LEADING IN UNCERTAIN TIMES – 4

Mohan G Joshi

Big or small, preparedness determines outcome

Of the 60 million micro, small and medium enterprises (MSMEs) India has, it is estimated that up to 15% could wind up during the year thanks to the disruption caused by the virus. Revenue growth, it is feared, will shrink by up to 21%. Given that this sector employs over 110 million people and contributes nearly 30% of India’s gross domestic product and 50% of exports, it is easy to imagine the impact on both employment and the economy.

No one wants to close an enterprise. But when the situation and the outlook are both grim, good management mandates a closure before bad becomes worse. Unless you are prepared.

That applies to all, whether you are a small shopkeeper or India’s largest bank.

Small shopkeeper cuts losses

He moved his stationery shop from the railway station to my neighborhood, right in front of a busy college. And he added a line of snacks to his offerings. Students like to munch when they “hang out.” Margins were low, but the volumes more than made up for that.

It was a good move. Until the pandemic closed the college down. He lost 80% of his business almost overnight.

Last I met him, he was preparing to close. “Maybe I made a mistake, banking on one shop. I knew the students would come and go. But I thought the college was permanent.”

I tried to lift his spirits, pointing out that there were always neighbors like me to support him. “Yes, people like you are permanent customers,” he appreciated my concern but was also pragmatic. “The business you generate can hardly account for a fraction of the heavy rent I am paying.”

So, he was bailing out when he was still solvent. Maybe he would come back after some months? He just shrugged.

Biggest bank was better prepared

It might appear incongruous to compare a solitary trader with a giant institution. Yet, the elephant can fall heavier from the blow and find it more difficult to get back on its feet.

But the State Bank of India, India’s largest bank was prepared. As Rajnish Kumar, the Chairman of SBI, said, they had been testing for disruptions in a simulated environment, and now, “this is testing in a real environment.”

“Fortunately, we had been investing in our technology and digital capabilities and had been looking to build on that. So, we have been able to keep our operations up and running, and there’s been no disruption of service as far as transactions go,” he was happy.

It helps that, even before the pandemic, “90 percent of customer transactions were happening away from our physical branches.” While the platform has proved its mettle, “we still have to build on our digital capabilities to serve customers better.” And he wants to be ready to serve “those who want to come to the branches” as always.

We and the whole economy need both the stationery shop and the bank. It is up to the leaders to ensure they both survive and emerge stronger.