Pandemic sparks global automation drive

The coronavirus pandemic is forcing global company executives to reconfigure operations and dramatically step up plans to automate their businesses, according to a new survey.

David Sapsted

30 March 2020

The EY Global Capital Confidence Barometer – based on a survey of more than 2,900 executives in 46 countries – found that 73 per cent of respondents believed COVID-19 would have a "severe" impact on the global economy, with just over half saying they were having to reconfigure operations because the virus had exposed vulnerabilities in supply chains. And 41 per cent of C-suite executives said their reviews of operating models had led to their accelerating investment in automation.Steve Krouskos, EY global vice-chair of transaction advisory services, said, “The human cost is the most tragic aspect of this crisis, not only in terms of the lives lost, but also the number of livelihoods at risk. As business leaders respond with urgency to the unprecedented impact that COVID-19 is having globally, workforce welfare and job preservation will be at the top of their minds.“There is no playbook for this situation and the C-suite is reconfiguring and readjusting its response in real-time as events evolve rapidly. COVID-19 has created new vulnerabilities and unforeseen challenges. For most companies, the full impact on revenue and profitability across value chains are still highly uncertain.”

Mergers and acquisitions activity intentions remain strong

The survey found that 54 per cent of executives expected a slow economic recovery would extend into 2021 although mergers and acquisitions (M&A) activity intentions remained strong, with companies looking beyond the current health crisis.

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"Business leaders are focusing on navigating the immediate impact that COVID-19 has across supply chains, revenue and profitability, while reconfiguring capital allocation and M&A plans for the post-crisis world," said EY.Some 49 per cent of global businesses reported profit margins that, even before the virus outbreak, were either the same or lower than two years ago. Now, the vast majority (95 per cent) said they were braced for further downward pressures on margins as the global economy slows.

New priorities for executives

The survey also found that, once some normality has returned to the economic order, executives would be prioritising new investments in digital and technology, and capital allocations across their portfolios.“Business leaders are seeing their transformation plans paused or slowed currently," said Mr Krouskos. "With these plans set to restart, possibly with added energy, once the situation stabilises, executives will have to make faster moves to re-imagine, reshape and reinvent their business and create long-term value.”

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Mr Krouskos added, “The ongoing COVID-19 outbreak and its impact on major economies has not caused dealmakers to shelve their plans entirely. Deals continue to be a powerful means to reshape portfolios and accelerate the transformation imperative facing CEOs.“As the post-financial crisis period shows, the M&A landscape often enables companies to make high-quality acquisitions in a recovering market. Lessons have been learned from the 2008–12 M&A downturn, which hindsight shows was an opportunity to make acquisitions of high-quality assets that would have fuelled faster growth in a recovering market.”