Companies have faced other cash crunches before. They usually responded by slashing capital spending between 20% and 40%. While this protected certain costs, they had to sit and wait for the market to rebound. Today’s market simply won’t tolerate the same response. Instead, companies should look at their competitiveness as a foundation to measure cost effectiveness.
The survivors from the COVID-induced recession of 2020 will have wielded a scalpel in a connected fashion to cut portions of spend across three areas—working capital, capital projects and the portfolio. They also will have gone deep without sacrificing capability while realizing that focusing only on capital project cuts would not have provided enough firepower.
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Clearly, each company will need to consider capital and portfolio. However, how hard they’ll have to ease spending will depend on the real-time findings the virtual command center provides—and their own specific risk and resilience position.
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We expect only a handful of companies will see themselves in the green low-risk/high-resilience quadrant in the second quarter of 2020 and even fewer staying there (thanks to aggressive actions) by the fourth quarter. Few will be companies that have executing decisions based on risk and resilience and that have unlocked upwards of 20% of cash within 60 days.
Projections based on Accenture analysis and experience working with oil and gas companies.
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