The impact of COVID-19 in Latin America and the Caribbean has presented an unparalleled challenge for the global and regional economy. Nations are mobilizing every asset at their disposal to implement strategies aimed at alleviating the multifaceted crises—economic, financial, social, and health—induced by the pandemic, while concurrently exploring various methods to manage the virus's proliferation and maximize life preservation. While a lot of attention is, and must be, put in analyzing how governments are reacting today in order to learn how to better react in the face of a similar crisis sometime in the future, the crisis also demands a question: why are some countries responding better than others?. The hard reality is that not all countries are facing the crisis from the same starting point. Developed countries are in a better position to face the different dimensions of the crisis due, to a large extent, to their available fiscal and healthcare resources. No country in the LAC region can afford the increases in public spending and investment carried out by developed countries in response to the pandemic, nor do they have the same access to international financing. Developing regions such as Latin America and the Caribbean (LAC) must face large trade-offs when deciding where to allocate their available resources to respond to the effects of the crisis. Moreover, these tradeoffs are accentuated by the structural social inequality faced across the region. However, these limitations and conditions were not directly caused by the crisis that began at the start of the year, but rather the result of decades of policies that have created economies heavily burdened by social and economic vulnerabilities. These vulnerabilities are a crucial factor when determining the region’s starting point in the face of the pandemic, the extent of the social and economic impacts, and its capacity to respond. Projected impacts on the LAC economy and growth As of January 2020, Latin America and the Caribbean (LAC) had projected GDP growth rates of 1.6% for 2020, and further 2.3% for 2021. However, these projections have drastically changed because of the crisis brought by the coronavirus pandemic. While the containment measures taken by LAC countries are bound to have an impact on their overall GDP growth, the uncertainty of how the pandemic will evolve, and how each country will respond, make estimations a very difficult exercise. The projections from the June 2020 IMF World Economic Outlook indicate that Real GDP growth in Latin American and the Caribbean is estimated at -9.4% in 2020 but will return to a 3.7% growth in 2021. The 2 largest economies in the region, Brazil and Mexico will experience similar trend. These projections are vastly different from the estimations done earlier in April 2020. [caption id="attachment_5426" align="aligncenter" width="607"] Source: IMF World Economic Outlook June 2020.[/caption] These projections consider several key assumptions. For instance, the forecast factors a larger hit to activity due to the lockdowns in the first half of 2020, and a slower recovery in the 2nd half of the year compared to what was estimated during the April 2020 estimations. Productivity will be impacted as surviving businesses focus on improving workplace safety and hygiene standards. Countries struggling to control infection rates will need to extend the lockdown and social distancing measures. On the other hand, countries that have controlled infection rates will not reinstate stringent lockdowns and will rather rely on more targeted measures (i.e. contact tracing, isolation, etc.). The projections also factor in the impact of the fiscal countermeasures implemented so far and anticipated of the rest of the year. The model also assumes that fuel prices are expected to remain broadly unchanged compared to the April 2020 version of the economic outlook, with average petroleum spot prices at $36.20 per barrel in 2020 and $37.50 in 2020, with expectations of an increase up to $46 (25% below the 2019 average). Nonfuel commodity prices are expected to rise faster than what was assumed in the April projections. During October, the IMF released its update with new growth projections, showing that the economic impacts of the pandemic are hard to estimate. The new projections show more positive scenario for the region and its 2 largest economies in 2020, but with slightly lower growth estimates in 2021 for the region and Brazil. We will likely see further changes in these projections as countries enter the year 2021, and actual figures for full-year 2020 become available. [caption id="attachment_5428" align="aligncenter" width="552"] Source: Source: IMF World Economic Outlook October 2020[/caption] Earlier during April 2020, the Interamerican Development Bank (IDB) developed a model depicting 4 shock scenarios for the region, taking into account external factors such as: GDP losses in the US and China, with some recovery towards the end of 2020 and into 2021; asset price shocks and their impact in financial markets and capital flows; and commodity prices for oil, metal and agricultural products. The variables were chosen by the key assumption that the shock from the crisis is external, so no internal impact from the measures taken by the countries was considered for the model. While the quantitative estimations might be outdated when compared to the IMF World Outlook projections, the different variables used for the model give some insight on how the crisis can impact countries and sub-regions differently. For example, low oil prices will have negative impact on major oil exporters such as Mexico, Colombia, Venezuela and Ecuador, while low metal prices will affect exporters such as Chile and Peru. While metal and oil prices do not tend to affect employment or consumption, they do have a large impact in public revenues, output, and investment. On the other hand, the prices on agricultural products affect employment, consumption, and public revenues (i.e. export taxes). Source: IADB As per the IADB projections, the LAC region will lose between 6.3% and 14.4% of its’ GDP during the 2020-22 period. The Southern Cone will be impacted mostly by commodity prices, but the dislocation of financial markets will also have a relevant impact, since countries in the sub-region tend to be financially integrated. For the Andean region, the impact might seem low at sub-regional level, but specific cases might vary per country. Ecuador, as an oil exporter, will be impacted by the low prices and its financing needs, and it cannot use the exchange rate to absorb the shock because its economy is dollarized. A similar case might be observed for Colombia, which is an oil exporter that normally attracts foreign investments to finance current account deficits. Peru, on the other hand, will be impacted by copper prices, but has relatively low debt and good access to capital markets. Mexico is also expected to suffer severe GDP losses, mainly because of its trade dependence with the US, globally integrated value chains and low oil prices. Central American and Caribbean countries can benefit from low oil prices, as they are mostly oil importers, but their GDP losses are mainly caused by the high dependence on the US for tourism revenues and remittances. In 2018, North America accounted for 69% of tourists in the Caribbean. Due to the current and expected travel restrictions, tourism in the Caribbean is expected to contract by 25%. Tourism represents 15.5% of the GDP in the Caribbean region, but the range of dependency varies greatly per country, as tourism expenditures represent 75% of Aruba’s GDP, compared to 4% for Trinidad & Tobago. The impact will also be felt directly in employment and household incomes, as the sector employs 2.4 million people in the Caribbean region. [caption id="attachment_5433" align="aligncenter" width="618"] Source: UN-ECLAC Statistics[/caption] Impact on Trade Moreover, the pandemic will also have an impact on the already weak international trade prospects for the region, additional to decrease impact in commodity prices. The first phase of the US-China agreement in January, on which China pledged to increase its importance from the US by at least $77 billion in 2020, could potentially displace LAC as a trade partner for China in some product categories. It is estimated that the value of LAC’s goods exports will be reduced by at least 10.7% by 2020, due to both a fall of 8.2% in prices and a 2.5% fall in export volumes. [caption id="attachment_5436" align="aligncenter" width="1011"] Source: UN-ECLAC[/caption] Note: The following growth rates are assumed for 2020: 1.0% (world), 1.0% (United States), 0.3% (Japan), 0.5% (United Kingdom), -0.2% (European Union, 27 countries), 3.0% (China) and -1.8% (Latin America and the Caribbean), plus an average reduction of 16% in the region’s commodity export basket. The greatest impact will be felt by the countries of South America, which specialize in the export of commodities, making them more vulnerable to a decrease in prices. In contrast, the value of exports from Central America, the Caribbean and Mexico would decrease less than the regional average due to their links with the US and their lower dependence on commodity exports. However, oil-exporting countries are expected to see the largest decrease in value. The COVID-19 crisis may also have an impact on the region’s export performance because of its effect on imports used to produce exports. Some of the most affected countries will be Mexico and Chile, which receive 7% of their intermediate inputs from China, followed by Colombia and Peru, which import ~ 5% of their intermediate inputs from China. Regional exports to China are expected to fall the most in 2020 (-21.7%), affecting products with linkages in the value chains within China (iron ore, copper ore, zinc, aluminum, soybeans, soybean oil, etc.). The most exposed countries in the region are Argentina, Brazil, Chile and Peru, which are the region’s largest suppliers of such products to China. [caption id="attachment_5437" align="aligncenter" width="981"] Source: UN-ECLAC Statistics[/caption] Note: The following growth rates are assumed for 2020: 1.0% (world), 1.0% (United States), 0.3% (Japan), 0.5% (United Kingdom), -0.2% (European Union, 27 countries), 3.0% (China) and -1.8% (Latin America and the Caribbean), plus an average reduction of 16% in the region’s commodity export basket. Regional exports to the US (-7.1%) and the European Union (-8.9%) are also expected to decrease to a lesser extent. Mexico is the country most exposed to changes in supply and demand conditions in the US, especially in the manufacturing sector. Costa Rica is also highly exposed to economic conditions in the US, as about 10% of its GDP depends on the United States supply and demand. The countries most exposed to changes in supply and demand conditions in the European Union are Chile, Mexico, and Brazil, as around 5% of their GDP depends on the service and manufacturing sectors. Impact on Poverty and Employment Given the region’s economic and social inequalities, the effects of the pandemic will disproportionally affect the poor vulnerable middle-income segments of the population. This will lead to an increase in informal employment and child labor, as the most vulnerable families will have to rely on these for survival. Poverty in the region had already increased during 2014-2018, and the effects of the pandemic are very likely to increase the poverty and extreme poverty rates. According to ECLAC estimations, if the effects of the pandemic lead to a 5% loss of income for the economically active population, the poverty rate can increase by 3.5 percentage points, while extreme poverty is expected to rise by 2.3 percentage points during 2019-2020, compared to an increase of 0.3 and 0.7 percentage points change respectively in the previous year. [caption id="attachment_5438" align="aligncenter" width="597"] Source: UN-ECLAC[/caption] People employed by micro, small or medium-sized enterprises (MSMEs) are a very vulnerable segment. Almost 99% of companies in the LAC region are MSMEs, and these represent the majority of companies in almost all economic sectors. The temporary shutdown measures and restrictions on economic activities will lead to a significant decrease in sales revenues, putting the survival of these companies at risk. The economic impact numerous bankruptcies and closures MSMEs will have large social cost, given that these companies accounted for 61.1% of total employment in the region in 2016. Regional Context LAC governments face significant constraints in terms of their capacity to fight the effects of the pandemic. These constraints are not necessarily new, neither have they been caused by the pandemic. Rather, the pandemic has exhibited the many deficiencies in the institutional capacity of LAC countries due to decades of development policies that were not conductive to create sustainable and resilient economies. The results of this are, to varying extents among countries, economies heavily burdened by dire fiscal spaces, and gaps in access to basic services. Fiscal Space The LAC region presents a weak fiscal situation. No country in the region can afford the increases in spending carried out by developed countries to mitigate the impacts of the crisis. On average, public debt represented 62% of the GDP in 2019, compared to 40% of GDP in 2008. The high levels of debt will limit the response capacities of countries, and these will greatly vary as the levels of debt are very different between them. In 2009, the region was able to respond to the international crisis with an average fiscal expansion of 3% of GDP. At the current debt levels, the response capacity today would be approximately 1.5% of GDP. [caption id="attachment_5439" align="aligncenter" width="567"] Source: IADB & IMF[/caption] Moreover, the region’s capacity to access financing has also been affected by the crisis. According to data from the Emerging Markets Bond Index (EMBI), the cost of borrowing in for LAC countries doubled between January and March 2020. The region pays on average 700 basis points for external credit, but this varies between countries. Countries like Brazil and Chile can still access international credit at higher but “reasonable” rates, while for countries like Argentina and Costa Rica, the costs are so high that this is no longer a viable option. [caption id="attachment_5440" align="aligncenter" width="550"] Source: IADB with data from IMF and Bloomberg[/caption] Supporting Infrastructure: Internet, Healthcare & Social security Digital technologies have enabled a transition to work-from-home and study/learning-from home, reducing the impact on some economic activities and education. Although more than 67% of LAC’s population had access to internet in 2019, there are big differences in terms of access between countries. While +80% of the population has access to internet in countries like Bermuda, Aruba and Chile, this percentage drops below 50% in Peru and as low as 12% in Haiti. This is without considering the sub-national disparities between rural and urban populations, as well as income segments within each country, regarding access to internet. [caption id="attachment_5442" align="aligncenter" width="1043"] Source: World Bank[/caption] As for health services, the capacity of health systems in the region varies greatly between countries. The region’s government spending in health was 2.2% of GDP in 2018, far below the 6% of GDP recommended by the Pan American Health Organization (PAHO). In 2016, out-of-pocket health expenditure by households as a proportion of total current health expenditure in Latin America and the Caribbean (37.6%) was more than double that of the European Union (15.7%), and participation in health insurance plans for employed people aged 15 years and older was only 57.3%. [caption id="attachment_5445" align="aligncenter" width="334"] Source: World Bank[/caption] The LAC region has a serious deficit in hospital beds, including those in in- tensive care units (ICUs), and medical personnel (doctors, nurses, and others). In OECD countries, there are 3.5 doctors and 9.8 nurses per 1,000 inhabitants, whereas the comparable figures for LAC countries are 1.8 doctors and 4.4 nurses. Source: UN-ECLAC Statistics Moreover, health services in the region tend to be inadequate and not entirely accessible. In line with the low spending on healthcare, public services tend to be of varying quality, and private healthcare services are only available for those who can afford them. Furthermore, specialized healthcare services and physicians are mostly concentrated in key urban centers, making their access and affordability challenging for the low-income segments of the population. Social protection systems in LAC will also face several issues, especially for countries with limited fiscal space. While these were already inadequate before the crisis, social protection systems will face several issues affecting their capacity to respond to the pandemic. The region faces high rates of employment informality, with a regional average of more than 50% in 2017, limiting the access to social protection services and benefits. Only a few countries in the region have unemployment benefits. In 2019, only 6 countries (Argentina, Brazil, Chile, Colombia, Ecuador and Uruguay) had employment insurance for formal sector workers. Contributory social protection systems will face very high demands of sick leave benefits by workers, and the tax funded non-contributory social protection programs, which are normally designed to support the ported segments of the population, will need to be extended to cover low income families at risk of falling into poverty. Policy recommendations The pandemic has put countries in a situation on which they face 2 simultaneous crises: a health crisis, and an economic crisis. Given the limited fiscal space and costly access to finance for some countries in the LAC region., the response options are very limited. The link between the health and pandemic impacts will have governments juggle between different key objectives. In the short term, the implementation of lockdowns, people movement restrictions and other social distancing measures are the most effective ways to fight the spread of the virus and control its mortality. However, general lockdowns also increase unemployment, declines in salaries, and increases poverty. Governments do not have the fiscal resources to compensate the sectors affected by the pandemic. Therefore, governments must prioritize resource allocation. Naturally, allocating resources to one sector will reduce the resources available for another. The social context of the region will augment this tension. For instance, many households in the region were already poor before the pandemic, and any decrease in their income will put their survival at risk. On the other hand, households in the vulnerable middle class proportionally suffered the steepest decline on their incomes, so it will not be easy to balance the support given to both segments. At the same time, governments must balance between supporting the sectors most affected by the pandemic (hotels, restaurants, etc.) and the workers of the many other sectors that will also be affected. Typical support measures, such as cash transfers, will not be sustainable for extended periods of time, even in countries with greater fiscal resources. The current social support programs implemented by some countries in the region have limitations due to their design. These typically target segments classified withing structural poverty and are not designed to target vulnerable groups that are going through the transitory poverty caused by the pandemic. While the specific measures will vary per country, according to their available resources, there are several recommendations that can be followed to tackle both crises.: A commensurate fiscal stimulus is needed to support health services and protect incomes and jobs. Countries must guarantee the supply of essential goods, such as medicines, medical equipment, food and energy, as well as universal access to testing and health care services. Health spending must be a priority, especially in countries with limited budgets. During the confinement period, resources must be focused on increasing the response capacity of the health system and expanding testing capacity. Mass targeted testing could be used to control infection rates among vulnerable populations. Focus mass testing efforts in targeted regions and hotpots on which the most vulnerable populations (i.e. those more pressed to go back to work, those most vulnerable or exposed to the virus) are concentrated. Serological tests would be the most efficient for this testing method on the LAC region, given that they are cheaper and do not require complicated technology. Social protection systems need to be strengthened to support vulnerable populations. Countries need to expand non-contributory programs, such as direct cash transfers, unemployment, underemployment, and self-employment benefits aimed at vulnerable population segments. Leverage and adjust already existing programs. Some countries in the region already had cash transfer programs in place before the crisis, which could be expanded and adjusted with new targeting instruments to cover poor and vulnerable population segments. Using alternative sources of data to identify vulnerable households, such as electricity consumption, application of employment benefits, or data from recent household censuses, can be used to identify priority targets. Housing crisis and massive business closures can be avoided by enabling mortgage and rent payment deferrals. Government should also consider deferring payments of basic services such as of water, electricity, and internet bills for low-income people for the duration of the pandemic. Central banks must ensure firms’ liquidity to ensure their operations can be carried out and the stability of the financial system. Central banks should intervene directly to provide the liquidity needed by the private sector. Prevent the collapse of the financial system by extending guarantees and credits to the banking sectors and other businesses whose closure would put financial stability at risk. While this measure will affect resources available for other interventions, it will benefit companies and economic sectors not benefited directly by other policies. Avoid the bankruptcy of businesses and minimize the decline in formal employment. Governments can extend loans and guarantees to businesses to provide liquidity. Temporarily suspend (moratorium) or reduce payments of taxes, mandatory contributions (except health insurance) and other regulations that increase the cost of production. Make the necessary legislative reforms to allow companies to temporarily reduce employment costs without permanent layoffs, such as temporary reduction of working hours and salaries. Immediate support should be provided to workers in MSMEs, low-income workers and those in the informal sector. International cooperation and multilateral organizations should design new technical and financial instruments to support countries facing fiscal pressures. They should also consider offering low-interest loans and debt relief and deferrals to open fiscal space. Multilateral institutions can go beyond financial support and provide technical assistance, by leveraging their areas of expertise and support networks, to help countries drat their response plans and their sequencing over time, and offer support in cross-cutting areas, such as big data and artificial intelligence to facilitate tracing, among other areas. Lift the sanctions on countries that are subject to them so they can have access to food, medical assistance and supplies, and COVID-19 tests. Ensure coordinated management of the response to the crisis. It is imperative that governments create high-level coordination mechanisms, especially given the multi-level government system in some countries, to establish and monitor goals and timeframes, allocate resources, and organize communication about the crisis. Ensure continuous and transparent communication with the general population, private sector, minorities, especially regarding the efficient and effective use of resources to fight the pandemic, to ensure public support and collaboration in the different measures. Conclusions While countries are already fighting the pandemic with using some and other policy measures, no response will be perfect. Governments will most likely have to implement and sustain multiple measures at a given time, by leveraging their available resources, and implement adjustments based on the results over time. The crisis was certainly unpredictable, but as mentioned before, it has exhibited the many deficiencies in the economic and social systems developed by Latin American countries in previous decades. While countries must focus on fighting the pandemic today, once the crisis is over (hopefully soon), countries must look back to the past and rethink their development models to re-commence addressing the challenges that they have been dragging for decades, such as high levels of informality, poverty, untransparent fiscal management, access of basic services and build resilient and sustainable economies for the future. Jesus Cazares - Senior Research Associate Sources: IADB https://publications.iadb.org/publications/english/document/2020_Latin_American_and_Caribbean_Macroeconomic_Report_Policies_to_Fight_the_Pandemic.pdf IADB https://publications.iadb.org/publications/english/document/Public-Policy-to-Tackle-Covid-19-Recommendations-for--Latin-America-and-the-Caribbean.pdf UN-ECLAC https://repositorio.cepal.org/bitstream/handle/11362/45351/1/S2000263_en.pdf UN-ECLAC https://estadisticas.cepal.org/cepalstat/web_cepalstat/estadisticasIndicadores.asp?idioma=i IMF June 2020 Economic Outlook: https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020 IMF October 2020 Economic Outlook: https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020 World Bank https://databank.worldbank.org/home.aspx
With the long-term implications of the global coronavirus pandemic, crisis management is being put under the spotlight on all levels, from households to companies, different institutions, and governments. Amid the crisis, governments began to mobilize their economies on several fronts including closure, economic, and healthcare policies; to mitigate the negative impacts of the pandemic. Zooming in on businesses, we’ve seen through the news, reports, and most importantly regulations how they’ve been impacted differently based on their sectors, as well as size; but can their type of ownership play a role in the effects of COVID-19 on businesses? In this blog we’ll be looking at family vs non-family-owned businesses, shedding light on the differentiating factors at the core of this split that echoes in times of crisis management, allowing us to underline the contrasting coping measures. Interestingly, family-owned businesses have received less media coverage than non-family; while according to the Family Firm Institute, family businesses account for 2/3 of all businesses across countries, generating between 70-90% of global GDP and creating 50-80% of the jobs around the world. Organizational differences between family and non-family businesses First and foremost, the significant and particular influence of family governance represents a distinctive difference between family-owned and non-family businesses that should be considered. Ownership among those families is strongly related to a psychological experience, which results from years of investing in the business’ governance. By integrating the business life into their families, the fate of the employees, customers, and surrounding communities becomes linked to its success. Family governance is associated with a series of values, among which are collectivism, altruism, trust, identification, loyalty, and commitment. Another distinguishing factor between both ownership models is that more often than not family owners admit having a business purpose related to the pursuit of non-financial goals; versus non-family owners who measure their organization’s success through its financial performance. The latter supports another core value at the heart of family businesses which is the valued labor relations. To illustrate this better, in the US, you can find many family businesses with greater employee benefits, than big non-family businesses or unions. For example, the In-N-Out Burger chain offers its part- and full-time employees, benefits that include the 401(k) plan of retirement, paid vacations, dental and vision coverage; which is a rare package in the fast-food industry. Employees are often treated like family and find the needed support on personal matters such as family members’ medical bills or funeral expenses. With this emotional attachment to the firm, families tend to have an observation period towards the long-term future more often than the short-term; showing a commitment to the family legacy and its core values. The main objective is to then secure the survival of the firm and succeeding in the uninterrupted family succession project. This approach is frequently referred to as the zoom in/zoom out approach which focuses on iterating between two parallel time perspectives. Firstly, the zoom-out perspective consisting of 10 to 12 years; then the zoom in perspective where the scope is limited to 6 to 12 months. In adopting this approach, families believe that by getting both horizons right, everything else in between will fall in its place. Conversely, the traditional non-family approach usually adopted is the strategic 5-year planning; which is a time frame that belongs to the period in-between when relating it to the zoom-in/zoom-out strategy. Now that we’ve seen some core differences, how is family vs non-family crisis management affected based on the different business models? How family-owned businesses are managing the COVID-19 crisis effectively? Based on Harvard Business Review’s definition, crisis management is the process of adapting oversight of the enterprise under conditions of extreme uncertainty in order to ensure that all stakeholders are aligned around the firm’s long-term vision, values, expected financial outcomes, and risk management measures. With the COVID-19 pandemic, few studies, mostly qualitative, have been conducted surveying European family businesses, different in size and sectors to evaluate their coping mechanism vis-à-vis the current crisis. All surveyed family-owned companies underlined the extent to which the families are prioritizing governance as a necessary service to get them through this period. In fact, maintaining the solidarity and commitment of family members is as important as the continuity of the business. The latter is as effective as proactive crisis management and effective leadership. Family businesses’ crisis management is centered around 5 main factors that are: safeguarding liquidity, operations, communication, business models, and organizational culture. Under a crisis, maintaining an adequate level of liquidity is one of the main stressors families have to manage, on one side; while the pursuit of their business operation becomes more critical than any other time. To begin with the importance of liquidity, some of the favored measures were reducing profits, including executive compensations and dividends, instead of laying off their employees. Secondly, in regards of safeguarding their operations, some of the measures taken by families were reduced social contacts, closing meeting rooms, cafeteria and spreading awareness amongst their employees. Layoffs were hardly mentioned by the family owners as a measure taken at the beginning of the COVID-19 crisis. In fact, families commonly involve employees in finding alternatives that would reduce the firms fixed costs. The third important factor that is crucial in crisis management is safeguarding the communication with employees, customers, and suppliers, even with social distancing. Studies have shown that family-owned employees have mainly 2 fears: one being the consequences which COVID-19 can have on their friends/families and the second being the inevitable economic impact on the firm, as they fear losing their jobs. Family members, then, dealt with the latter through extensive and proactive communication, for example, a German manufacturing company and an Austrian services company communicated their 700 and 15 employees, respectively via WhatsApp messages; while other European companies relied on FAQs on their websites, communication through email, blogs/podcasts, service hotlines or daily newsletters by their CEO written personally to their employees. On the other hand, the biggest challenge when it came to customers, was keeping a personal communication during a time where digital channels are the only ones that can be used. However, it is worth noting that with COVID-19 the general acceptance of digitization has increased, even among late adopting customers. The fourth factor revolves around the firm’s business models that are challenged in times of crisis like COVID-19, at different levels based on the sector of activity. Some family owners found it more suitable to adapt within the same business model; while others found it unavoidable to consider new ones. For example, a family business in hospitality has lost over 80% of its revenue streams but found an opportunity in the increasing demand for toilet paper and used their unoccupied spaces to sell them and generate revenue. Another case of a clothing company where mask production presented itself as an opportunity and production was changed accordingly. Other companies digitalized their workshops and started to include only digital meetings in their standard price offering, charging an additional cost for an on-site consultation. Finally, in family-run businesses, core values remain intact supporting the organizational resilience by yielding both, stability and direction during times of high uncertainty and volatility; which brings us to the last factor of crisis management that is culture. The pandemic has been creating a strong feeling of solidarity among the different stakeholders including employees and suppliers driven by the idea of facing the crisis together. For instance, many family firms have underlined the manifestation of employees’ commitment seen through an increase in motivation, teamwork, and cohesion. In addition to the latter, an increased acceptance towards digitization has been shown among the older employees, as well as others, such as cooks in restaurants who still took orders by hand. To conclude, the differences at the core of the family-owned businesses, especially when it comes to the owners’ emotional attachment to the firm, as well as the non-financial goals are what stem different reactions and crisis management approaches than non-family owners of companies. We can see through this example the importance of crisis management and how it extends to the core values and culture an entity holds. Farida Rehab - Business Analyst Sources: https://www2.deloitte.com/content/dam/insights/us/articles/r7-12011_long-term-goals-meet-short-term-drive-family-business-survey2019/DI_Long-term-goals-meet-short-term-drive.pdf https://www.familybusinessmagazine.com/opinion-family-business-and-coronavirus-fears https://hbr.org/2020/05/what-family-businesses-need-to-adapt-to-a-crisis https://www.emerald.com/insight/content/doi/10.1108/IJEBR-04-2020-0214/full/pdf?title=the-economics-of-covid-19-initial-empirical-evidence-on-how-family-firms-in-five-european-countries-cope-with-the-corona-crisis https://link.springer.com/content/pdf/10.1007%2F978-3-658-16169-9.pdf https://www.sbs.ox.ac.uk/oxford-answers/covid-19-call-action-family-business https://www.businessinsider.com/in-n-out-employee-pay-2018-1