How consultants can face the coronavirus crisis
The coronavirus pandemic is likely to cost consultancies business this year, but the revenue risk varies considerably depending on the market, the industry, and the type of consulting work, according to projections released by Source Global Research, a professional services firm based in London.
Worldwide, the consultancy industry is projected to generate an average 19% less in revenue this year because of business lost due to the coronavirus that causes the disease COVID-19. The industry’s global revenue is expected to decline to $130 billion this year, down from $160 billion in 2019. The second and third quarters are expected to look the worst, according to Source Global Research, which surveyed more than 1,000 senior partners in consultancies around the globe to help come up with the estimates.
“The damage is real, profound, and widespread,” said Imran Furkan, FCMA, CGMA. He is CEO of Tresync, a consulting business that specialises in corporate governance, particularly strategic and business model changes. Tresync is based in Singapore and employs about 20 people full time across Asia Pacific.
At Global PMI Partners, a consultancy that specialises in mergers-and-acquisitions integration worldwide, deals that hadn’t closed yet are on hold indefinitely, said Scott Whitaker, a US partner. “Projects that were in flight seem to be finishing out normally, though I expect there will be pressure to wrap up quickly to conserve expense.”
The European consulting market is projected to suffer disproportionally. German manufacturers will experience supply chain disruptions, UK businesses were already struggling to deal with the fallout of Britain exiting the EU, and Italy is an epicentre of the COVID-19 outbreak.
Source Global Research estimated consultancies in Europe and Russia will generate 28% less revenue in 2020. The impact is projected to be 19% in Central and South America, 18% in the Middle East, 15% in the North America, 14% in Africa, and 12% in Asia Pacific.
The impact is also expected to vary by the work a consultancy does. Jobs that require travel and time spent on a client’s site will be hardest hit. Strategy work that can be done in the consultancy’s office (or from home) will be less affected. Long-term contracts will fare better than short-term contracts.
Large consultancies are expected to do better than small and midsize ones, according to the projections.
The sector in which the consultancy works also matters. Source Global Research’s modelling suggests that demand in the services sector, which includes leisure companies and airlines, will shrink 29%. Consulting demand is projected to decline 28% in healthcare; 25% in energy and resources; 21% in manufacturing; 17% in technology, media, and communications; 12% in financial services; and 10% in retail.
At Tresync, some projects are stalled, face-to-face client meetings have been challenging, and in-person pitches for business development have been cancelled or postponed, Furkan said. But demand for Tresync’s expertise around business model reconfiguration is robust, he said. “Expectations for the rest of the year are actually quite hopeful.”
7 tactics to master the crisis
The COVID-19 pandemic is an opportunity for consultants to earn clients’ trust. To master this and other crises, Furkan suggested tactics he’s following himself at Tresync:
1. Use updated information only. The situation is evolving rapidly. Information that is updated and relevant, such as information about government stimulus and relief packages from industry bodies, is critical for making decisions in-house and for clients. They give hope not just to clients but all stakeholders, including employees and their families.
2. Manage cash flow. Client payments might be delayed significantly and may not come at all, if the entity were to declare bankruptcy. To protect your brand among future potential employees, it is critical to sort out cash flow early by talking to your finance providers and continuously updating them.
3. Focus on what you can control. Employees and clients can feel powerless, which can cause anxiety. Focus on what is possible for the firm and its clients to control, such as working arrangements and internal processes, and plan for what’s outside the control of the firm and its clients, such as the length of lockdowns imposed by authorities.
Whitaker said he’s working on firm infrastructure projects, such as product development and marketing, work that is tough to get to when you are very busy and that you can do remotely.
4. Empathise, but don't sugar-coat. Say what you truly believe in, however outrageous or unlikely it is, and say it as early as you can. Share your internal analysis to foster the trust of clients.
5. Show clients and staff the light at the end of the tunnel. This is not the time for conservative thinking and hesitancy. Your staff and clients will sniff this out, and you will lose credibility. Help clients trust you to imagine how the future will unfold in terms of the products and processes. This is a huge responsibility, and you need to use it not only to increase billable hours but also to deliver a once-in-a-generation, transformative experience, using every fibre of your innovativeness and transformational thinking.
6. Create value beyond the current engagement. Share advice from third parties and even the direct competition with your clients. For example, Furkan said, “we have been sharing tax advice from the tax office and content from accounting bodies on how to survive COVID-19.” Clients have come to appreciate this, he said, even if they have paused projects or payments.
7. Add capacity to grow. This decade will be volatile and transformative. Hence consulting firms must look at adding capacity to the team. The crisis will provide an unprecedented opportunity to recruit some of the most talented new consultants out there, but only if the consulting firm maintains a growth mindset rather a survival mindset.
For more news and reporting on the coronavirus and how management accountants can handle challenges related to the outbreak, visit FM’s coronavirus resources page.
— Sabine Vollmer (Sabine.Vollmer@aicpa-cima.com) is an FM magazine senior editor.