Question

In: Operations Management

How COVID-19 affects SME companies? How to reduce economic losses. Answer in your own words.

How COVID-19 affects SME companies? How to reduce economic losses. Answer in your own words.

Solutions

Expert Solution

COVID affects the SMEs in following ways.

(i) Amdist lockdown and curfews imposed by authorities and to ensure the safety of workers, all work needs to be stopped, which means that no revenue generation. In such scenario, it is very difficult for the SME owners to meet the fixed costs of operation, such as paying rent, insurance, salaries and loans, due to small reserves and buffer capacity.

(ii) It hampers productivity because, not all work can be done through virtual means and barring few fields, the work is greately affected.

(iii) The productivity is affected due to employees or their families becoming sick.

(iv) Even if the company is in condition to do business, its partners might not be in condition to do so, which affects its efficiency.

The losses can be reduced by negotiating with partners such as employees, financers, government authorities etc. to work out a way to ensure continuity of operations on minimum sustainable level without compromising on safety and security. The other way is to focus on the tasks which were ignored during regular times due to lack of time or availability of resources. These can be capacity building, employee development, training,  research and other activities which are otherwise considered secondary. It will be appropriate to identify the alternative ways of revenue generation which involve minimum risk of virus transmission, and can contribute to the sustainability of oerations till the pandemic subsides.


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