperfect measures
1. Refers to total reported recoveries as a percentage of total reported infections (cases), 2. No. of doubling days based on 7-day CAGR 3. Basis Johns Hopkins CSSE; 4. Daily growth rate basis 7-day CAGR;
5. Community transmission defined basis WHO - Countries experiencing larger outbreaks of local transmission on basis of decided factors
Sources: Johns Hopkins CSSE, Our world in data, WHO situation reports, BCG analysis

27

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

FranceSpain

17th Apr'20

EPIDEMIC PROGRESSION,
VIRUS MONITORING, &HEALTH CARE CAPACITY

As countries move into Fight phase, several have started to see
decline in number of daily cases
As of 15 May 2020

Non-exhaustive

Several countries increasing doubling rate...

Fight

Daily cases (seven-day moving average)
for countries2 with doubling rate > 14 days

Daily growth rate of total cases (seven-day average)
7%

80,000South Africa
Russia

6%

Qatar

India

Mexico5%

Brazil4%

Cases doubling:
14 daysCases doubling:
21 days
Singapore3%

60,000USA

40,000
CanadaSpain

Sweden2%

CanadaNetherlands
Austria

1%
0%
1,000
Asia1

S Korea
Australia

Japan

Iran UK
Belgium

US

North America

South America

1. Includes Middle East & Australia 2. Countries selected from the chart on the left
Source: Johns Hopkins CSSE, Our World in data

Italy
Germany

France Germany
Italy
China
Spain

10,000100,000
1,000,000
Cumulative number of confirmed cases (log scale)
EuropeUK

20,000Africa001 MarFranceIran

15 MarAsia1

01 AprEurope15 Apr

01 May15 MayNorth America

28

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Rates improving from top to bottom

Flatten...driven by decline in number of daily cases

EPIDEMIC PROGRESSION,
VIRUS MONITORING, &HEALTH CARE CAPACITY

Some countries currently have cases doubling in under 14 days;
strong monitoring in the next few weeks
As of 15 May 2020

Non-exhaustive

Rates improving from top to bottom
Fight

Daily growth rate of total cases (seven-day average)
7%

South Africa
Russia

6%

Qatar

India

Mexico5%

Brazil4%

Cases doubling:
21 days
Singapore3%

Sweden2%

CanadaNetherlands
Austria

1%
0%
1,000
Asia1

Cases doubling:
14 days

S Korea
Australia

Japan

Iran UK
Belgium

US

France Germany
Italy
China
Spain

10,000100,000
1,000,000
Cumulative number of confirmed cases (log scale)
EuropeNorth America

South America

AfricaCases doubling: 11

BrazilMax/day:
785

Max/day:
17,126# of newcases# of newcases

Days since first 100 infections

Qatar

12

India

Max/day:
1,733

Max/day:
4,353# of newcases# of newcases

Days since first 100 infections

Mexico13

RussiaMax/day:
2,437

Max/day:
11,656# of newcases# of newcases
Days since first 100 infections

Note: For doubling days, round off values calculated based on last 7 days CAGR of total confirmed cases 1. Includes Middle East, Australia
Source: Johns Hopkins CSSE, Our World in data, WHO situation reports

12

Days since first 100 infections

13

Days since first 100 infections

14

Days since first 100 infections

29

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

S. Africa
FlattenWhile countries further relax lockdown measures,
they are substantially ramping-up testing

EPIDEMIC PROGRESSION,
VIRUS MONITORING, &HEALTH CARE CAPACITY

As of 15 May 2020

Cumulative # of cases per million population
6,000• For countries with complete orpartial lockdowns (Singapore, UK,
France, etc.), reopening is gatedby lack of widespread testing

IcelandSingapore
Belgium
USA
4,000

Italy

• For countries with relaxed
lockdowns (S. Korea, Australia, etc.),
continued higher testing is
criticalUK
Switzerland
SwedenPeru
FranceNetherlands

Germany
IsraelEcuador Canada
Saudi Arabia
Norway
Iran

2,000

UAE

Australia

Brazil
Japan
0

0

10

India
20

S. Korea
Malaysia

South Africa
30

40

50

• For countries to move to the rightand reopen, they need an
integrated Virus Monitoring
System that includes testing,tracking, and tracing

150

Total tests / Total cases
Source: World-o-meter, BCG Analysis

30

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Spain

Testing landscape is changing | Tests to detect viral genome
and patient immune response are now available
As of 15 May 2020

EPIDEMIC PROGRESSION,
VIRUS MONITORING, &HEALTH CARE CAPACITY

Not exhaustive; US example

In development

Lab-based
Presence ofviral genome

Immuneresponse tovirus

Near-patient/Point-of-CareLab-based
Near-patient/Point-of-CareMany players announced
development plans1

Antigen tests:
Presence of viral particle

Viral load:
Amount of virus
1. More than 180 serology test makers have notified FDA that they have serology tests available for use as of May 15, 2020
Source: CDC website, FDA website, company websites, BCG analysis

Currently none

31

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Available for last 3+ weeks

Test purpose

Becoming available now(over last 1-2 weeks)

EPIDEMIC PROGRESSION,
VIRUS MONITORING, &HEALTH CARE CAPACITY

Vaccine fast movers | 7 vaccine candidates already into clinical trials
As of 15 May 2020

Phase II

4

1

Phase I/II

Phase ICanSino Biologics

BioNTech & Pfizer

China National Biotec1

InovioPhase II

Phase I/II

Phase I/II

Phase I

Phase 2 advancement sinceApr 2020; follow-up
expected by Oct 2020

Trial ongoing in Germany;
if approved, distribution
possible by Oct-Dec 2020

Trial started in Apr 2020;
expected completion of final
trials by Nov 2021

Trial started in Apr 2020;
larger studies possible in
Jun-Aug 2020

Moderna

Oxford Uni. & AstraZeneca

SinovacPhase II

Phase I/II

Phase I/II

125

Pre-clinical

Early results of trial expectedby Jun 2020 (expanded toinclude older adults)

Trial on-going in UK;
late-stage trials possible in
Jul 2020

Trial started in Apr 2020;
expected completion by
Aug 2020

132

Total

1. Listed as 2 candidates by WHO: Beijing institute of Biological Products / Sinopharm & Wuhan Institute of Biological Products / SinopharmSource: WHO (May 15th), Citeline Pharma Project (May 19th), Milken Institute (May 12th), ClinicalTrials.gov (May 19th), Bloomberg, BCG analysis

32

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 15 May 2020 Version 6.1.

2

Therapeutics outlook | Timeline and key developments acrosscritical trials show broad availability by end of Q3 2020 earliest

EPIDEMIC PROGRESSION,
VIRUS MONITORING, &HEALTH CARE CAPACITY

As of 28 Apr 2020

Q1 2020

Q2 2020

Remdesivir

Gilead and NIH
launch multicenter
Phase III trials

Gilead provides
compassionateuse accessRitonovir/
lopinavir

Randomized controlled Drug combination
trials in China fail to
included in WHO
show clinical benefit
Solidarity trial

Neutralizing
antibodies
ConvalescentplasmaTrials launched; multiple
companies pushing development,incl. several partnerships
FDA authorized FDA greenlights
emergency use
Phase II trials
in April 2020

Observation study
in China shows
improved survival

Chloroquine/hydroxychloroquine

Roche Phase III
trial launched in
March 2020
Phase II and III
trials launched in
March 2020

Sarilumab

French Study shows
reduction in viral load

Retrospective
study shows noclinical benefit

Q4 20202021+

Phase III studies show reduced time torecovery; FDA authorizes emergency use

Hyperimmune
globuline
Tocilizumab

Q3 2020

Initial lead-candidate data
expected from multiple
trialsPhase III randomized
controlled trials expectedto launch in May 2020

Therapy to expand
nationwide, pending
Phase III results

Clinical trials
anticipated to begin
in June 2020

Phase II and III readouts,
August to September
2020, and early access

Preliminary results
reveal significant
mortality reduction

Wide availability,
pending Phase III
trial results

Interim results show lower
mortality in mechanicallyventilated patients

Wide availability,
pending Phase III
trial results

NIH ORCHID
and Oxford trials
launched in April 2020

EPICOS study
in Spain

Source: Company websites; National Institutes of Health, ClinicalTrails.gov data, April 28, 2020, WHO, BCG analysis

Preliminary ORCHID
results expectedin fall of 2020
Trial start

Wide availability if
Interim Oxford
shown to be effective instudy results
randomized controlled trails expected in 2021

Preliminary data

Early accessBroad availability

33

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

TherapyScenarios and impact | Five key questions

ECONOMIC IMPACT

As of 15 May 2020

Illustrative

FlattenFight

Economic
activity
100%

Restart

Vaccine/treatment

1a

2a
3
2b

Potential pathways

1b

Critical carepatients

Five questions
will shape theeconomic
impactSource: BCG

What will the LENGTH of "Flatten” be?
1a What are the preconditions to transition?
When will we achieve them?

What will the LENGTH of "Fight” be?
2a What are the preconditions to transition?
When will we achieve them?

To what DEPTH does the economy
drop in "Flatten"?

2b What level of recovery does the economy

1b

What will the DEPTH of "Fight" be?

Where does the
economy return to,
3 relative to the preCOVID era in"Future"?

achieve in "Fight"?

34

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Shut down

FutureMethodology | To determine economic impact, must derive
depth (from economic starting point) and factor in length of crisis

ECONOMIC IMPACT

Pre-crisis
Fight
Flatten

Depth:

Economic starting point:

Length:Pre-crisis
Fight
Flatten

Projected economic impact:

Deriving theFactoring in the
Determining the result as fullimpaired'Flatten'
economic
duration
ofduration
crisisyear economic impact from
| Impaired economic activity (depth) andlockdown'Flatten'| Impaired
economic activity (depth) and lockdown duration(length)yield
full-year
economic
impactfor'Flatten'phase(length)yield
full-year
economic
impactfor'Flatten'phase'Flatten' |activity
Impaired economic activity (depth) and lockdown duration
directimpact of disease(length) yield full-year economic impact for 'Flatten' phase

Understanding a country's
sector composition

ECONOMIC IMPACTECONOMIC IMPACTECONOMIC IMPACT

Preliminary figures
E.g., legal, &software​12%

E.g., auto &mining​22%

Germany

​65%

​11%

Italy

​66%

​8%

Europe

Spain

​57%

UK
North Am.

US

​7%

​16%
​14%
​21%

​68%

​11%

​53%

​13%

Brazil

​15%

​7%

​23%

​71%

​9%

1%

​18%

LatAm
Mexico

​62%

India

​8%
​71%

​19%
​4%

​11%
​19%

For each country andsector cluster, estimateson activity reduction are
madeEurope​13%​11%

Example of Germany:
60-80% activity reduction
estimated for 'red' sectors(consumer services, retail,travel & tourism, food service& drinking places)

​6%

Asia
Japan
Under stay-at-home order
Contact intensity

​53%

​5%

​29%

​12%

Open
Low to High

LimitedLow

LimitedMediumLimitedHigh

Germany

Germany​9%​12%

Lockdown
durationFranceFranceE.g., tourism& restaurants​12%

Note: European figures reflect gross output by sector, which is analogous to revenue by sector. US figures directly reflect revenue by sector.
Source: Eurostat Database; St. Louis Fed Reserve; O*NET; American Community Survey; other country-specific sources available on request; BCG COVID response teams; BCG Analysis

2

Copyright © 2020 by Boston Consulting Group. All rights reserved.

E.g., groceries, & health careproviders​54%

Impaired economic activity due to COVID-19 during 'Flatten' phase
Estimation in private sector relative to pre-COVID in %Revenue by sector (%)
FranceNorth Am.

Need to combine pre-crisis, 'Flatten' & 'Fight'
phase to conclude impact for 2020

Italy

Europe

Italy

Spain

Spain

UK

UK

US

North Am.

BrazilLatAm
MexicoUS
BrazilLatAm
Mexico

India
Asia
Japan

x

India
Asia
-30%

Japan-20%

-10%

0%

Full-year economic impact(in weeks)(in weeks)Not directly comparable to GDP, excl. gov't
spending, invest. & changes in balance of trade8-2% – -5%

4-6
8-12

-1% – -3%
Europe-2% – -6%

8-14

-3% – -8%

7-12

spending, invest. & changes in balance of trade-2% – -5%

vs. pre-COVID
run rate2

Lockdown
duration(in weeks)Not directly comparable to GDP, excl. gov't
spending, invest. & changes in balance of trade8-2% – -5%

-1% – -3%

4-6

-1% – -3%

8-12
Italy

-2% – -6%

8-12

-2% – -6%

8-14
Spain

-3% – -8%

8-14

-3% – -8%-2% – -6%

7-12 UK-2% – -6%

7-12

-2% – -6%

10-14

-2% Am.
– -7%
North

10-14US

-2% – -7%

10-14

-2% – -7%

4-6

-1% – -3%

4-6

LatAm
-2%
– -8%

-1% – -3%

8-12

-2% – -5%

8-12

8-2% – -8%

6-10

-2%
Asia– -6%

8
Francevs. pre-COVID
run rate2

Brazil4-6

Mexico8-128IndiaJapan
6-10-1% – -3%
-2% – -8%-2% – -5%-2% – -6%=

8-2% – -5%

6-10

-2% – -6%

Disclaimer: These analyses represent only potential scenarios based on discrete data from one point in time. They are not intended as a​Max of estimated range​Min ofprediction or forecast and the situation is changing daily. Figures shown only reflect economic activity "directly displaced" by effect of virus.
-30%
-20%
-10%
0%
(i.e. period
estimated range
-30%
-20%
-10%hardest hit by the lockdown)0%
However, multi-order impacts and the impact of government spending and stimulus not considered
Disclaimer:
only potential scenarios based on discrete data from one point in time. They are not intended as aDisclaimer:
analyses
represent
only potential
intendedThese
as a analyses represent
Note: Lockdown length capped at 6 weeks.;
We expect a Theselot of variations
acrossgeographies,
even withinscenarios
countries. based on discrete data from one point in time. They are not​Maxof estimatedrangedaily. Figures shown only
​Minreflectof economic activity "directly displaced" by effect of virus.
prediction
or forecast
and thesituationis changing
1. European figures reflect gross output by
sector, whichanalogous andto revenue
by sector. is
USchanging
figures directlyreflect
revenueby sector.
2. Only accounts
foractivity
COVID-19
impact, does
notfactorunderlying
growth.
prediction
orisforecast
the situation
daily.
Figuresshown
only reflecteconomic"directly
displaced"byineffectof virus.
periodhardestby the lockdown)
estimated
However,
multi-order
impacts
andthe impactof hitgovernment
spending andstimulusrange
not considered
3(i.e.
Source: Eurostat Database; St. Louis Fed However,Reserve; O*NET;Americanimpacts
Community
Survey;other country-specificsourcesavailable on
request;BCG COVID
response teams; BCG Analysis
multi-orderandthe impact
of government
spending
andstimulus
not considered

For each country and sector cluster,
assumptions are made on activityreduction based on reduced contact

Source: BCG

Full-year economic impact

4-6
Germany

Copyright © 2020 by Boston Consulting Group. All rights reserved.

As of 05 May 2020

Need to combine pre-crisis, 'Flatten' & 'Fight'
phase to conclude impact for 2020

As of 05 May 2020

Need to combine
pre-crisis, 'Flatten'& 'Fight' activity1Full-year
Impaired economic activity1 due to COVID-19 during 'Flatten' phase
Lockdown
economic
impactImpaired
economic
due to COVID-19
during'Flatten' phase
phase to conclude impact for 2020
Estimation in private sector relative to pre-COVID in %Not directly
Estimation in private
sector relative to pre-COVID
in %comparable to GDP, excl. gov't
duration1

Copyright © 2020 by Boston Consulting Group. All rights reserved.

ECONOMIC IMPACT​Max of estimated range(i.e. period hardest hit by the lockdown)

vs. pre-COVID
run rate2​Min ofestimated range

Result is full-year economic impact (notcomparable to GDP as excludes fiscal stimulus
and other effects) – need to combine pre-crisis,
Flatten, and Fight phase to conclude impact
for 2020

Note: Lockdown length capped at 6 weeks.; We expect a lot of variations across geographies, even within countries.
Note: Lockdown length capped at 6 weeks.; We expect a lot of variations across geographies, even within countries.
1. European
figuresreflect
gross output
by sector,
which does
is analogous
to inrevenueby sector.
US figures directly reflect revenue by sector. 2. Only accounts for COVID-19 impact, does not factor in underlying growth.
1. European figures reflect gross output by sector, which is analogous to revenue by sector. US figures directly reflect revenue
by sector.
2. Onlyaccounts
for COVID-19
impact,not factor
underlying
growth.
Source: Eurostat
Database;
St. Louis
Fed Reserve;
American Community Survey; other country-specificsources available on request; BCG COVID response teams; BCG Analysis
3
Source: Eurostat Database; St. Louis Fed Reserve; O*NET; American Community Survey; other country-specific sources available
on request;
BCG COVID
response
teams;O*NET;BCG Analysis

For each country, a range of
microeconomic loss is derived

For each country, expected
length of stay-at-home order isfactored in

Copyright © 2020 by Boston Consulting Group. All rights reserved.

As of 05 May 2020

As of 05 May 2020

Economic starting point | Understanding of countries' sector
composition critical to estimate negative impact of reduced contact

335

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Shown for 'Flatten' as lengthof 'Fight' still unknown

Economic starting point | Understanding of countries' sector
composition critical to estimate negative impact of reduced contact

ECONOMIC IMPACT

As of 15 May 2020

Preliminary figures

Revenue by sector (%)

EuropeE.g., legal, &softwareE.g., auto &miningE.g., tourism& restaurants

12%

22%

12%

Germany

65%

11%

Italy

66%

8%

Spain

67%

7%

UK

68%

US

North Am.

53%

16%
14%
11%
11%

13%

Brazil

7%

9%

12%
15%

23%

71%

9%

13%
11%

1%

18%

LatAm
Mexico

62%

India
Asia

71%

China
Japan

Under stay-at-home order
Contact intensity

8%

19%
4%

65%

19%
25%

53%

5%

Open
Low to High

Limited
Low

11%

29%
LimitedMedium6%

For each country andsector cluster, estimateson activity reduction
are made
Example of Germany:
60-80% activity reduction
estimated for 'red' sectors(consumer services, retail,travel and tourism, foodservice, and bars)

10%
12%
LimitedHigh

Note: European figures reflect gross output by sector, which is analogous to revenue by sector. US figures directly reflect revenue by sector.
Source: Eurostat Database; CNBS; Statistics Bureau of Japan; St. Louis Fed; O*NET; American Community Survey; other country-specific sources on request; BCG COVID response teams; BCG

36

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

FranceE.g., groceries, & health careproviders54%

'Flatten' | Impaired economic activity (depth) and lockdown duration(length) yield full-year economic impact for 'Flatten' phase
As of 15 May 2020

Need to combine pre-crisis, 'Flatten' & 'Fight'
phase to conclude impact for 2020

Estimation in private sector relative to pre-COVID in %x

Lockdown
duration(in weeks)

North Am.

=

Full-year economic impact
Not directly comparable to GDP, excludes gov't
spending, investment, and changes in balance of trade

France8-2% – -4%

Germany

4-6-1% – -3%

Italy

8-12

-2% – -6%

Spain

8-12

-2% – -6%

UK

7-12

-2% – -6%

US

10-14

-2% – -7%

Brazil4-6-1% – -3%

Mexico8-12-2% – -8%

India

8

-2% – -4%

Japan

6-10

-2% – -6%

LatAm

Asia
-30%

-20%

-10%

vs. pre-COVID
run rate20%Disclaimer: These analyses represent only potential scenarios based on discrete data from one point in time. They are not intended as a
Max of estimated range
Min ofprediction or forecast and the situation is changing daily. Figures shown only reflect economic activity "directly displaced" by effect of virus.
estimated range(i.e. period hardest hit by the lockdown)
However, multi-order impacts and the impact of government spending and stimulus not considered
Note: Lockdown length capped at 6 weeks.; We expect a lot of variations across geographies, even within countries
1. European figures reflect gross output by sector, which is analogous to revenue by sector. US figures directly reflect revenue by sector. 2. Only accounts for COVID-19 impact, does not factor in underlying growth.
Source: Eurostat Database; St. Louis Fed Reserve; O*NET; American Community Survey; other country-specific sources available on request; BCG COVID response teams; BCG Analysis
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Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Impaired economic activity1 due to COVID-19 during 'Flatten' phase

EuropeECONOMIC IMPACT

'Fight' | ~5 to 25% of economic activity can be temporarily at risk –implying protracted economic challenges

ECONOMIC IMPACT

As of 15 May 2020

Impaired economic activity1 during 'Fight' phase
Estimation in private sector relative to pre-COVID-19 in %FranceEurope

Italy

Sector mix and local
conditions will vary thedepth of 'Fight' on very
short timescales, making
the full-year economic
impact challenging toestimate precisely

Spain
UK
North Am.

US
BrazilLatAm
Mexico
India
Asia

China
Japan
-30%

-25%

-20%

-15%

-10%

-5%

0%

Disclaimer: These analyses represent only potential scenarios based on discrete data from one point in time. They are not intended as aUpper boundBase
Lower boundprediction or forecast and the situation is changing daily. Figures shown only reflect economic activity "directly displaced" by effect of virus.
case
case
case
However, multi-order impacts and the impact of government spending and stimulus not considered
Note: We expect a lot of variations across geographies, even within countries, hence the wide ranges.
1. European figures reflect gross output by sector, which is analogous to revenue by sector. US figures directly reflect revenue by sector.
Source: Eurostat Database; CNBS;Statistics Bureau of Japan; St. Louis Fed Reserve; O*NET; American Community Survey; other country-specific sources available on request; BCG COVID response teams; BCG
38

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Germany

1

Guide for leaders
Need for performance transformation across companies

2

Updated epidemic, economic, and businessscenarios and impact
Epidemic progression, virus monitoring, health care capacity
Economic impact
Business scenarios and impact

3

Appendix: Further readings
Learnings from successful business leaders
Further readings

39

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

How to restructure cost, and manage cash and liquidity

CEOs are in the spotlight more thanever as they lead their companies
through the current crisis. By
understanding principles
underpinning when and how muchleadership matters, and factors that
increase the odds of success, leaders
can learn valuable lessons aboutnavigating today’s challenges
For further details; refer to the article
from BCG Henderson Institute:
Leadership Matters: When, How Much,
and How?

1

Strive to defy the average

2

Identify key moves and act preemptively

3

Take a de-averaged and dynamic approach to strategy

Focus more on innovation and new opportunities in order to be exceptional.
Defy the average within your industry; focus less on “best practices” which
tend to level performance

Early action is key; accelerate turnover of underperforming management teams,
make deals early, and embark on transforming organizations early when needed

Adopt the right approach to strategy in each part of the business, and in particular,
use dynamic and/or creative approaches where necessary. In more uncertainand fast-moving contexts, classic planning is not always the best approach4

Articulate and fulfill a positive social purpose
Articulate a purpose beyond maximizing financial returns, and improve performanceon non-financial dimensions as well. Pursue sustainable business models as expectationsof social contributions are increasing

40

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Recent learnings
from successful
CEOs

Based on survey of
7,000 CEOs worldwide

COVID-19 BCG Perspectives

Relevant topic publications

Selected sector publications

Edition #5

Edition #4

Cash & Liquidity

Cash & Liquidity

Consumer

Automotive

Revamping
Organizations for the
New Reality

Accelerating digital &technology
transformation

A Cash Management
Survival Guide

Essential lifeline: RapidResponse CashManagement Office

COVID-19 Consumer
Sentiment Snapshot #9

Auto Companies Will
Outlast COVID-19 andCome Out Stronger

Edition #3

Edition #2

Leadership

FinanceTravel & Tourism

Health Care

Emerging stronger fromthe crisis

Preparing for the restart

Leadership Matters:
When, How Much, andHow?

The COVID-19 CFO
Pulse Check

The Great Reset for
Revenue Managementin Travel

COVID-19 Stressing Financesof Even the Strongest US
Health Systems

Edition #1

Transformation

Transformation

Power & Utilities

Technology

Facts, scenarios, andactions for leaders

COVID-19 Response:
Big Decisions for CEOs
Right Now

Crisis Can Spark
Transformation andRenewalB2B Energy Retailers
Can Weather the
COVID-19 Storm

Is Your Technology
Ready for the New
Digital Reality?

Source: BCG

41

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 19 May 2020 Version 6.1.

Additional perspectives on COVID-19

Disclaimer

The materials contained in this presentation are designed for the sole use by the board of directors or senior management of
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BCG. BCG has used public and/or confidential data and assumptions provided to BCG by the Client. BCG has notindependently verified the data and assumptions used in these analyses. Changes in the underlying data or operating
assumptions will clearly impact the analyses and conclusions.
The situation surrounding COVID-19 is dynamic and rapidly evolving, on a daily basis. Although we have taken great careprior to producing this presentation, it represents BCG’s view at a particular point in time. This presentation is not intended
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The services and materials provided by Boston Consulting Group (BCG) are subject to BCG's Standard Terms(a copy of which is available upon request) or such other agreement as may have been previously executed by BCG.
BCG does not provide legal, accounting, or tax advice. The Client is responsible for obtaining independent advice concerningthese matters. This advice may affect the guidance given by BCG. Further, BCG has made no undertaking
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