In a Post-COVID World, Engineering & Construction Industry Surviving the Storm

Introduction

COVID-19 has affected communities globally, with more than 382 million reported covid cases as of today- a number that continues to rise every day. While governments and businesses around the world are responding quickly, there's plenty more to be done.

The construction industry in India is more important than ever in this difficult time. The sector has played a crucial role in responding to the crisis and in the recovery, from constructing hospitals in a matter of days to providing lifesaving equipment.

The engineering and construction industry is accustomed to cyclical downturns, but COVID-19 has struck with unprecedented speed and strength. Ongoing projects are expected to be either delayed or canceled. And the construction sites that are operating have faced disrupted supply chains and operational restrictions. Worker's and subcontractor labor health is an issue, and social distancing on construction sites poses practical obstacles. And because many construction and contracting firms lack significant cash reserves, the lockdowns may force them to restructure debt, seek new sources of finance, or risk going bankrupt.

It is difficult for engineering and construction in the post COVID world, but quick yet thoughtful action may help E&C leadership teams handle the current crisis, stabilize supply chains, and strengthen their firms' financial position so that they can emerge from the crisis on a stronger footing.

Manage the Immediate Crisis

For construction industries in India and all over the world, financial stability is a top priority. In the face of such uncertainty, achieving or maintaining stability clearly requires a review of capital and corporate cost budgets, as well as possibilities for generating cash, including government stabilization or stimulus packages.

However, the lack of transparency in the E&C industry, supply chains, and the wider economy makes any cost-cutting or other financial choice exceedingly difficult. There is no perfect solution to this uncertainty, but a rigorous scenario analysis — which uses models to forecast financial demands and possibilities based on a variety of scenarios regarding COVID-19's duration and impact — can assist businesses in navigating it.

Stabilize your Supply Chain

Besides the immediate impact of a downturn on construction demand, the crisis is projected to have a long-term impact on supply and demand, resulting in substantial changes in investment patterns.

In order to find vulnerabilities in your supply chain and decide how to respond to them, you need to maximize your visibility. Contact your suppliers, collect data, and create a dashboard that you can maintain and improve over time. Consider the legal and financial consequences, as well as their influence on margins, cash flow, loan repayments, and conditions, based on what the dashboard displays. Check to see if your project controls, risk management, and governance procedures can handle all of the supply chain changes you're thinking about.

Strengthen the Financial Position of the Company

Many E&C companies are dealing with a financial setback, which is having a particularly negative impact on their cash flow. They should perform a comprehensive project-by-project analysis and seek government financial help in the short term. In addition, management teams should think about contract terms, the recoverability of receivables in the event of a site closure, and the inefficiencies that come with remote working and on-site distance limits. Many businesses will also need to renegotiate financing agreements and acquire additional capital in the near future.

To develop and execute a financial plan that will help your firm reach that exclusive class, make sure your finance staff has the most up-to-date data and predictions, backed up with cutting-edge analytics.

The Next Normal Reimagined

As we move beyond the COVID-19 crisis and into the next normal, it is becoming more evident that the world will look quite different. And as the construction industry leaders are navigating through this crisis, surviving and thriving in the next normal, a call-to-action has to be proposed across five stages: Resolve, Resilience, Return, Reimagination, and Reform. Reimagination, in particular, can assist industry leaders to look beyond the crisis and beginning to plan for the next normal.