What McKinsey and Bain are telling their clients about how to prepare for coronavirus

• Major companies and businesses can prepare for the economic impact caused by the coronavirus outbreak.
• McKinsey and Bain & Company brought their problem-solving approaches to all the available data on the virus. Both firms broke down the industries most likely to be impacted.
• The leading consultancies shared their advice on how businesses can prepare for the coronavirus outbreak and change market approaches accordingly.
• Click here for more BI Prime stories.

As the coronavirus has spread to every province and region in China and at least 88 other countries, many companies are uncertain about what this means for their business.

Leading consultancies McKinsey and Bain & Company recently shared reports advising clients to set up company contingency plans to help combat the virus outbreak.

At their best, management consultants are essentially business doctors that leaders rely on to help fix complex problems. And in the midst of the coronavirus outbreak, these experts shared you can make smarter business decisions to soften the financial blow.

Here's exactly how businesses should prepare for the coronavirus outbreak, according to McKinsey and Bain consultants.

Industries most impacted

According to McKinsey's breakdown, the industries likely to be impacted for the longest amount of time include hospitality, aviation, automotive, and tourism. As Chinese tourism accounted for $277 billion, or 16% of international tourism in 2019, McKinsey predicted a 40% reduction to demand in the tourism and hospitality industries until the disease is under control.

Karen Harris, managing director at Bain, generated her insights based on a coronavirus Situational Threat Report Index (SITREP) that combined data with her firm's problem-solving approach. She recommended that all businesses focus on mitigating the threats of disease transmission to their staff and halting unnecessary investments for now. Moreover, Bain predicted that the coronavirus would cost China more than $72 billion.

About 51,000 companies worldwide have direct suppliers in the affected regions to date, and the entire global economy has been put at risk due to the spread of the coronavirus, according to the Federal Reserve. The coronavirus, which causes a disease known as COVID-19, has killed more than 3,400 people and infected more than 100,000 worldwide. The vast majority of cases - just over 80% - are in China.

Protect your workforce

Your employees come first.

Both McKinsey and Bain consultants advised clients to prioritize the safety and well-being of their workforces, and many major companies are trying to do just that.

For example, Google and Apple restricted international travel and encouraged employees to work remotely, Business Insider previously reported. Consulting firm Accenture also cancelled "any non-essential international travel and do not plan any additional until further notice," according to an internal memo sent to employees seen by Business Insider. That memo stated that an Accenture employee had been diagnosed with coronavirus and that more than 100 Accenture workers were quarantined in China and Italy. A company spokesperson confirmed the memo's authenticity.

Bain consultants also advised companies to start preparing for future talent needs, as "uncertain market conditions often make critical talent available," according to the report. In other words, recruiters should start hiring people they're going to need in the long term. On top of focusing on softening the economic slowdown, think about how you're going to grow and profit after the virus blows over, the report said. Neither report commented on fears of the virus becoming a permanent part of life, like flu season, as the virus remains unpredictable and is rapidly changing.

How to grapple with a break in the supply chain - take stock

The coronavirus has disrupted many companies' supply chains, and McKinsey made several recommendations about how companies can cope.

First, McKinsey said to monitor your company's supply shortage, and then to draft predictions on how this will impact your business in a year's time. Look for other opportunities to build partnerships with vendors, and design a new approach for the future to prevent another major interruption of the partnership.

"Create a sufficient supply buffer that factors in traffic suspensions and supplier shutdowns, and monitor the end-to-end supply chain, including raw materials, inventory and delivery challenges," Harris and consultants wrote.

Create a response team to deal with rapid change

Adaptability is the key to overcoming change.

Bain advised clients to be ready to move quickly if opportunities present themselves. If you have a company plan for 2020, make sure to adjust your budget and rework investment deals. You want it to make sense considering the current market conditions.

McKinsey recommended that you set up a cross-functional response team specifically for any issues related to COVID-19.

"Companies should nominate a direct report of the CEO to lead the effort and should appoint members from every function and discipline to assist," the report noted. "Team members will need to step out of their day-to-day roles and dedicate most of their to virus response."

Nevertheless, both consultancies stressed that company crisis responses are a group effort, in which employees and managers should prepare for on switching gears and taking on unfamiliar responsibilities to deal with an unpredictable outbreak.