A look into SMEs vulnerability to post-pandemic restructuring

SMEs require not only fundings but thorough planning to outlast the pandemic...

In the race to curb the widespread transmission of coronavirus, the global economy has come to an abrupt halt expeditiously. Like the Asian Financial Crisis of 1997, the COVID-19 pandemic feels as if history is repeating itself on a much larger scale. One thing that has made this economic downturn a little easier is the convenience of technology.

In this article, TranSwap’s CEO and co-founder, Benjamin Wong, discusses how the diversification of business models influence SMEs' vulnerability to post-pandemic restructuring, and how some industries have a steadier growth than others.

1. SMEs’ contribution to the economy

SMEs make up the largest number of businesses globally and they are crucial contributors to generating employment opportunities and advancing global economic development. In Singapore alone, SMEs account for 48% of the country’s GDP with an employment rate of 65%.

The last half of the decade saw SMEs offering job opportunities to 70% of the workforce, meaning there are stable incomes for the skilled, semi-skilled, and even unskilled individuals. Acknowledging this, the government attempts to catalyse SME operations through various schemes, grants and incentives such as the Technology Adoption Program (TAP) and Startup SG Tech to give companies leeway for developing proprietary technology solutions and incorporating a scalable business model.

Gaining first-hand experience as a pioneer in the Fintech scene in Singapore, Mr Benjamin Wong postulates that speed is the key to success in this rapidly evolving digital world. With the provision of innovative lending models and scalable funding structure, SMEs must be assisted to stay afloat during such crises to be able to position themselves to be innovative.

2. Problems in SME funding

One of the enduring challenges faced by SMEs is their likelihood of falling behind in resources funding due to their limitations in size and lack of reliability. As a result, SMEs across the region are ill-equipped with the necessary means to maintain or retrieve further finances. Moreover, Southeast Asian financing is considered to have one of the most notorious financial inclusion worldwide with 7 in 10 adults either have no access to long-term saving plans or credit cards, and are underbanked or do not even have access to bank accounts at all.

The gap between finance and business development accessibility can be bridged by technology. Fintech solutions are all about keeping up with the changing times and have made digital transactions a more popular method.

3. Why do some industries fare better than others?

With their responsibilities to drive and sustain the economy, SMEs operations cannot be left to chance and must require detailed planning. The lack of effective communication is one of the reasons why SMEs are failing today as employee engagement took a nosedive.

Companies that failed to acknowledge the efforts of individuals in their workforce are jeopardising themselves as the pandemic has caused most to question their purpose in life. The lack of purpose has led to reconsiderations of work, thereby compromising engagement and productivity, and leading to further internal changes within the company.

To stay afloat, companies must channel efforts into appeasing their stakeholders. Although certain industries like Food & Beverage have flourished, others cannot say the same. Global manufacturing has largely declined, with border controls and logistic service disruptions having derailed operations of international supply chains.

An icon in itself, Singapore Airlines (SQ) has taken a reduction of 99% of its travel, with full efforts concentrated to maintain its responsibilities to stakeholders and employees alike. Be it engaging stewardesses as safe distance ambassadors, or emulating in-flight experiences, the reception from most towards SQ are highly positive.

The repercussions of COVID-19 are inevitable, which is why to stay afloat, companies are offered stimulus packages. However, some SMEs have mistranslated such support and see it as a means to wind up or expand their businesses, which resulted in unsustainable growth. Until there is a solution to curb the spread of COVID-19, companies must balance being realistic and optimistic to allow the economy to move quickly.

4. Considerations to include in business models to reduce vulnerability

Companies must decide whether they should focus on measures to tackle temporary efforts or engage in stringent tactics to induce structural changes. Making the right decision matters more than ever today for businesses to have a future to look forward to.

TranSwap, for instance, is experiencing this second wave of demand for business-focused solutions as the company finds it easier to convince businesses to adopt their services as compared to before. Today, the businesses that TranSwap works with have made the platform an integral part of their payment system, incorporating 120 different currencies globally.

The recovery preparation allows business leaders to think systematically through various possibilities and how their business could be impacted by the onset of COVID-19. Unlike MNCs, one disadvantage that plagues SMEs is the lack of available data. As a result, SMEs require systematic planning to gain greater insights into operations and better resource allocations to be more informed of strategic decisions.

Next, being vocal on social impacts and honest engagement with stakeholders will allow all parties involved to be aware of the implications of business decisions, such as investment and public policies. This allows businesses to have greater communication with their customers while simultaneously tapping into a new market. Moreover, this also shows the firm’s willingness and ability to adopt technologies and business models that are required to be successful in the post-pandemic world.

Lastly, it is imperative to design frameworks that allow monitoring and, wherever necessary, reviewing programmes to ensure continuous delivery and achieving the intended income. For investors to confidently maintain their investment levels, one must demonstrate an enthusiastic approach to measuring and improving impact.

TranSwap is passionate about assisting SMEs to globalise. Our solutions to move money better between different countries through our multi-currency Global Account allows SMEs to perform global transactions easily and at the lowest cost possible. For further enquiries, send your questions here or visit our website at transwap.com.

Have a specific topic you would like us to cover next? Just let us know!