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SMEs and the Post-COVID Economic Environment

Courtesy of AASK Advisory Services

“Change is the only constant in life”. - Heraclitus

Unlisted companies such as founder and family-owned businesses account for 75% of global GDP. In some economies, that number is even higher. Small and medium enterprises, or SMEs, are responsible for creating more than 50% of employment worldwide and are simply indispensable to the global economy. This makes SME development a high priority for many governments around the world.

There is no denying that the world has changed in the last few months and every person and business has been affected by COVID-19. In the current environment, revenues have reduced significantly or stopped, liquidity has dried up, jobs have been lost, and entrepreneurs have dramatically curtailed if not temporarily closed their businesses.

In these challenging times, risk advisors can offer valuable guidance as well as an objective perspective and calming influence.

Most SMEs face the same challenges across geographies. Here are 5 key areas on which SME leaders should focus at this time.


As we navigate through these unsettling times, your employees' physical and mental well-being should be at the core of your business considerations.

People are a company’s greatest asset and SMEs typically have a core of employees who have been with the company for a long time. Consequently, people decisions should be made with compassion as this will have a long-term positive impact on the business. CEOs also need to adopt the "we" attitude vs the "I" attitude to ensure that decisions are being made for the benefit of the company.

At this time, your people will be concerned about their job security and their future. Clear and regular communication on the steps being taken to maintain and sustain this will be essential. Most of our clients have made arrangements for staff to work remotely and managers need to provide the right tools for their team to ensure the business continues as a going concern.


Managing liquidity is the top priority for keeping a company solvent and liquidity analysis and planning is of paramount importance. For the past 2 months we have been assisting clients in developing a dynamic, rolling 12-week short-term cash flow forecast that can be tested against best- and worst-case scenarios. Further, the cashflows are reviewed with management on a fortnightly basis.

The single largest expense for most companies is salaries and wages. And although the temptation is to make staff redundant, we would advise clients to reduce wages where possible. Most staff will appreciate the fact that they have some income to support their households.

Where possible, staff should be encouraged to take excessive leave entitlements. We also recommend that a business review its Profit and Loss on a line by line basis to check where costs can be reduced. Companies should prepare a list of key suppliers and critical payments that must be made to ensure operational continuity.

At the same time, they should check where cash can be conserved, e.g. cancelling orders if demand has decreased. If possible, businesses should identify pockets of excess working capital and establish initiatives to quickly convert these into cash.

In addition to focussing on liquidity, leaders should also assess any stimulus money that their governments may be availing. These include job retention packages (in Singapore, for example, the government guaranteed a rebate of 75% of an employee’s salary to the employer for the months of April and May 2020), cash grants, loan repayment deferrals/holidays and low-interest or government guaranteed loans.

Other immediate actions that can be taken to manage cash flows include:

  • In the short term, follow up on any customer payments due, particularly from larger corporates, and seek extended credit terms with suppliers.

  • Now is the time to revise cash flows, working capital management & inventory forecasts alongside your new demand-supply predictions to help understand how financial stability may be impacted, and consider this impact in relation to, and restrictions in, access to funding.

  • Talk to your banker to clarify expectations, understand your current loans, including bank covenants and repayment obligations. Your banker may also be able to assist you in understanding additional options if there is need to raise additional debt or equity.


Business owners will have built solid relationships for many years/decades and business relationships are more important than marketing.

Across the geographies with which we work, most successful clients have extremely strong relationships with their suppliers, advisors, and customers. These relationships will allow businesses to survive in this current environment and thrive in the post COVID-19 era.

Continue to have trusting and meaningful discussions with those you have successfully worked with over the years. Do not underestimate the power of the right relationships at the right levels.


Most of our clients have strong brands in their respective industries and markets. Our advice is, in addition to working on their brand, businesses should work out what they can do to help and support the community during these challenging times.


Over the years many SMEs will have had advisors who have been with the companies through thick and thin. Advisors are uniquely positioned to help clients as they understand your business well and can act as a sounding board and assist in staying focused on the bigger picture including providing peace of mind during uncertainty. A good advisor will also help clients feel that they are in control.

Therefore, do not lose your valued advisor in these times. We are here to support you and your business and share the burden of the challenges you face.

In conclusion, on a positive note, know that these challenging times will end. It is how we implement the suggestions above, while thinking with clarity now, that will hold the business in good stead.

About AASK Risk Advisory Services: AASK serves a core client base of mainly family-owned businesses across Singapore, India and East Africa.

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