Businesses should find ways of harnessing it meaningfully, and not squandering it with ill thought-out decisions.
The global COVID-19 pandemic is something we have all had to adapt to. We are on unfamiliar ground, where a host of new words and phrases has become commonplace: social distancing, furloughing, lockdown.
One word, however, now connected to COVID-19 is all-too familiar: recession.
But, according to Javad Marandi, how companies respond to this particular recession will be subject to close scrutiny.
What coronavirus has done is to accelerate an aspect of business that has already been making serious inroads. That aspect is social responsibility.
What the looming recession is now poised to do is highlight what are economically necessary responses in a recession, but also what are socially unacceptable actions.
A major one of these is asset stripping.
The bargain basement approach
During a downturn, companies can run into trouble. This makes them vulnerable.
Recessions can create cut-throat environments, where one company (or an individual) takes control of another, sells off its under-performing assets, and leaves it as a hollowed-out shell.
Unfortunately, along with mass job-cutting, asset stripping has become a common practice in challenging economic conditions.
Profit-or-plunder merchants are economic predators, and a recession provides them with a wide hunting ground.
The problem is where there can be blurred lines between asset stripping and what private equity firms call valuation creation.
And traditional strategic responses to recession put cutting costs high on the to-do list, along with focusing on core areas of business and putting investment or capital expenditure plans on hold.
There are clear signs, however, that the culture of business is shifting, and that the old knee-jerk responses to recession are no longer socially acceptable.
The unacceptable face of capitalism
COVID-19 has shone a spotlight on business practices, and highlighted those enterprises that are perceived to be failing their employees.
For example, the planned redundancies announced by British Airways, in spite of the extension of the Government furlough, have been branded a disgrace by MPs.
There is a feeling that, in a time of national crisis, business responses need to put people’s interests and needs first.
While COVID-19 has accelerated and accentuated these feelings, however, change has already been in the air.
You only have to consider the public downfall of Sir Philip Green to see how his particular form of buccaneering business is no longer seen as acceptable by many.
Behind the story of a Midas-touch that has gone wrong, there are issues to do with poor business ethics, cashing in on a dying business (BHS), and the consequent damage to his public persona.
Changing the system for good
What, if any, opportunities does a recession offer?
The old model suggests it’s a time to be strategically decisive, regardless of the human cost.
Weaker companies are ripe for the picking, and redundancy is a tool for increasing profits by slashing costs.
But what if the opportunities for change were more profound, and positive?
There are indications that in some sectors and areas of life, COVID-19 will have a lasting effect on our behaviours.
Working from home may turn out to be a permanent fixture for many businesses, along with flexible working hours.
Does this kind of flexibility offer a way of avoiding large-scale job cuts and the hollowing-out of businesses in the pursuit of efficiency?
The blurring of boundaries between home and the office, and the wholescale rearrangement of work-life balance during lockdown, point the way to an alternative, more socially responsible, approach to doing business.
But to change the system there has to be a commitment to act differently.
Business owners should no longer use limited liability as a means of squeezing out every last grain of value from a company then walking away when things get tough.
And employers should consider how they can preserve jobs through embracing flexibility, rather than cutting them as a first resort.
Being socially accountable
Business does not exist in its own bubble, separate from society. If lockdown has taught us anything, it is that we value our communities and businesses that support them.
There is an enormous amount of goodwill out there, despite the fear and uncertainty.
Businesses should find ways of harnessing it meaningfully, and not squandering it with ill thought-out decisions.
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