Thursday 6 August 2020

OGN survey gives insights into strong challenges in industry

MANAMA, July 5, 2020

The global Covid-19 pandemic has jolted the oil and gas industry, disrupting supply chains and choking off demand. And if that wasn’t enough, the plummeting oil prices heightened the challenge for companies in the industry.
To understand the extent of the challenges faced by companies, OGN magazine conducted a survey in the GCC region across all sectors of the industry: upstream, midstream and downstream.
“Considering the significant role of oil and gas in the region’s economies, the survey gives us an insight into the possible long-term impact on the industry, and compels companies to ask themselves hard questions and think strategically about how they will adapt as the pandemic and markets evolve,” says Abdulaziz Khattak, Editor of OGN.
Of the survey’s respondents, 57.2 per cent were small- and medium-sized companies and 28.6 per cent were large companies. 
About 57.1 per cent said their business was moderately affected by the pandemic, while 28.6 per cent said the impact had been strong. Some 14.3 per cent also said they had not yet felt the full effect of the pandemic despite a visible slowdown.
The impact of the situation on the companies has been in many ways. Some 57.1 per cent said they had been affected due to a temporary shutdown, while others had been affected by employee absences due to sickness (28.6 per cent), clients not paying their bills (71.4 per cent), reduced logistics services (28.6 per cent), problems with infrastructure, such as internet or roads (28.6 per cent), increased administrative bottlenecks (28.6 per cent)
About 42.9 per cent companies expressed difficulty in importing materials or products from abroad, while 14.3 per cent said they were facing difficulty accessing inputs domestically.
Over half of the responding companies (57.1 per cent) said they were operating on reduced capacity, with 28.6 per cent saying their operations were normal and an equal number said they were operating remotely.
With regard to working ability, all the companies said they could work remotely. However, some companies added the inability to travel due to restriction were impacting sales and services, and customer interactions. Some also said their plants had to have people for operations.
To the critical question of whether their business was at the risk of permanently shutting down because of this crisis, 71.4 per cent were confident they would stay open. Only 14.3 per cent said they were at a risk of closing down in six months or more.
To further elaborate this, they were asked how long before the continued pandemic would force their business to close down, 28.6 per cent gave a timeframe of 3-6 months, an equal number said 6 months to a year, and 14.3 per cent said they would close down in less than 3 months if the pandemic continued.
The pandemic has had a huge impact on the workforce, with 42.9 per cent) saying their workforce numbers had changed due to Covid-19. About 28.6 per cent said they had laid off employees, while 42.9 per cent said they were temporarily reducing employment.
Other companies were also considering measures including reduction in its current workforce (57.1 per cent respondents), freeze on new employee hires (57.1 per cent), pay/salary freeze (14.3 per cent), and salary reduction (28.6 per cent). About 14.3 per cent said they were maintaining their current workforce numbers.
Other strategies followed by companies to cope with the crisis include remote working (85.7 per cent), online sales (57.1 per cent), increase in marketing efforts (28.6 per cent), reduction in marketing expenditure (14.3 per cent), and introducing customised/new products (14.3 per cent).
There was concern for maintaining financial performance for the current year. Some 71.5 per cent companies said the impact on their financial performance would be moderate, while 14.3 per cent anticipated a major impact.
A good sign, however, was the ability of companies (42.9 per cent) to maintain standing lines of credit to help them bridge this interruption in business. Yet 28.6 per cent said they had no financial cushion.
When asked what top three government measures would be most helpful to cope with the Covid-19 crisis, 57.1 per cent said rent subsidies, followed by employment programmes (such as temporary unemployment programmes), financial programmes (such as low interest credit line or credit guarantees), and tax waivers.
Among other challenges of the pandemic, companies pointed to keeping the morale of the workforce high and adjusting to the new normal topped the list. Yet others said there were financial challenges, and those of travel, sales and mental health of employees.
Some sales-oriented companies were concerned about the inability to have face-to-face meetings with customers. And others were worried about global trade. --Tradearabia News Service


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