Milind Jain
Credit Speciality Leader, Middle East and North Africa
The COVID-19 pandemic made 2020 an incredibly challenging year for the manufacturing sector. Though the impact has been profound and sustaining, many within the sector are now out of the fight or flight mode and able to be far less reactive than they were at the beginning of the crisis.
In fact, those that have shown resilience are in a position to take advantage of the opportunities that the new normal presents - liquidity, however, will need to play a key role in achieving success.
Though it was an intense crisis, the recovery has been relatively fast. In fact, the manufacturing sector in the Middle East is almost back at the same productivity levels seen pre-COVID-19. This is particularly true for those manufacturing current-day necessities like IT products, home appliances, packaging for food, pharmaceuticals and even fertilisers.
COVID-19 has proved particularly harmful to those with pre-existing conditions; the same sentiment can also be held for businesses. Those manufacturing businesses that were experiencing challenges before the pandemic found it harder to weather the storm, with banks and lenders unable to support their recovery. This has contracted the sector, making it a more competitive space for those stable and strong manufacturing companies that were able to survive.
The increased demand that this creates also helps with recovery — especially as manufacturers are broadening the regions and customer bases they service. Those with exposure to Europe and the UK now more than ever appreciate the need to have a diversified global approach. Many in the region are looking to Africa and Asia for new opportunities and an expanded customer base.
Fundamentally, every crisis creates one fundamental opportunity, and that is to learn hard lessons. For manufacturers surviving the pandemic, that has been not to rely on one source of supply chain. It is essential to create a more diversified framework, where there is access to alternative suppliers of raw materials. This also encourages competition, which leads to better prices.
With these opportunities to build resilience in mind, there are a number of ways for manufacturing businesses to protect themselves against liquidity risks:
By focusing on a solution-driven approach to the three key liquidity risk areas of receivables, supply, and debt obligations, a strong and robust financial system can be created for a manufacturing company that will allow it to seize opportunities and protect their business for future growth.
Credit Speciality Leader, Middle East and North Africa