A massive explosion in Lebanon on 4 August marked the latest in a series of crises that the country has gone through since October 2019. Compounding the humanitarian crisis from the blast is an ongoing popular uprising to oust a corrupt government, a financial crisis that has resulted in an 80% currency devaluation and a growing coronavirus pandemic. But for most YPO business leaders in Lebanon, the massive explosion at the Port of Beirut was particularly painful as it directly affected not only their businesses and property, but more importantly, the lives of their families and friends.
As volunteers clear the rubble amid a new lockdown to control surging cases of COVID-19 post-explosion, these business leaders have developed the ultimate crisis management checklist in preparation for more challenging times ahead.
Five chief executives — from the retail, manufacturing, trading and health sectors — share some of their survival tactics and lessons in resilience as many global business leaders continue testing their own crisis management readiness in the face of the coronavirus crisis.
Accept and act on the non-essentials
“Accept the situation, your feelings of being hurt and disappointed, and that your life as it was has changed. The faster you accept this, the faster you can cope,” says Christine Assouad, Founder and CEO Dunkin Donuts Lebanon and Semsom. “The piling up of the crises has made it especially difficult. But in each case, what proved important was not getting stuck in denial and moving fast in cutting the nonessentials in the business.”
In Assouad’s case, those non-essential expenses covered the tiniest of details, including stopping color printing, as well as optimizing unused space and putting on hold all marketing campaigns and consumer research to compensate for the increase in raw material cost since all supplies are imported.
“Today is about survival and cash flow. We kept food safety as part of our essentials. But since last October, we have had to close 10 stores, two of which were completely destroyed by the blast, and shut down three departments,” says Assouad. “Making decisions of closing stores and departments is always difficult. But accepting the reality and acting with speed proved important for the survival of the business.”
Strengthen crisis management preparedness
Having experienced years of war and violence, all the leaders interviewed had detailed crisis management plans to cover potential risks, and the blast provided an opportunity to stress-test these plans.
Hassan Sinno, President of ITCO, a vertically integrated lumber and building material company with headquarters close to the port in downtown Beirut, says that in terms of digital backup and servers, they were well prepared. His team was fully operational the day after the blast.
Similarly, for Nabil Makari, Managing Partner at NJO Holding S.A.L, and CEO of Retail Alliance S.A.L, “business continuity was always on the agenda. Corona(virus) had a small positive in that sense as confinement made us better at working remotely, and there was a crisis management group in all the retail shops.”
Richard Haykel, Chairman at Haykel Hospital, explains how the level of planning and testing that have been put in place before the blast paid off. “In Lebanon, everything has to have a backup plan, including planning different sources of electricity and phone networks,” he says “We have learned to add redundancies, the duplication of critical components or functions of a system, in everything. For example, we have done a lot of planning for the space outside the building, like turning one of the parking parks into triage if required.”
While no one could have expected the blast, these plans paid off. Assouad explains, “The team thought it was an earthquake, and they were trained to put their heads under the table if an earthquake happens. They reacted quickly and lives were saved by avoiding the falling glass. We will continue to plan for the worst and hope for the best in order not to get caught off guard.”
For Randa Mahasni, Managing Partner at Food & Drug Corporation (FDC) S.A.I., it remains uncertain if the company’s insurance policy, which includes the risks of war and political violence for property, will cover the damage caused. “We were told until the investigation on the cause of the blast is confirmed and how to classify it, we cannot expect a refund as insurance coverage is linked to the cause.”
“While Lebanese always expect ‘black swan events,’ this was even beyond the worst we could have imagined,” says Sinno. “We had insurance covering all kinds of risks, including war and business disruption. What we had not planned for is the solvability of the insurance company itself or even of the ‘cut through clauses’ they have with their reinsurers in case of insolvency.”
Meanwhile, with 80% of Sinno’s imports going through the Beirut port, the entire logistics chain got destroyed. “We are now struggling to develop our operation in the less cost-effective port of Tripoli. We have learned that diversification, be it in banking, insurance or even logistics, has to be thought through beyond borders, and that dividing the risk among several local companies is not enough,” adds Sinno.
Adaptability and agility
Since October, businesses had to adapt to the new way of working as a result of the multiplying crises. “All practices have changed, and the economy is turning into a cash economy. We are operating without banking facilities. Letters of credits and letters of guarantees don’t exist anymore,” says Mahasni, who is trying to navigate around these restrictions by leveraging her relationship with other industry leaders and stakeholders to try to find grassroots solution. “In light of the country’s risk and absence of bank facilities, many of our suppliers reviewed down our payment facilities and consequently we had to review down our facilities to the trade.”
Makari’s supermarket chain business was particularly hit as the central supply warehouse is located near the port.
“In times of panic, people rush to supermarkets. Stocks are getting depleted and we are unable to tap into our main warehouse, so we are currently looking at opening fulfillment centers across the country to refill stocks instead of centralizing in one location,” he says, “Another idea we are exploring is expanding the backdoor receiving area, the depot of each supermarket. We have to be creative, counterintuitive, while trying to remain cost efficient.”
Because of the devaluation of the currency and plummeting purchasing power of consumers, Makari has had to implement product rationalization, reducing by half the number of brands normally found on shelves. “A lot of space is not being utilized, so we are using the concept of ‘shop in shop,’ with other ‘pop up’ store fronts displaying items and services people need at this time,” says Makari, who has also accelerated the expansion of an e-grocery section since the blast.
Trying to create new opportunities has been an important part of managing the crisis for Assouad as well. “While you need to react to the latest immediate crisis, it is important to keep the future in mind, including trying to find opportunities for growth created by the crisis,” says Assouad, who has recently partnered with a large grocery store chain to help sell her products outside her stores. “This future growth mindset is as important as survival. I keep reminding my team that this will end and that we can emerge from crisis stronger.”
Today is about survival and cash flow . . . Making decisions of closing stores and departments is always difficult. But accepting the reality and acting with speed proved important for the survival of the business. ”
— Christine Assouad, Founder & CEO Dunkin Donuts Lebanon and Semsom share
Lead with compassion, and by example
A key thread in the coping strategies for all these business leaders has been showing empathy and compassion for their teams. Haykel, for example, has been helping place some of his locally trained nurses at hospitals in the Gulf countries for a year or two, to gain experience and a decent income, and come back when things settle.
Makari has also tried to motivate his team through engaging them in community service and in the strong civil society movement in Lebanon, including encouraging them to lead volunteering initiatives such as distributing food supplies. He says, “One of the ideas from the team was to distribute products that were partially damaged by the blast, such as dented cans of tuna, but still edible, to those in need. This has kept us going, knowing that we are lucky to have a business and be able to help has strengthened our company culture.”
Leading by example has also been a key driver for team building during times of crisis. “I lost my home and suffered from multiple injuries from the blast. But after two days, I was at work. As CEO, this sends a big message and motivated everyone to try to do their best,” says Makari.
Take care of yourself first
“While we try to keep our teams positive, there are also so many things at a personal level to deal with,” says Assouad. “I was very strong in the revolution (started last October) and was distributing doughnuts and coffee on the streets, but the energy gets depleted.”
After the blast, Assouad took five days off to go to the mountains and focus on herself and her kids, using this time to also connect with her YPO peer network to organize a fund to help those in need. She has also found a new way of recharging by working on her new YouTube channel that she founded at the start of the lockdown to mentor business leaders. “The YPO fund and the videos have helped give me positive energy. Business is shrinking, so I needed to find something that recharges and energizes me.”
The group expressed the same sense of crisis fatigue, with many admitting lack of sleep and the need to spend more time in nature, with the family or supporting peers.
“Focusing on myself has been very important, allowing me to take a step back and come back stronger. As CEOs, we need to accept that we are also human, and we need to make sure we are well first, as we can’t help anyone otherwise,” says Assouad.
“Something we often forget in coping with crisis is that you and your teams’ physical and mental wellbeing is what will, in the end, drive the business through a crisis. All material issues, no matter how big, will eventually be resolved one way or another.”