With more than C$44 billion ($33.3 billion; €28 billion) of direct private equity investments on its books and at its subsidiaries, Canada Pension Plan Investment Board knows something about running a business.
The C$434 billion institution had C$105.6 billion of private equity assets under management as of 30 June, per its Q1 quarterly report published last week.
As the coronavirus batters global economies and portfolio companies, Suyi Kim, CPPIB’s head of Asia-Pacific, has shared guidance to help business leaders navigate the pandemic.
Speaking on a digital panel hosted by investment non-profit FCLT Global on Tuesday, Kim warned business leaders that fear and insecurity can shut down long-term thinking and creativity.
She outlined three crucial points for executives and stakeholders to consider.
Kim advised portfolio company executives to use the pandemic as an opportunity to emerge in a better position.
“My first advice is to resist fear and seize the opportunity to come out of this crisis stronger,” Kim said, citing Starbucks’s decision to launch the ‘My Starbucks’ customer rewards scheme during the global financial crisis in 2009.
The coffee chain’s share price more than trebled from a low of below $5 at the end of 2008 to around $16 dollars within two years.
“Starbucks faced crisis when the customers opted for cheaper coffee, so they were forced to close many, many stores which were loss-making. More importantly over the crisis, Starbucks shifted the focus from bureaucracy back to the customers and they implemented new strategies that includes [the] My Starbucks idea, based on technology, […] free-thinking and community involvement.”
Private equity-backed companies have found innovative ways to generate revenue during the pandemic. Manufacturers, for example, have retooled existing capabilities to produce goods that are in greater demand as a result of coronavirus.
Prepare for the worst
Business leaders should be prepared for the situation to worsen and recovery times to lengthen.
“When covid initially hit, I remember talking to our portfolio company executives and investment target companies, who were all predicting that their business would be back to normal by this summer – we all now know that will not be,” she said, noting that recovery will depend on when a vaccine is produced and the execution of voluntary and mandatory social distancing measures.
“Internally, we think that the global economic activities will not be back to pre-covid level until 2022,” she added. “We’re expecting companies and leaders to understand and prepare for this pandemic’s effect on the business under various if, and when, scenarios.”
Kim also urged business leaders to build loyalty from employees, customers and suppliers.
“The employees are your key asset,” she said. “[Protecting them] can not only help a business ramp back up more quickly when the situation allows, but also create greater loyalty.”
CPPIB has implemented several human resource measures for its employees, including “thoughtful” return to the office policies that take into account childcare, home-schooling or elderly care needs.
Meanwhile, the fund’s Indian toll-road business L&T Infrastructure Development Projects distributed food to migrant workers travelling home from cities to the countryside by foot.