Impact of COVID-19 on Business and Technology

& Risk Mitigation Strategies for CIOs

March 27, 2020Dun & Bradstreet

CUMULATIVE NO. OF CONFIRMED COVID-19 CASES

2

The outbreak of COVID-19 in China disrupted the global value chain. With more cases being reported in the USA and European Union, the level of disruption has widen and covering most part of the world economy

-

50,000

100,000

150,000

200,000

250,000

300,000

Jan

20, 2

020

Jan

30, 2

020

Feb

10, 2

020

Feb

20, 2

020

Feb

29, 2

020

Mar

10,

202

0

Mar

20,

202

0

Mar

24,

202

0

China Other countries

Source: Johns Hopkins CSSE, WHO, CDC, ECDC, NHC and DXY

Confirmed cases438,749

Recovered cases111,89525.5%

Deaths19,6754.5%

Note: Data as on March 25, 2020Dun & Bradstreet

COPING CAPACITY

3

The average overall Global Health Security Index score is 40.2 out of a possible 100. This shows that collectively, international preparedness for epidemics and pandemics remains very weak

Source: NTI , Johns Hopkins, The Economist Intelligence Unit

Least prepared More prepared Most prepared

Index Pillars

Dun & Bradstreet

CHANNELS OF IMPACT

4

Indian companies face strong headwinds both from global and domestic factors. The three major channels of impact are legal linkages, supply chain and macroeconomic factors

Channels of impact for Indian companies

Global Domestic

Legal Linkages Trade(Supply Chain)

Macroeconomic factors

Investment flows

Financial Markets

Currency MarketsDun & Bradstreet

IMPACT ON GLOBAL ECONOMY

5

Besides the impact on human lives and global supply chain, the pandemic is a severe demand shock

Source: IMF, UN

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%20

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Previous Forecasts Revised Forecasts

= US$ 1 tn

Global GDP growth (constant prices; market exchange rates)

Global Foreign Direct Investments

5-15%

Global Exports

US$ 50 bn

Global unemployment

25 mn peopleDun & Bradstreet

IMPACT ON GLOBAL FINANCIAL MARKETS

6

The pandemic has resulted in acute market volatility across the globe reflecting the unprecedented uncertainty of the situation

Source: Dun & Bradstreet Analysis, WSJ, fedprimerate.com

-87%

-36%

-54%

-37%

1929 -The Great Depression 1987 crisis

2008 -Global Financial Crisis

Coronavirusoutbreak

P-T Decline (Months)

Peak-to-Trough (P-T) Decline %(Dow Jones Industrial Average)

Recovery to Peak (Years)

6 2 17 1.5

22 2 5 ?Dun & Bradstreet

IMPACT THROUGH TRADE AND LEGAL LINKAGES

7

Implications for Indian businesses via legal linkages and trade remain significant

Source: Dun & Bradstreet, Ministry of Commerce & Industry

32%

13%

11%

9%

9%

5%

4%

3%3%

11%USA

Germany

United Kingdom

Japan

Netherlands

France

Switzerland

China

Italy

Others

50% 48%

Imports Exports

Severely Impacted countries Other countriesNote: Others include South Korea, Spain, Sweden, Canada, Belgium, Denmark, Austria, Norway, Malaysia and Iran

% share of countries (most affected by COVID-19) in which Indian entities have legal linkages

% share of countries (most affected by COVID-19) in India’s import and export basket

Dun & Bradstreet

COMPARISON OF COMPANIES RESUMING OPERATIONS IN DIFFERENT REGIONS

8

There are some positive signs - Companies across China are resuming operations

Source: Dun & Bradstreet

96%89% 88% 86% 86%

72%62%

4%11% 12% 14% 14%

28%38%

Southwest China East China South China Northeast China North China Northwest China Central China

Resumed Operations Temporarily closedDun & Bradstreet

RISKS FOR BUSINESSES

9

COVID-19 outbreak poses several organisational risks – supply chain, operational, financial and market. The sheer size of the shock interconnects all these risks making companies vulnerable to knock-on effects

Source: Dun & Bradstreet

Operational risksBusiness Continuity risksIT risksCompliance risksEtc.

Supply chain riskRaw material availabilityInput cost fluctuationsQuality riskEtc.

Market risk Demand riskMarket interest rateEtc.Financial risks

Credit riskInvestment riskEtc.

Dun & Bradstreet

INDEX OF INDUSTRIAL PRODUCTION - INDIA

10

Manufacturing activity across the sub sectors was significantly weak in 2019. The outbreak of COVID-19 only prolongs the recovery

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

Textiles

Chemicals

Pharmaceuticals

Electronics

Electrical equipment

Machinery

Motor vehicles

Furniture

Worse than 5 year average Within 5 year average Better than 5 year average

Trend in growth of Index of Industrial Production

Source: MOSPI, D&B AnalysisDun & Bradstreet

D&B INDIA BUSINESS OPTIMISM INDEX – SECTORAL INDEX

11

The level of optimism increased across all services sectors and some industrial sectors in Q1 2020

Source: Dun & Bradstreet

56

69

Q4 2019 Q1 2020

68 68

Q4 2019 Q1 2020

68

64

Q4 2019 Q1 2020

58

67

Q4 2019 Q1 2020

82

54

Q4 2019 Q1 2020

66

68

Q4 2019 Q1 2020

75

65

Q4 2019 Q1 2020

Capital GoodsConsumer Non-Durable Goods BFSI Other services

Intermediate Goods

Consumer Durable Goods Construction Basic Goods

55

82

Q4 2019 Q1 2020

Dun & Bradstreet

D&B INDIA BUSINESS OPTIMISM INDEX - PARAMETERS

12

The level of optimism increased across all services sectors and some industrial sectors in Q1 2020

Source: Dun & BradstreetLess optimistic More optimistic

% of respondents who expect an increase in the corresponding parameters in Q1 2020(Note: the survey was conducted in Dec 19 when there were 0 confirmed COVID-19 cases in India)

Volume of Sales

New Orders received

Net Profits after Taxes Level of Selling Price

Workforce size

Basic Goods 61% 33% 58% 6% 45%

Capital Goods 68% 36% 60% 20% 32%

Intermediate Goods 57% 39% 65% 9% 39%

Consumer Durable 71% 17% 75% 8% 25%

Consumer Non Durable 63% 33% 71% 0% 38%

Construction 81% 30% 41% 0% 22%

BFSI 62% 36% 67% 3% 41%

Other services 75% 39% 74% 8% 58%

Dun & Bradstreet

D&B INDIA CFO OPTIMISM INDEX – SECTORAL INDEX

13

The level of optimism increased across all sectors expect consumer durables goods sector in Q1 2020

Source: Dun & Bradstreet

0 20 40 60 80 100 120 140 160

Consumer Durable Goods

Basic Goods

Media

Intermediate Goods

Capital Goods

Hospitality

Construction

BFSI

IT-ITeS

Consumer Non-durable Goods

Retail

Q1 2020 Q4 2019 Index valueDun & Bradstreet

IMPACT OF COVID-19: STORY OF RECOVERY HAS BEEN REVERSED

14

The impact of COVID-19 outbreak will be disproportionate – while some sectors will be severely impacted, some will see a positive impact

Source: D&B Analysis

High

ModeratePositive

Severe

COVID-19Sector Impact

Drugs & Pharma

Automotive

Textile

Metals

Remote working applications

Online gaming

E-education

Over-the-Top Media service

Retail: Non-food items

Wholesale trade

Electronics

Banking

MSMEs

Gems & Jewellery

Entertainment

Hospitality

Transport

Livestock

Tourism

Key actions points for business continuity

Renegotiate interest rate and terms, cut down costs

Manage credit terms with customers, facilitate remote working and flexible production

Stabilize supply chain and inventory management

Dun & Bradstreet

15

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