Hat tip to one of our clients for sharing a report last weekend from the Imperial College of London COVID-19 Response Team. Naturally, it’s a very technical report, but it’s worth reading the Summary on page 2.
Models are models, to be sure, but the Imperial College research suggests:
The U.S. is nowhere near herd immunity (approximately 4% national infection rate; the highest state infection rate is in N.Y. which is estimated at 17%)
Ro still > 1 in about half of U.S. states(1)
Without robust test-and-trace programs and continued caution we will likely see a resurgence in infections and deaths in the coming months
From a business perspective it feels a little bit like we might be in the eye of the storm. Not that we’re likely to return to the infection and death rates of March and April, but that there are clearly more challenges ahead as bank lines are used up, savings are drawn down, and PPP monies are utilized.
We’ve weathered the initial punch; we’ve taken action to stabilize our businesses temporarily; perhaps we have extra liquidity on hand (bank lines; PPP; EIDL). But there are more challenges ahead – maybe if revenue doesn’t pick up; maybe if backlog dries up; maybe if costs increase as we adapt to new modes of operation.
In March I talked about resilience. In April I talked about resilience. Staying with that theme, it’s worth preparing for the possibility of 6-12 months of slog...of restrictions being lifted and reimposed; of states and locations not moving through the re-opening phases as quickly as hoped; and therefore, of a slow, grinding, two steps forward and one step back return to prior levels of economic activity.
Get with your CFO or controller. Refresh the cash flow scenarios you ran in March and April. Now carefully review the downside case – how are you going to handle that?
1. Ro is reproduction rate, or the number of people infected by one infectious individual; the goal of stay-at-home has been to drive Ro below 1, but it turns out while Ro can be pushed down to 1 fairly quickly, it's very difficult to keep it below 1 for a virus with this kind of transmissibility.