BCG Perspectives
Facts, scenarios, and actions for leaders
Publication #5 with a focus on
Revamping Organizations for the New Reality
Version: 8 May 2020

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

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 8 May 2020 Version 5.1.

Objectives of this document

Flatten

Establish crisis
management

9

action areas
for businessleaders

Focus of thiseditionNavigatethrough
Flatten, Fight,
and Future

Fight

Future2Create a Rapid Response
and Transformation(RR&T) team1

Develop Scenario-Based
Planning Approach to
manage 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

2

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

LEADING IN THE
NEW REALITYExecutive Summary | COVID-19 BCG Perspectives

Across countries, efforts to flatten the curve and ramp-up testing continue; the impact on economy, sectors, and business persists•Globally, about 33% of COVID-19 patients have recovered and the case doubling rate has improved to 28 days
•While many countries are planning to relax lockdown measures based on the flattening disease spread curve, they continue to step up testing•The testing landscape is changing rapidly and molecular testing continues to be the “gold standard;” efforts focused on improving speed•Economic and employment impact from lockdown of 'non-essential' activities during 'Flatten' phase becoming more evident for many countries•Economic forecasts deteriorating globally for 2020 while remaining stable for 2021; global rebound to pre-COVID levels not expected before end of 2021
•Total Shareholder Return continues to rebound with only a few sectors above pre-crisis level; impact still varies widely within industries

We believe during thiscrisis leaders need tothink along two
dimensions:1

Taking an integrated perspective on
health/medical progression, governmental
responses, societal reactions, andeconomic implications to understandbusiness/sector impacts

2

Thinking multi-timescale ina Flatten-Fight-Future logic

1. Impact only for duration of specific phase (Flatten and Fight). Only accounting for first order effects of microeconomic data and subject to change, e.g. as governments act
Source: BCG

3

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

With several countries in restart mode, a critical priority for businesses is to think through emerging PEOPLE implications•Many countries are moving into restart mode with the easing of lockdown measures from early May•Consumers are starting to have a more optimistic outlook than two weeks ago, and are spending more time on the move
•Clear people priorities are emerging – including 'smart' (more remote, lower cost) work and a more flexible workforce, but also leadership and purpose•As companies begin bringing (some of ) their people back to work safely to meet business demand, a more flexible workforce will be required•Leaders must assess current capabilities and future strategic needs to define a people plan that caters to short-term crisis and long-term strategy

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 8 May 2020 Version 5.1.

Flatten

1

Guide for leaders
Getting ready for Restart2

Updated epidemic, economic, and businessscenarios and impact
Epidemic progression
Economic impact
Business scenarios and impact

3

Appendix: Detailed action areas and further
readings
Detailed action areas for business leaders
Further readings

5

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

How to revamp organization for the New Reality

COVID-19: Impact dashboard
Epidemic Progression

3.7M

1.2M

264K

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

22 Apr

29 Apr

6 May

19

25

28

27%

30%

33%

# of countries with
1k+ cases

81

85

89

# of tests / case2

19

20

21

12k

15k

19K

# of tests / million2

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%

06 May vs 21 Feb -15%

-20%

-21%

-6%

S&P500

FTSE100DAX

CHN SSE

Total Shareholder Returns9
First column: 21 Feb to 20 Mar; Second column: 21 Feb to 6 May

Americas

EuropeAsia

Pharma-19% 1%-20% -1%-22% -4%

Telecom-17% -11%-20% -21%-14% -8%

F&B10-26% -15%-24% -18%-12% -3%

Software-30% -9%-32% -21%-28% -16%

US

~159

~34

~21%

Retailing-42% -25%-36% -24%-24% -3%

UK

~33

~5

~14%

Capital goods -38% -22%

-35% -25%-29% -19%

Germany

~45

~10

~23%

Financials-36% -22%-35% -23%-19% -10%57

France

~28

~10

~36%

Real Estate-42% -33%-26% -23%-22% -9%

6-24

Italy

~23

~6.5

~28%

Auto

-47% -36%-45% -30%-32% -20%

Spain

~20

~4.3

~21%

Energy-56% -37%-45% -30%-41% -27%

VaccineTreatment

Trials in pre-clinicalstage and beyond3

88

115

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. Mean 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 firstround of drugs being tested succeeds – then 6-9 months; if not – substantially longer 7. Available data as of May 1; figures are changing rapidly and often being reported with a lag from the current date 8. Includes increase in unemployment and employees covered by
6
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 07 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: The Guardian (UK), Reuters (Italy), News Break (Spain), RFI (France), Barrons (Germany)

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

As of 06 May 2020

Many countries in restart mode with easing of lockdown measures
As of 06 May 2020

EuropeNorth
America

Asia

April

May

Current status of measures

Spain

164

Four phased de-escalation of restrictions planned with Phase 0 starting 04 May

Germany108

Cautious exit in coordination with states with ongoing restrictions

France103

Plan to ease restrictions from 11 May with shops and businesses to reopen

Italy

87

Factories, wholesale trade, parks opened. Restrictions on restaurants till 01 June

Sweden29“Low-scale lockdown” approach avoided total economic shutdown

UK

25

Gov’t to review lockdown by 07 May and announce plan for easing restrictions

US

28

Federal gov’t proposed three-phase plan; implementation at governor's discretion

Canada23

Several provinces started to ease restrictions on allowing non-essential businesses

Japan

47

Declared emergency with suggested lockdown restrictions; extended till 31 May

India

11

Eased in low-risk areas with shops opening; extended in high-risk areas for 2 weeks

China

NA2

Staged reopening with mandatory monitoring, testing, and contact tracing

S Korea

NA2

Avoided lockdown with exception of schools (to reopen from 13 May)

Hong Kong

NA2

Avoided lockdown with exception of schools; now reopening gyms, cinemas, bars

Restrictions without lockdown

Lockdown

Re-entry started

Planned re-entry

Indicates improving trend

1. No. of doubling days based on 7 day CAGR; 2. For China, S Korea, Hong Kong, number of average daily new cases is fewer than 10 resulting in ~0% growth rate; and very high doubling days;
Notes: ‘ (Began…) ’ refers to the start date of a country's lockdown, lockdown definition varies among countries but generally refers to date non-essential businesses were ordered to shut down. Easingof lockdown comes with certain restrictions in all the countries; Source: Oxford COVID-19 Government Response Tracker, World Economic Forum, Our World in Data, Press search, BCG Analysis

7

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March

# of days forcase doubling1

As of 27 April 2020

Respondents who agree that… (%)"The worst of the coronavirus is still ahead"
90

70

50
20
March 6–9

March 13–16

Italy

UK

March 27–30

US

April 10–13

FranceApril 24–27

CanadaSource: BCG COVID-19 Consumer Sentiment Survey, March 6–9, 2020 (N = 3,454 UK; 3,465 US), March 13–16, 2020 (N = 2,521
France, 2,206 Italy, 2,797 UK, 2,417 US), March 27–30, 2020 (N = 2,928 Canada; 2,985 France; 2,150 Italy; 2,984 UK; 2,944 US),
April 10–13, 2020 (N = 2,827 Canada; 3,156 France; 2,922 Italy; 3,112 UK; 2,960 US), and April 24–27, 2020 (N = 2,933 Canada;
2,954 France; 3,024 Italy; 3,126 UK; 2,783 US), unweighted, representative within 3% of census demographics.
Note: Question text: “How much do you agree with each of the following statements about the coronavirus?”

8

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Consumers
starting to display
more optimistic
outlook than two
weeks ago

People starting to spend more time on the move
As of 02 May 2020

Non-residential movement compared with usual

Weekly city movement compared with usual

Tracked as changes1 in visits to retail & recreation stores, grocery stores andTracked as movement of people including walking, cycling, public transport
usage, cabs, etc. by an app.; 100% implies usual level of movement

Increase in movement

20%
0%

50%

40%

-20%
-40%

10%

CanadaBelgium

Austria

United States

South Korea

6 Apr

13 Apr

20 AprSeoul

NorwayTorontoSwitzerland

0%

Chicago3 May 2020

Philadelphia

Germany

Google mobility index

19 Apr 2020

Hamburg

5 Apr 2020

Berlin22 Mar 2020

Vienna8 Mar 2020

Brussels-60%

27 AprCitimapper mobility index

1. Taken as weekly average compared with decline from baseline (median value to corresponding day of the week during Jan3-Feb 6 2020); Represented only for selected countries.
Note: Dates mentioned are the week commencing. Source: Google mobility report; Citymapper mobility index

9

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

pharmacies, parks, transit stations, and workplaces

With Restart, businesses start to think about revamping
organizations for the new reality

10

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

As of 06 May 2020

People priorities to be accelerated by the COVID-19 crisis

KEY PEOPLERESPONSES

Source: BCG analysis

Fight & Future

From COVID-19...

...to the New Reality

1

Accelerate smart work

1

Smart work (more remote, lower cost)2

Enhance corporate health and hygiene

2Comprehensive health and wellbeing

3

Manage workforce flexibility

3

Flexible workforce

4

Mitigate people and skills risk

4

New talent and skill paradigm

5Communicate openly with empathy

5

Leadership with head, heart, and hands

6Stand together

6

Purpose-driven organization and culture7

Speed up digital readiness

7

Resilient and Bionic organization

THE NEWREALITY

11

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Flatten

7 people priorities for the new reality

Smart work (more remote, lower cost)2

Physical and mental health3

Flexible workforce

4

Source: BCG

Accommodate virtual collaboration and remote work at scale
Try a new approach that balances remote and on-site work
Set up smart workspaces
Realize the cost upsides

Cultivate physical health capabilities
Make mental health and mindfulness matter
Promote wellbeing and resilience

Make your workforce, cost, and skill-planning dynamic
Tailor working models to employees
Institute new performance, rewards, and compensation systems

5

Leadership with head, heart, and hands

6

Purpose-driven organization and culture

7

Resilient and Bionic Organization

Lead with empathy, and direction
Enable and empower frontline leaders
Develop a continuous, two-way communication platform

Foster a culture of resilience
Align purpose, vision, and values
Commit to sustainability and social
impact at a higher level

Simplify your operating model
Harness data and digital platforms
Use AI and algorithms to complement humans
Adopt agile at scale

New paradigm for skills and talent
Create an adaptive learning ecosystem
Upskill and reskill by building digital capabilities at scale
Refocus and enable talent programs and platforms
12

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THE NEWREALITY

1

Smart work
(more remote,lower cost)

Which smart work
practices will remain
after the crisis? How can
we optimize for safety,
productivity, andeffectiveness while
realizing cost savings?
• Who should work remotely in my organization?

Find the right balance between onsite and remote…
On-site work benefits

Remote work benefits• Easier communicationand social interaction• Better group creativity
and problem-solving• Easier social distancing• Lower infrastructure costs• More “chance” encounters yielding potential• Better environmental
footprint• Reduced commuting
and travel time

… and pull the right levers to make it work …

• What should the newly
balanced model be?
• Which tools do we needfor remote collaboration?
• How do we keep motivation and productivity high?
• Can we translate changes
to OPEX savings?

Smartofficespaces &
usage

Right
technology& infrastructure

New travel
policyPurposedriven
sustainablecultureLevers for successful smart work

New
Leadershipskills…for safety, productivity,
effectiveness, andcost savings
ExampleInsurance company~40%target for
remote work

~20-40%reduction indesks1~10%+
reduction inleasing expenses~5-10%
reduction in
travel expenses

1. Based on 0.6 desks/employee
Source: BCG

13

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1

Physical andmental health

How do we ensure
employee safety?
How can we manage
increased stressand make working
models sustainable?
• What physical health andsafety measures should bemaintained for reboundpreparation?
• What mindfulness andmental health measures canhelp employees improvetheir wellbeing andperformance?
• What innovative tools can weleverage to optimize forcustomization and access?

Ensure physical health—non-negotiable for operations

1
2
3
4
5

Update emergency protocols

Example | App manages operational safety

Create transparency for workforce

Safe@Work

Increase hygiene standards• Targeted information• Crowd density alerts• Contingency staffing• Compliancemonitoring• Self-reporting• Workspace management• Infection tracing

Guarantee social distancing
Track infection chains

Foster mental health—more critical than ever
Example | Service provider offers employees mental health training

Mentalhealthtraining+22% Employee focus1

Stressmanagement

Positivethinking

Collective
intelligence

Habit review

Asking for
help

Mindfulness-30% Stress level2

PsychologicalsafetyEmotionregulation…

-50% Burnout rate2

1. Mayer (2018): Mastering Digital Transformation with Mindfulness; SAP Blog (n = 650) 2. Aikens (2014): Mindfulness Goes
to Work Impact of an Online Workplace Intervention; Journal of Occupational and Environmental Medicine (n = 89)
Source: BCG

14

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2

Flexible
workforce

How do we translate thechanging businessdemands to dynamic
workforce adjustments?
• Which areas are mostcritically affected bysmart work?

Illustrative

Understand changing demand and the impact on staff functions...

Surpluses andshortfalls
per function
month by month
via planning model

Demand versus supply (# FTE, color %)Function

FTE

SurplusFinance & Controlling

407

0

3

Engineering799

0

3 56 78

General Management587

0

2 10 15 20 15 15 20 15 10 10 10 8

6 10 15 20 25 20 10 10 5

3

3

2

12 11 11 1078 56 35 25 15 5
0 0 5 0
7

Shortfall

3 -1 2 -1 2
3 -3 -5 -8
700- - 10 15 15

8 10 13 7

8

3

…
Q3

Q4

2020

Q1

Q2

Q3

2021

Q4

Q1

…

2022

…

• Do we expect capacity
gaps and surpluses in anyof the areas?

… then manage the surplus/gaps proactively• What measures can wetake to manage the gaps?

Reduce employee
capacity

Optimize personnel
factor costs

Repurpose workers
for other activities

Ramp up/shift capacity• Reduce overtime• Extend vacations• Furloughs, leaves• Short-time work
• Terminate contractors• Hiring/promotion stop
• …

• Leverage governmental
support• Delay/reduce voluntary
payments• Reduce other expenses(e.g. travel)• (Re)negotiate tariffs• …

• Insource: replace ext.
with int. workers• Second people to otherorganizations• Pool talents across orwithin industry• Support pro bono work
• …

• Bring back alumni/
part-timers• Offer inducements• Leverage talent
platforms• Expand automationof work• …

Source: BCG

15

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3

3

Flexible
workforce

Dimensions offlex-work models

Affiliation
Location

B TimeC Location

Contracted ↔ Contingent

Full-time ↔ Part time

Onsite ↔ Remote

Leverage flex-talent options:use gig economy platforms,
share workforce with partners
in your ecosystem, etc.

Individualize flex-time options,such as part time work adapted
to team specifics, life stages,
and nature of work

Introduce flex-location options,such as offering remote work
adapted to needs, possibilities,
and nature of work

ExampleExampleExamplePharmaceutical company

Facilities mgmt.1 firm

Health care provider

Uses on-demand talent

Introduces flex-time

Pilots remote working

Rapid spin up/down ofresearch teams in changing
clinical trials results inmuch lower cost

Initiative lets employees
craft individual flex-timework options with their
managers

Call center staff leveraging
special at-home technology
saves space and attract
better global talent

A

C

B

Time
1. Management
Source: BCG

A Affiliation

16

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Example | Companies leverage flexible work models in three dimensions

New paradigm
for skills
and talent

Determine who needs which skills in the future...
Illustrative
DigitalDigital business

Capabilities

How can we quickly upand re-skill our talent inline with changing ways
of working and businessdemand?
• Which skills are becoming
more critical and should
be development priorities?
• How do we assess
employees' current skill
level?
• What should an integrated
learning journey look like?
• How do we source talent
in the New Reality?

… and source proactively

Digital HR

Job functionms
es stesin osyub ec
al &git els
i
D od
…
m

oy
pl
em s
ild eyBu urnjo1

Lead/Global Business Partner

A

A

B

2

Talent Attraction (incl. student)

A

B

3

Learning Program Manager

4…
Not directly relevant

A

Adv. Analytics

ee

…

s
es
oc

…

pr
ic
ot at.
b
Ro tom
au

...

A

A

B

B

B

E

B

Bring backAlumni talent pools

Borrow

Gig economy and contract labor

Buy

Tech-enabled recruiting

Ro(Bot)Automation

Build
A

Awareness “I know”

B

Basic “I can apply”

E

Expert “I can teach”

Training amd development

Example | Household products retailer builds offline workers’ digital skills
Majority of salesforce skilled
for sales in 150 offline stores
Offline sales limited due to
shutdown
Digital skills lacking foracceleration of online sales
Source: BCG

Virtual training to drive
customer acquisition on
third-party online tools
Conversion of offline
staff to digital salesforce
within one week

Acquisition of~20k new customers

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4

Leadership withhead, heart,and hands

Envision, inspire, and execute on three topics and timelines

Head
Envision the future and focus on the big rocks

What have we learned
about our firm's
leadership capabilities
in this crisis and how
can we prepare it for
the future?
•

What do leaders need to
do now?

•

How can webuild capabilities offrontline leaders?

•

How can wedrive behavior change?

Heart

Team health& safety
Business
strength

Inspire and empower your people

Hands

FlattenFight

FutureTackleimmediatepriorities

Preparefor thereboundPursuestructuralenhancements

Financialresilience

Execute and enable with agility

Example | Mining company uses head, heart, hands to communicate to employees

Head

Heart

Hands

CEO announces plans forbusiness continuity

Coworker mobilizes sponsorshipfor community support projects

COVID task force regularly updates
work guidelines

Recruiting director lowers intake
targets but continues campaign

Board members communicate via
video messages from homeLine managers push changes ini employee app
work schedules via

Plant manager limits production
but pursues maintenanceTeam lead checks-in with teammembers via daily video chats

Directors host townhall meetings
to directly address concerns

Source: BCG

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5Purpose-driven
cultureLink purpose, strategy, and culture to succeed in the new reality
PurposeStrategy

CultureWhat did the crisis
teach us about ourorganization’s purpose
and culture and how
should we shape it for
the future?

Why we exist
guides what we should do

What we do
guides how we act

How we act
guides our success

2.5x

3x

2x

• How should we lean into
our purpose and vision?

Increase in productivity
when employees
are inspired

More likely to succeed
when strategy, purpose, andculture are linked

Higher TSR Performance
when company cultureis aligned• Do we need toadapt our culture?

Example | Supermarket leans into purpose in reaction to COVID-19 crisis
Purpose“Feed the Nation”

Source: BCG

Updated strategy and culture
launched
new ways todeliver groceries
to customers

created dedicatedcall center forcustomers who
cannot shop online

implemented faster
payments tosecure cashflow ofsmaller suppliers

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6

Resilientand Bionic
Organization

Pull key levers to accelerate org design for the new reality…
Near-term:

Prepare for strongest possible crisis impact

How can we rapidly
simplify our operating
model to prepare forthe new reality?

Structure& RolesWork & Waysof Working• How can we increase
productivity with a new
operating model?
• How can we simplify theorganization quickly andreduce costs?
• How do we enable moreagile ways of working andincrease resilience?

Leadership,
Culture, &Capabilities

Cost efficiency & productivity
Mid-/long-term:

Prepare for rebound andpursue structural enhancements
Agility & resilience… following five-step logic

1
2
3
4
5
Source: BCG

Rapid assessment of current state and future needs to prioritize areas of focus
Finding the 'Big Rocks'—no-regrets moves for rapid cost take out
Defining meaningful changes to the operating model for the New Reality
Accelerated implementation across the full organization
Start of transition to Resilient and Bionic Organization with agile and digital structure,processes, and talent

20

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7

Leaders need to assess current capabilities and strategic
importance as they chart their priorities
Illustrative

Current
Strategic
capabilities importance
Low
1

1

Smart work (moreremote, lower cost)

Realize the cost upsides…

and2 Physicalmental health

Promote wellbeing and resilience…

3 Flexible
workforce

Make your planning dynamic…

4

New paradigm
for skills and talent

Create an adaptive learning ecosystem…

with
5 Leadershiphead, heart, hands

Lead with empathy and direction…

6 Purposedriven culture

Align purpose, vision, and values…

and Bionic
7 Resilientorganization

Simplify your operating model…

Source: BCG

High Low
2

3

4

1

Identification and prioritization of key
initiatives and next steps

Low

Workingmodels

High
2

3

4

Purpose,vision, & values

Dynamic workforce planning

Virtual collaboration
PhysicalBalances remotehealthand onsite work
capabilities
Data and digital platforms
Adaptivelearning
Mental health &ecosystem
mindfulness
AI and algorithms
Empathy,
Rewards &coaching, & direction
Reflective
compensation
cultureEnable- &systemsempowerment
Digitalcapabilities…

Sustainability &social impact

High
Low

Strategic ImportanceFuturedifferentiators

Mid-term
initiatives

High
First
changes
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B
Current Capabilities

A

Quick assessment of current capabilities andstrategic importance of New Reality topics

1

Guide for leaders
Getting ready for Restart2

Updated epidemic, economic, and businessscenarios and impact
Epidemic progression
Economic impact
Business scenarios and impact

3

Appendix: Detailed action areas and further
readings
Detailed action areas for business leaders
Further readings

22

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

How to revamp Organization for the New Reality

~33% reported recoveries1 globally so far;case doubling rate improves to 28 days

EPIDEMIC PROGRESSION& VIRUS MONITORING

As of 06 May 2020

UK

USA

Italy

China
Iran

06th May' 20

19
8
days

25
12
days

18
28
days
days

Japan
South
Korea

India

29th Apr'20# of days of doubling2 the cases globallyDays of doubling cases:
0-3 days

184
Countries with cases3

710k

973k

1,245k

(27%)

(30%)

(33%)

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

6-14 days

3.7M[∆2%]4

Confirmed cases globally

14-30 days

264k

>30 days
34
55

48

50
67

[∆2%]4

Fatalities globally# of countries with community transmission5

Note: Continued cases and fatalities are subject to different testing, propensity, reporting standards and hence 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

23

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

FranceSpain

22nd Apr'20

Many countries currently flattening the curve

EPIDEMIC PROGRESSION& VIRUS MONITORING

As of 06 May 2020

Rates improving from top to bottom

8%
India

7%
6%

South Africa

MexicoCases doubling:
14 days4%

Cases doubling:
21 days

Singapore
Canada3%

Netherlands
FranceJapan Switzerland
Iran
Portugal
Iceland Norway
S Korea

0%
1,000
Asia1

Austria

100,000

10,000

NorwaySouth Korea

South America

Iceland

Austria

1,000

Italy

Belgium
China

North America

Italy

UK
Germany
FranceIran
China
CanadaBelgium
Netherlands
Switzerland
Portugal
SwedenJapan

USSingapore

Germany
Spain

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

UK

Sweden2%US1,000,000

Brazil

5%

1%
Fight

Cases doubling:
10 daysRussiaTotal cumulative number of confirmed cases (log scale)for countries2 with doubling rate > 14 days

AfricaIncludes Middle East 2. Countries selected from the chart on the left 3. # of days after exceeding 100 confirmed cases
Source: Johns Hopkins CSSE, Our World in data, WHO situation reports

100

0

20

40

Asia1

Europe60
Number of days3
North America

24

Copyright ©
Copyright© 20202020 byby Boston
Boston Consulting
Consulting Group.
Group. All
All rights
rights reserved.
reserved. Updated
Updated 24
8 May
April2020
2020Version
Version5.1.
3.1.

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

FlattenCountries planning to relax lockdown measuresand substantially ramp-up testing

EPIDEMIC PROGRESSION& VIRUS MONITORING

As of 06 May 2020

Cumulative # of cases per million population

Spain

Iceland• For countries with complete orpartial lockdowns (Singapore, UK,
France, etc.), reopening is gatedby lack of widespread testing

Belgium
US

4,000

Italy

Singapore• For countries with relaxed
lockdowns (S. Korea, Australia, etc.),
continued higher testing critical

Switzerland

UK
FranceNetherlands
2,000 Ecuador Sweden
Peru
Iran

Germany

Israel
NorwayCanadaUAE

Saudi Arabia
Brazil
0

0

Japan
10

India
20

Malaysia

South Africa

30

40

Australia
S. Korea50• For countries to move to the rightand reopen, they need an
integrated Virus Monitoring
System that includes testing,tracking, and tracing

100

Total tests / Total cases
Source: Worldometer, BCG Analysis

25

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

6,000

Testing landscape is changing: Tests to detect viral genome
and patient immune response are now available
As of 04 May 2020

EPIDEMIC PROGRESSION& VIRUS MONITORING

Not exhaustive; US example

In development

Lab-based
Presence ofviral genome

Immuneresponse tovirus

Near-patient/Point-of-Care

Rapid, on-site
portable test

Handheld digital PCR

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

Antigen tests:
Presence of viral particle

Viral load:
Amount of virus
1. More that 120 serology test makers have notified FDA that they have serology tests available for use as of April 23, 2020
Source: CDC website, FDA website, company websites, BCG analysis

Currently none

26

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Available for last 3+ weeks

Test purpose

Becoming available now(over last 1-2 weeks)

Scenarios and impact | Five key questions

ECONOMIC IMPACT

As of 06 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"?

27

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Shut down

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

ECONOMIC IMPACT

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

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, arange of microeconomic
loss is derived

For each country,
expected length of stay-athome order is factored 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 contact328

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Pre-crisis
Fight
FlattenEconomic starting point | Understanding of countries' sector
composition critical to estimate negative impact of reduced contact

ECONOMIC IMPACT

As of 05 May 2020

Preliminary figures

Revenue by sector (%)

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

54%

12%

22%

12%

Germany

65%

11%

Italy

66%

8%

Spain

67%

7%

UK

68%

North Am.

US

16%
14%
11%
11%

53%

13%

Brazil

7%

9%

12%
15%

23%

71%

9%

13%
11%

1%

18%

LatAm
Mexico

62%

India

8%
71%

19%
4%

11%
19%

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)

6%

Asia
Japan
Under stay-at-home order
Contact intensity

53%

5%

29%

12%

Open
Low to High

LimitedLow

LimitedMediumLimitedHigh

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

29

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

FranceE.g., groceries, & health care providers

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

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

Impaired economic activity1 due to COVID-19 during 'Flatten' phase
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 aprediction or forecast and the situation is changing daily. Figures shown only reflect economic activity "directly displaced" by effect of virus.
However, multi-order impacts and the impact of government spending and stimulus not considered

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

Min ofestimated range

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. 30
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

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

As of 05 May 2020

EuropeECONOMIC IMPACT

'Flatten' | ~15 to 35% of employees in Europe and the
US impacted by COVID-19 crisis

ECONOMIC IMPACT

As of 06 May 2020
Numbers are approximate

Preliminary figures

North
America

Increase in unemployment

Employees coveredby support programs

(M)

(M)

(M)

Absolute numbers(M)% of total
employment

Comments

France

28

0.1

10.0

10

36%

Temporary unemployment scheme –84%
of net wages
paid by government
Temporaryunemployment
scheme– 84% of net wages paid by government

Germany

45

0.1

10.1

10

23%

Assistance program launched to provide
government funds to cover lost wages

Italy

23

—1

5.0 - 7.72

Spain

20

UK

33

US

159

3.5 - 5.0

0.6

4.0

33.53

5-8

22-33%

Expansion of salary support for
employers and €300m fund for
employees with reduced hours

3.5 - 5.0

18-25%

Firings banned but temporary layoffs
allowed – 70% of salary paid by the state

5

14%Program to pay companies 80% ofsalaries for non-working staff tokeep them employed

34

21%

Government wage support provided
through unemployment insurance

Note: These figures are changing rapidly and are often being reported with a lag from the current data.; Bolded figures are rounded to the nearest million;
1. Absolute unemployment went down driven by less people looking for work; 2. Only 5M have received funds.; 3. Government wage support provided throughunemployment insurance; jobs protected by PPP not included.
Source: Employment figures: Eurostat (Europe), Trading Economics (US); Gov't Wage Support figures & comments: The Guardian 4/27 (UK), Reuters.com 4/29 (Italy),
The Financial Times 5/7 (US), Reuters 5/5 (Spain), RFI 4/22 (France), Barrons 4/30 (Germany)

31

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Europe2019 total
employment

Employees impacted by
COVID-19 crisis

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

ECONOMIC IMPACT

As of 05 May 2020

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

To determine full-year
economic impact, need tofactor in length of 'Fight'
which is still unknown –see next page for
estimated timeline

Spain
UK
North Am.

US
BrazilLatAm
Mexico
India
Asia
Japan
-30%

-25%

-20%

-15%

-10%

-5%

Disclaimer: These analyses represent only potential scenarios based on discrete data from one point in time. They are not intended as aprediction or forecast and the situation is changing daily. Figures shown only reflect economic activity "directly displaced" by effect of virus.
However, multi-order impacts and the impact of government spending and stimulus not considered0%Upper bound
case

Base
case

Note: Gov't employment does not include health care in EU countries to maintain comparison with US.; 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; St. Louis Fed Reserve; O*NET; American Community Survey; other country-specific sources available on request; BCG COVID response teams; BCG Analysis

Lower bound
case

32

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Germany

'Fight' | Accelerated movement toward vaccine ortreatment at scale could limit Fight phase to 12-24 months

ECONOMIC IMPACT

As of 06 May 2020

VaccineTreatment

Herd
immunity••••

Estimated timeline

Multiple vaccines (e.g. Moderna, CanSino, AstraZeneca) in Phase 1 trials
Simultaneously, investments being made in manufacturing capacity
Likely about 12 months to earliest FDA-approval
Likely to take 4-6 months post-approval to full implementation

April '21 – April '23(12-36 months)
12-month development "best case,” then likely
to require time to scale across population• Anti-viral therapies potentially available at scale in Q4-2020—
however, likely only used for more advanced cases• Antibodies from recovered patients currently being tested—
use will be limited to small scale/at-risk groups

Remdesivir is approved now,
could be more widely available by July '20• Potentially could achieve herd immunity through exposure todisease and subsequent recovery• Estimates suggest greater than 60% population is required toacquire and recover to reach herd immunity2

Substantial
Would likely involve “pulsing” economy on/off,but always maintaining caseloads below carecapacity

For the next wave, estimated timeline is
October '20 – April '22(6-24 months1)

Likely must be combined with vaccine
1. If first round of drugs being tested succeeds – then 6-9 months; if not – substantially longer; 2. This would require mass exposure, high fatality rate, and an assumption that
re-infection does not occur. Achieving herd immunity through disease exposure would likely take significant time; and it is currently unclear if exposure prevents reinfection
Source: BCG analysis; Morningstar

33

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Current status

Economic forecasts deteriorating globally for 2020
while remaining stable for 2021

ECONOMIC IMPACT

As of 05 May 2020

GDP level forecast2

GDP growth forecast vs. baseline

EOY 2021 vs. EOY 20192021

-10% -8% -6% -4% -2% 0%
Forecast -5.9%

2%

4%

6%

8% 10%

Baseline 2.0%

-10% -8% -6% -4% -2% 0%

2%

4%

6%

1.7%

4.7%

8% 10%

US

97-100%
Forecast range
1.2%

6.0%

5.8%

9.2%

107-112%

China
-7.5%

1.3%

1.4%

4.7%

95-101%

Europe1.9%

5.8%

6.5% 7.4%

104-111%

India
-5.2%

0.7%

0.5%

3.0%

96-100%Japan
Forecast (IMF Apr 2020)

Baseline (IMF Jan 2020)

Forecast range (IMF & Banks3)Last week's forecast range (onlyshown if change is significant)Note: As of reports dated 31 March 2020 to 05 May 2020, YoY forecasts 1. Announced by the German Federal Ministry for Economic Affairs and Energy on 29 Apr 2020 2. Range calculated with
25th & 75th percentile values of forecast range 3. 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: German Federal Ministry for Economic Affairs and Energy; Bloomberg; IMF; BCG analysis

34

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

2020

TSR has rebounded over last month, but impact
visible across all sectors

ECONOMIC IMPACT

Two time periods from 21 February 2020 to 6 May 2020

Decline reflects economic scenario and consumer sentiment

Healthier sectors

Pressured sectors

Vulnerable sectors

Americas

EuropeAsia

2/21-3/20

2/21-5/6

2/21-3/20

2/21-5/6

2/21-3/20

2/21-5/6

Food/staples Retail
PharmaHousehold Products
Semiconductors
SoftwareTelecom

-10%
-19%
-19%
-30%
-30%
-17%

-7%
1%
-10%
-8 %
-9%
-11%

-15%
-20%
-16%
-43%
-32%
-20%

-15%
-1%
-10%
-19%
-21%
-21%

-8 %
-22%
-5%
-27%
-28 %
-14%

-12%
-4%
3%
-8 %
-16%
-8 %

Food & Beverage
Health Equipment
Tech Hardware
Materials

-26%
-33%
-29%
-34%

-15%
-14%
-11%
-17%

-24%
-31%
-25%
-31%

-18 %
-14%
-11%
-19%

-12%
-11%
-23%
-30%

-3%
-5%
-16%
-18 %

Prof. Services
Retailing
Transport
Utilities

-30%
-42%
-37%
-33%

-17%
-25%
-26%
-22%

-29%
-36%
-38 %
-30%

-17%
-24%
-35%
-25%

-31%
-24%
-13%
-6%

-21%
-3%
-18 %
-1%

Capital Goods
Financials
Media
Hospitality

-38 %
-36%
-36%
-49%

-22%
-22%
-24%
-36%

-35%
-35%
-47%
-47%

-25%
-23%
-40%
-37%

-29%
-19%
-14%
-23%

-19%
-10%
2%
-16%

Insurance
Banks
Real Estate
Auto

-42%
-41%
-42%
-47%

-35%
-36%
-33%
-36%

-40%
-44%
-26%
-45%

-28 %
-45%
-23%
-30%

-27%
-26%
-22%
-32%

-18 %
-21%
-9%
-20%

Durable Goods
Energy

-49%
-56%

-33%
-37%

-32%
-45%

-22%
-30%

-21%
-41%

-10%
-27%

Note: As of 6 May 2020; Based on top S&P Global 1200 companies; Sectors are based on GICS definitions 1) Performance is tracked for two periods, firstfrom 21 February 2020 (before international acceleration of outbreak) to 20 March 2020 (trough of the market) and from 20 March 2020 through 6 May 2020
Source: S&P Capital IQ; BCG ValueScience® Center; BCG

Observations
Non-discretionary/essential service
less hit but still had recovery

Broad set of industries experiencing pressure,with some regions particularly affected forcertain sectors (e.g. transport in Europe)
Utilities, media, and health equipment
generally better off in Asia

Hardest hit sectors had the strongest
recoveries except banks

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Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

TSR performance1

Credit risk continues to be a concern for majority of sectors

ECONOMIC IMPACT

As of 21 February 2020 to 6 May 2020

Healthier sectors

Pressured sectors

Vulnerable sectors

Companies in
distress (%)3

2/21/2020

5/6/2020

2/21/2020

5/6/2020

Food/staples Retail
PharmaHousehold Products
Semiconductors
SoftwareTelecom

4%
3%
4%
5%
4%
4%

5%
3%
4%
7%
5%
7%

0%
0%
0%
0%
0%
0%

0%
5%
0%
0%
0%
15%

Food & Beverage
Health Equipment
Tech Hardware
Materials

3%
4%
4%
4%

3%
5%
4%
6%

0%
0%
0%
4%

0%
0%
0%
17%

Prof. Services
Retailing
Transport
Utilities

5%
5%
3%
3%

5%
9%
3%
4%

0%
0%
0%
0%

0%
41%
36%
0%

Capital Goods
Financials
Media
Hospitality

3%
4%
5%
5%

5%
6%
8%
12%

2%
0%
0%
7%

11%
5%
14%
43%

Insurance
Banks
Real Estate
Auto

4%
4%
5%
5%

6%
7%
10%
12%

0%
0%
0%
0%

0%
4%
17%
33%

Durable Goods
Energy

4%
5%

6%
12%

0%
0%

0%
35%

Note: As of 6 May 2020; Based on top S&P Global 1200 companies; Sectors are based on GICS definitions
1 Credit Default Swap; 2 Performance is tracked on 21 February 2020 (before international acceleration of outbreak), and 6 May 2020
3. Distressed comprises over 15% implied probability of default Source: S&P Capital IQ; BCG ValueScience® Center; BCG

Observations
Less discretionary and cash-rich sectors
are largely at lower risk of default in current
climateRetailing, hospitality, and energy industries
facing greatest risk of default based on
current credit profile

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Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Median 5-year CDS1 implied
probability of default2

Majority of companies negatively affected—yet some companies
in each sector manage to emerge much stronger

ECONOMIC IMPACT

As of 6 May 2020
YTD shareholder return in % per sector
40

0
-20
-40
-60

Healthier sectors
Top 10%Bottom 10%

MedianPressured sectors

EnergyDurable Goods

Auto

Real Estate

Banks

Insurance

Hospitality

Media

Financials

Capital Goods

Utilities

Transport

Retailing

Prof. Services

Materials

Tech Hardware

Health Equipment

Food & Beverage

Telecom

Software

Semiconductors

Household Products

PharmaFood/staples Retail-80

Vulnerable sectors

Performance spread between bottom and top 10%

Note: Sectors are based on GICS definitions; data as of 6 May 2020; Companies sampled from S&P Global 1200
Source: S&P Capital IQ; BCG ValueScience® Center

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20

1

Guide for leaders
Getting ready for Restart2

Updated epidemic, economic, and businessscenarios and impact
Epidemic progression
Economic impact
Business scenarios and impact

3

Appendix: Detailed action areas and further
readings
Detailed action areas for business leaders
Further readings

38

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

How to revamp Organization for the New Reality

Detailed measures across priority action areas (1/3)
Fight• Deep-dive into possible outcomes of disease spread, demand
shifts, supply/operations issues, regulatory requirements, andpotential operations restart; adjust for sector-specific issues• Frequently run scenarios and update plan; focus onunderstanding the de-averaged impact by geography
and line of business, depth of demand drop, durationof Fight phase1

Develop Scenario-Based
Planning Approach to
manage uncertainty• Perform scenario stress tests around cash-flow• Establish preconditions for what it will take to get workforce
back to offices, factories, etc.
• Set up teams to work on different time horizons (Flatten, Fight,
Future) to avoid reverting to crisis management across all

2

Create a Rapid Response
and Transformation(RR&T) teamNavigate throughFlatten, Fight, and Future

3

Revamp Organization for
the New Reality• Establish nimble cross-functional Rapid Response &Transformation team (RR&T)• Refine processes to manage the crisis situation, remote
working, disruption in supply• Ensure smooth transition of operations and workforce tothe 'New Reality'• Shift to digital/remote customer interactions• Define policies to keep employees safe with high morale• Engage across levels to retain talent• Move to online/remote working; redefine rosters, and train
for efficiency/effectiveness• Establish preconditions for coming back to the working
environment; clearly communicate them
• Build SWAT teams to address critical business areas, such as
product launch, digital channel redesign, retail delivery models
Source: BCG

Future• Develop recommendations for daily planning,
resources, supply chain, workforce, and otherstakeholder management as per modeled scenarios• To manage the massive complexity of "restarting,”enhance Rapid Response & Transformation teamstructures• Develop approach for how to bring people back towork, how/when to engage customers• Establish governance and standardization toeffectively coordinate other areas from the RR&T
• Get ahead of the curve to manage policies to getteams back to work safely• Take a clear view of forward demand and the newnormal: manage/restructure organization to fit
capacity needs• Create dedicated focus to accelerate digital,
process automation, new ways of working

39

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

FlattenEstablish crisis
management

Detailed measures across priority action areas (2/3)

4

5

Drive Topline Security
and Customer Trust

Stabilize and restart
Supply Chain,
Manufacturing

Fight

Future• Reach out to customers for their situation and needs• Assess changes in customers' behaviors• Drive actions to inspire confidence and ensure ability todeliver (multichannel, people-light approaches)• Adapt and transform channels(e-commerce), sales, marketing spend, pricing, and support• Manage volatility in demand and refine sales motions (tovirtual, etc.) and objectives• Ramp up commercial efforts significantly to seize market
shifts; leverage learnings to accelerate digital capabilities• Take measures to ensure operations continuity:
workforce safety and management, stop-gap measures
for supply chain, site readiness (access, maintenance,services, suppliers)• Ensure quick and safe restart of facilities; pushcentrally driven efficiency measures• Ensure open and direct communication with employees• Explore solutions to retain key talent• Set up capabilities (org, control tower) tomanage unstable supply chain; explore alternate
networks, dual/multiple suppliers for criticalgoods and services, delivery methods, etc.
• Accelerate production as demand rebounds;
account for product shifts

6

Restructure Cost, manage
Cash and Liquidity• Build forecasts for COVID-19 impact on P&L,
balance sheet, investor base• Build central team to simulate financials as per
evolving scenarios; drive agile ways of working• Review capital sufficiency scenarios and possible
effects on credit risk

• Decisively take structural actions: TURN PMO,
zero-based budgets, delayering/restructuring,
re-base tech portfolio, etc.; deploy rapidly as
speed is predictive of success in downturns• Manage credit and debt commitment for short term
• Create agile FY20-21 business plans and budgets todeal with uncertainty

Source: BCG

40

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

FlattenNavigate throughFlatten, Fight, and FutureDetailed measures across priority action areas (3/3)• Stress-test current value proposition and business
offerings, and scan crisis impact on key
customer/market trends

7

Emerge stronger; drive
advantage in adversity

Fight

Future• Plan for new projects to shift the portfolio andleverage the 'new normal'; plug capability gaps
• Identify white spaces in own industry and ecosystem• Selectively invest in areas where opportunistic M&A
can be conducted• Develop and implement strategy to exploit greatertalent availability

8

9Accelerate Digital andTechnology transformation

Help Society during
COVID-19• Address and serve immediate workforce needs forremote working• Identify and implement key digital use cases andadapt to agile way of working• Leverage tools for conducting key processes online• Accelerate use cases to meet demand shifts• Adapt traditional processes to become digitally viable• Redesign key customer journeys with emphasison digital interventions• Ensure immediate support to employees, suppliers,
communities, etc.
• Team with government/local communities/acrossindustries to address crisis• Determine how to contribute in the crisis toemployees, customers, through medical response,
supply of essential items for society, or by playing
a positive economic/employment role

• Leverage assets, supplier relationships, logistics
networks, and employees to help adjacent communities• Allocate innovation resources where possible tofocus on solutions to COVID-19 crisis• Work across industry boundaries to identify crosssectoral synergies to deploy solutions• Leverage expertise developed to support
government policies and responses, rebuild
business for local customers, suppliers, etc.

Source: BCG

41

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

FlattenNavigate throughFlatten, Fight, and FutureAdditional perspectives on COVID-19
Selected sector publications

Business & Society

People & Organizations

LeadershipTechnology

Consumer

How to Restart in the
Wake of COVID-19

People Priorities for the New
Now

Leadership in the
New Now

How Tech Companies Can Shape
Their Demand Recovery PostCoronavirus

COVID-19 Consumer
Sentiment Snapshot #8

People & Organizations

Corporate Strategy

Business & Society

Public Sector

Health Care

COVID-19 and Our New
Bionic Society

How Scenarios Can HelpCompanies Win the COVID19 Battle

The Role of Trust in the
COVID-19 Economic
Recovery

How Governments Can Galvanize
Their Nations for the ReboundRescuing Hospitals by
Resuming Care for All
Patients

Crisis Response Checklist

Cash & Liquidity

FinanceEngineering

Power & Utilities

Checklist

A Cash Management Survival
Guide

The COVID-19 CFO
Pulse Check

Stimulus Offers a Rare Chance for
Defense Agencies to Buy Better

B2B Energy Retailers Can
Weather the COVID-19 Storm

Source: BCG

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Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

Selected overarching and functional publications

Disclaimer

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