COVID-19

Business and financial impact on Malaysian organisations

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The context
This report is a concise document Overview on the COVID-19 situation in Malaysia:-
based on a research conducted
with over 900 Malaysian finance ▪ The presence of coronavirus disease 2019 (COVID-19) in Malaysia was
first reported in January 2020. As of 27 April 2020, the country reports a
professionals from 13 to 26 March total of 5,820 confirmed cases, 1,764 active cases, 3,957 recoveries and
2020 by ACCA. 99 deaths.
This information pack identifies the ▪ The Malaysian government implemented the movement control order
business and financial impacts to (MCO) beginning 18 March 2020 to curb the spread of COVID-19. Since
organisations in Malaysia and highlight then, many organisations have to temporarily cease operations. At time
proposed or implemented measures to of writing, the MCO is still in effect.
mitigate the effects of COVID-19
outbreak. While our observations
represent the views of respondents, we
hope these insights will help you
effectively navigate through the COVID-
19 challenges.

Source: The Guardian, Coronavirus world map

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The factsheet
Respondents are predominantly professional accountants serving in corporations and public practice firms.

Size of organisation Professional accountants

<50 people 18%

28% 30% 50 to 100 people

101 to 200 people
201 to 300 people
300-500 people
8%
11% 500-1000 people 82%
7% >1000 people
6% 9% Yes No

* Leaders in finance comprise finance directors, chief financial officers, chief executive officers, board members, heads of finance, financial controllers,
financial planning and analysis leaders, or their equivalent senior roles. Leaders in public practice comprise partners, directors or senior managers.

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 Headlines
▪ Malaysian ▪ Businesses ▪ Nearly half of ▪ COVID-19 ▪ Impact of
businesses are expects a businesses may brought more government
generally not downturn in 2020 suffer losses this challenges than intervention is
prepared to with predicted year, due to opportunities to highly uncertain
face COVID-19 decline in year on COVID-19 public practice
year revenue and
profit by at least
10%

▪ About one ▪ A worst case ▪ People first ▪ Reduced ▪ Businesses looks

quarter of scenario suggests approach in disposable income to enhance
businesses may revenue and profit mitigating the and shift towards robustness of
not last for 6 may decline effects of COVID- alternative BCP –
months due to beyond 50%, 19 outbreak but employment professional
cash flow and compared to prior maybe subjected models on the accountants to
lower revenue year to change horizon the fore
issues

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Severity of business impact
▪ It’s suggested that nearly half (49%) of
businesses may not survive in 12 months due Severity of business impact
to cash flow problems; with a quarter stating
difficulties in lasting for 6 months. Cash flow problems

Customers stopped / reduced purchases - affected…

▪ The damage is further compounded by lower Customers stopped / reduced purchases - supply…

Unable to fulfil customers' orders - operations…

future cash inflows because of lower revenue
due to:- Unable to fulfil our customers' orders - logistics…

❖ customers stopping or reducing purchases; or Unable to obtain supplies from preferred suppliers

Employee productivity negatively affected

❖ inability to fulfil customers’ orders; or
Having to defer launch of new products or services
❖ deferred launching of new products or 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
services
▪ Negative employee productivity has been
Severe impact affecting business existence or viability within the next 6 months
identified as the biggest impact to companies Severe impact affecting business existence or viability over the next 12 months
but its effect is not as devastating as the other Severe impact
Significant impact
factors. Moderate impact

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Malaysian businesses unprepared for COVID-19
▪ One-third of businesses do not have a BCP effectiveness against COVID-19 outbreak
business continuity plan (BCP)

▪ One in five businesses have BCP, but they 33%

are ineffective against crisis at the scale of
COVID-19 outbreak
47%

▪ Nearly half of businesses have BCP that

allow them to respond effectively against
disruptions brought by COVID-19 outbreak
20%

Our BCP is effective against COVID-19's disruptions

Our BCP has proven ineffective given the severity of COVID-19 outbreak
We did not have any BCP in place

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Businesses reforecast their outlook for 2020
Majority of businesses have reforecast their outlook for 2020 – giving them better grasp of the situation, but
finance leaders face these challenges when establishing reasonable reforecasts

Factors that impact ability of finance leaders to establish Businesses reforecast revenue
reasonable reforecasts and profit outlook for 2020
5

3 58%

2 4.27
3.26 3.10 2.94 2.80 2.72
1

0 42%
Uncertainty Lack of future- Weak insights Poor quality Lack of Poor quality
posed by oriented from other external data – analytical tools internal data –
COVID-19 predictive or functions financial and in place financial and
outbreak prescriptive non-financial non-financial
Yes No
analytical tools

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Businesses expect a downturn in 2020
Majority of businesses expect to face a downturn in 2020 – revenue and profit forecasted to decline by at least
10% year on year, but could be worse. Based on finance leaders’ most recent reforecasts, business outlook for the
remainder of 2020 is grim. In the worst case scenario, majority of businesses expect their revenue and profit to
erode by at least 25% year on year, while nearly 40% of them foresee their revenue and profit to erode beyond
50% compared to prior year.

Reforecast revenue growth rate vs prior FY Reforecast profit growth rate vs prior FY
Most likely Worst case Most likely Worst case

40% 40%
30% 30%
20%
20%
10%
10%
0%
0%

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Businesses expect losses in 2020
▪ Majority of Malaysian businesses expect to
suffer losses in 2020 due to COVID-19 Likelihood to incur losses due to COVID-19 outbreak
which is slightly more pessimistic as Greater China ASEAN Malaysia
compared to peers in ASEAN and Greater
China 45%
5.0 Very likely 45%
49%
▪ If businesses spend less to mitigate losses, 21%
the economy will contract further. On 1 April 4 23%
23%
2020, the World Bank cuts Malaysia’s GDP
target to -0.1%, a significant drop from its 18%
3.0 Neutral 23%
earlier target of 4.5%1. This projection is 19%
echoed by Bank Negara Malaysia which
projected Malaysia’s GDP growth to be 2
8%
7%
between -2.0% to 0.5% in 20202. 7%

8%
1.0 Not at all likely 3%
1. The Edge Markets, 1 April 2020, ‘World Bank cuts Malaysia 2020
2%
GDP target to -0.1%’.
0% 10% 20% 30% 40% 50% 60%
2. Malay Mail, 3 April 2020, ‘Bank Negara sees Malaysia’s GDP at
between -2pc and 0.5pc in 2020’.

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Businesses prioritised people-first approach
▪ Measures that organisations put in place
since the outbreak primarily focused on its People-first measures during the COVID-19 outbreak
people’s health and safety – employees,
customers and suppliers – ensuring they are Heighten health and safety practices of
employees
updated on how to manage disruptions
Provide employees with flexible work
arrangements
▪ COVID-19 outbreak also became a catalyst Establish communication mechanisms on
that sped up the adoption of flexible working COVID-19 measures
arrangements – allowing employees to work Increased health and safety practices on
remotely from home suppliers and customer deliveries

Improve assurance to customers - adequate

▪ Businesses also did not neglect their measures on health and safety

communities – approximately one third Implement an operating cost reduction

strategy
reflected on their social responsibility
towards the wider communities affected by Evaluate our social responsibility to the wider
the virus outbreak communities

0% 10% 20% 30% 40% 50% 60% 70% 80%

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Manoeuvres to soften the impact of COVID-19
Short-term manoeuvres:
Manoeuvres being considered to mitigate effects of
▪ Negotiate financial obligations – eg, restructuring or COVID-19 outbreak
deferring payment obligations
If condition deteriorates over next 3 to 4 months Actively considering
▪ Adjust employee remuneration and employment
model Negotiate debt service repayment obligations

▪ Mitigate cashflow impact through modifying working Adjustments to remuneration and…

capital arrangements with customers and suppliers Establish supply chains in less affected areas
and reduce operating cost Reschedule new product or service launches
Mitigate cashflow impact - engage with…
Long-term manoeuvres: Delay investments until the outbreak recedes

▪ Establish new supply chain in areas less affected by Evaluate our social responsibility to the…

the outbreak Implement an operating cost reduction…

Improve assurance to customers - adequate…
▪ Delay investments, including potential merger and
acquisition activities Increased health and safety practices on…

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

▪ Delay product and services launches

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Company size does not affect measures taken
Measures put in place by large companies do not differ significantly from SMEs or public practice, except that relatively
more large companies have increased the health and safety practice for employees and established communication
mechanism on COVID-19 responses.

Measures in place now to mitigate effects of COVID-19 outbreak

Large companies SMEs Public practice

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Heighten health Provide Establish Increased health Improve Implement an Evaluate our Delay Mitigate cashflow Reschedule new Establish supply Adjustments to Negotiate debt
and safety employees with communication and safety assurance to operating cost social investments until impact - engage product or chains in less remuneration service
practices of flexible work mechanisms on practices on customers - reduction responsibility to the outbreak with customers service launches affected areas and employment repayment
employees arrangements COVID-19 suppliers and adequate strategy the wider recedes and suppliers models obligations
measures customer measures on communities
deliveries health and safety

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Similar actions taken by firms in the short term
Large companies, SMEs and public practice firms may take similar actions in the short term. SMEs appears to be
slower in their response as compared to other types of business as they consistently show a higher percentage across
measures that are still being considered.

Measures actively considered to mitigate effects of COVID-19 outbreak

Large companies SMEs Public practice

60%
50%
40%
30%
20%
10%
0%
Heighten health Provide Establish Increased health Improve Implement an Evaluate our Delay Mitigate cashflow Reschedule new Establish supply Adjustments to Negotiate debt
and safety employees with communication and safety assurance to operating cost social investments until impact - engage product or chains in less remuneration service
practices of flexible work mechanisms on practices on customers - reduction responsibility to the outbreak with customers service launches affected areas and employment repayment
employees arrangements COVID-19 suppliers and adequate strategy the wider recedes and suppliers models obligations
measures customer measures on communities
deliveries health and safety

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Effects and
impact of
COVID-19 to
employees
in Malaysia

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Possible adjustments to keep businesses afloat
▪ Organisations may cut remuneration and shift towards alternative employment models to keep the business afloat
and retain staff
▪ Organisations have made adjustments to remuneration where they have discretion to do that, thus giving the
business a quick fix. SMEs have been more aggressive in adjusting remuneration and employment compared to large
companies or public practice.
▪ Meanwhile, organisations are considering other actions that may be legally more complex to execute and pose larger
impact on employees – e.g., retrenchment resulting in employees losing their source of income.
▪ If condition deteriorates over next 3 to 4 months, businesses may continue to cut remuneration further but avoid
laying off employees.

Top 5 Measures Taken Top 5 Active Considerations Top 5 Actions as Condition Worsens
Recruitment freeze Salary cuts Freeze salary increments
Freeze salary increments Voluntary unpaid leave Recruitment freeze
Bonus cuts Retrenchment Bonus cancellation
Change employment models Bonus cuts Bonus cuts
Bonus cancellation Voluntary Separation Schemes Mandatory unpaid leave

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Measures intensifies as condition worsens
▪ If condition deteriorates, it may become harder to obtain jobs and salaries across all sectors may likely to be
stagnant or lower.
▪ Large companies are still less likely than other types of businesses to cut remuneration.
▪ SMEs and public practice firms are more likely to ask employees to take unpaid leave.
▪ Organisations across all sectors ranked laying off employees as their last resort.

Further adjustments to remuneration and employment models, if condition deteriorates

Malaysia Large companies SMEs Public practice SMPs

45%

25%

5%
Freeze salary Recruitment Bonus Bonus cuts Mandatory Voluntary unpaid Salary cuts Change Voluntary Retrenchment
-15% increments freeze cancellation unpaid leave leave employment Separation
models Schemes

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More challenging for public practice firms
▪ Significant uncertainty over future events posed
by COVID-19 brought practical challenges to Public practice: Impact on client service
auditors to evaluate rationality of an entity’s Pressures to complete work - employee
measurement of assets, especially at fair value, mobility
as well as impairment of assets.
Inability to meet reporting deadlines

▪ Auditors require more time and technical support Increased audit risk - valuation of assets,
completeness of liabilities or going concern
to complete all necessary audit processes given issues
the higher associated audit risks coupled with Limitation of scope in gathering audit
restriction on movement presents higher evidence
pressure to meet reporting deadlines. Opportunities to assist clients - tax
compliance and advisory

▪ On the other hand, practitioners may have Opportunities to assist clients - improving
business resilience and continuity
opportunities to help clients overcome this crisis
Opportunities to assist clients - digital
in the areas of taxation, supply chain transformation and supply chain
management, digitalisation, business resilience management
and continuity, to name a few. 0% 10% 20% 30% 40% 50% 60% 70% 80%

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Firms uncertain about state intervention
▪ ESP2020 did not help majority of businesses
across all sectors – they either felt the ESP is not Effectiveness of economic stimulus package
relevant for them, ineffective or unsure about its introduced by government
effectiveness. 100%
90%
▪ Evaluation was made based on Economic 80%
70%
Stimulus Package 2020 (ESP2020) announced
60%
on 27 Feb 2020, as survey concluded before the 50%
second and third stimulus packages were 40%
announced. 30%
20%
▪ Similar observation was made from businesses in 10%
ASEAN. 0%
ASEAN Malaysia Large SMEs Public practice
companies
▪ There’s still room for policymakers to discuss with
Effective Not effective
businesses for possible interventions, particularly
Not relevant to my business Unsure
on areas that could severely undermine business
viability. No stimulus package

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Accountants needed at the forefront of COVID-19
▪ Majority of businesses want to enhance and make
their business continuity plans (BCPs) more Enhancements to BCP effectiveness
robust to ensure that the company copes more
24%
effectively during an unprecedented crises to the
scale of the COVID-19 pandemic.

▪ Professional accountants are push to the forefront

on an economic war against COVID-19, lending
their expertise; to assess, analyse and present 16%
60%
recommendations for improvements and
sustainability.

▪ It is advisable that organisations be encouraged to We will increase the robustness of our BCP
prepare for uncertainties akin to ‘making hay while
the sun shines’. No change as our BCP is adequate

No further changes as crisis to the scale of COVID-19 outbreak is rare

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More insights available in our global survey
▪ ACCA recently released its global survey based on gathered
responses from over 10,000 members and other stakeholders
across the world from over 100 countries.

▪ Click the link below to access the narrative from ACCA’s global
data on the impact of COVID-19 on global business communities
and organisations:
https://www.accaglobal.com/my/en/professional-insights/global-
economics/Covid-19_A-Global-Survey.html

▪ You can also access useful resources on ACCA COVID-19 hub

to help you and your organisation overcome the impacts and
implications brought by this pandemic: https://bit.ly/2wTcqEc

▪ Additionally, for more insights from ACCA, please visit our

Professional Insights page:
https://www.accaglobal.com/my/en/professional-insights.html

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 For Enquiries

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ACCA Malaysia
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Thank you

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