2020 perspectives on the business impact of COVID-19

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COVID-19 and the great reset: Briefing note #36, December 16, 2020

Vaccines are here. What can stakeholders do to ensure quick and effective distribution and boost public confidence in vaccination efforts?

The first COVID-19 vaccines have been authorized for use and dissemination has begun in several countries, marking a major turning point in the pandemic and bringing fresh optimism for a next normal in the new year. These vaccines were developed four times faster than any other in history, but they will also require a rollout four times greater, amounting to the largest simultaneous global public-health initiative ever undertaken. Governments and healthcare professionals will need to collaborate on an incredible scale to allot and deliver vaccine doses and to address challenges from storage and transport to administration and data tracking. Multiple vaccines and changing supply volumes will also necessitate an evolving delivery model.

Stakeholders face another hurdle to widespread vaccine adoption: some consumers remain skeptical of COVID-19 immunization. To reach herd immunity, our analysis suggests adoption ranges would need to be greater than those of vaccines for the flu and other diseases. The vast majority of US consumers surveyed believe the vaccine is important to facilitate a return to life as it was, but nearly half are “cautious adopters,” preferring to defer vaccination for up to three months to a year, after more data is available. To boost acceptance, healthcare leaders will need to dynamically engage consumers through information campaigns using trusted, influential sources.

New research from the McKinsey Global Institute points to another area of hope in the face of the current crisis: a renewed social contract. Governments across 22 countries have upped their fiscal spending as a percentage of GDP by around 20 percent compared with last year, and the private sector has made efforts to offer employee protections. Combined, these interventions have provided an economic buffer and some initiatives have the potential to translate into long-term solutions to protect individuals from the immediate effects of future crises.

The COVID-19 pandemic is unleashing a new era of change for businesses as well. Companies have seen the effects of high-consequence, low-likelihood risks firsthand. While corporate decision makers cannot plan for every potential risk, we examined some ways they can prepare for extraordinary risks, determine which protections are worth the investment, and position themselves for better resiliency. As CEOs continue to develop their COVID-Exit strategies, we analyzed how two companies have found a successful COVID-Exit path with transformations that balance portfolio moves and performance improvements.

Our research shows that companies are already focusing on two areas in particular. A new global survey of more than 800 executives reveals that companies are prioritizing business building for organic growth, launching new businesses at an accelerated rate and, in turn, growing faster. The strongest companies are also reinventing themselves through next-normal operating models, capitalizing on this malleable moment and the resulting spread of agile processes, nimbler ways of working, and increased speed and productivity.

This week, we took a close look at the banking sector, starting with our 2020 update to McKinsey’s Global Banking Annual Review. We also highlighted developments in two countries: how banks can provide a credit lifeline to small and medium-size enterprises in South Africa and steps Nigeria’s banking sector can take to thrive amid the crisis.

Our industry experts explored the future of fashion, how the COVID-19 pandemic has disrupted mobility and affected demand for in vitro diagnostics, and how Australia’s COVID-19 response can inform decision makers around the world. Global economist Dambisa Moyo also provided insights on models for growth, stakeholder capitalism, and how to drive enduring change amid uncertainty.

Finally, we launched our new Author Talks series, featuring interviews with noted management thinker and professor Roger Martin on the high price of efficiency and McKinsey Global Institute editorial director Peter Gumbel on searching for identity.

Executives everywhere are thinking about the critical next months of the pandemic. Start with the McKinsey Download Hub to find McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The Recovery Will Be Digital. The first four installments—a 172-page report on technology and data transformation, a 130-page report on the path to true transformation, a 206-page report on reimagining the postpandemic organization, and a 157-page report on the challenge of climate change—are available now. The final installment is coming as part of Our New Future, a multimedia series we created with CNBC.

You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 articles related to the coronavirus, our suite of tools to help leaders respond to the pandemic, and how our editors choose images that help readers visualize the impact of an invisible threat.

This briefing note was edited by Dana Sand, an assistant managing editor in the Atlanta office.

COVID-19 and the great reset: Briefing note #35, December 9, 2020

After a tumultuous year for racial justice, companies are pledging change. McKinsey announces one of our biggest commitments: the Institute for Black Economic Mobility.

The year 2020 has been one of losses—around the world, and in the United States in particular. More than 46,000 Black Americans have died from COVID-19—twice as many, proportionally, as white Americans. This year also saw the murders of George Floyd, Breonna Taylor, and many other Black Americans. The events of this year are emblematic of long-standing inequities and are rooted in a long history of systemic discrimination. The typical Black American family has eight times less wealth than a white American family. The racial wealth gap has profound consequences, for families and the US economy, which misses out on between $1 trillion and $1.5 trillion in GDP output each year.

To make good on these profound inequities, or at least make a start, nearly one-third of Fortune 1000 companies made a public statement on racial equity in recent months, and followed it up with an internal or external commitment. Of those, about 57 percent publicly announced the amount they were committing to racial equity initiatives, pledging a total of $66 billion.

This week, we published new research on five attributes of successful coalitions—ideas that can help make sure that the $66 billion pledged achieves maximum impact. We’re also proud to announce the McKinsey Institute for Black Economic Mobility, which will research the issues, convene stakeholders, and work to convert research findings into real-world impact. This is a critical moment. Corporate America is more focused on the issue of racial justice than it ever has been. It is imperative to ensure that the unprecedented commitment of resources and focus toward racial equity is channeled effectively, proves impactful, delivers a high return on investment for society, and brings about real progress for individuals and communities.

Women and children have also suffered immensely from the global pandemic. The latest edition of the McKinsey Quarterly Five Fifty distills our gender research to date in an easy-to-read five-minute summary, and provides links for those who want to learn more. One reason women are more affected: two million women (many of them mothers of young children) are thinking about leaving the workforce, or have already left. And our new research on learning loss during the COVID-19 pandemic finds that students have lost a lot of ground. We offer insights to help educators curb losses and accelerate learning.

In two new podcasts, McKinsey experts spoke with our editors about grief, loss, and burnout at work—and about America’s behavioral health crisis. We also published insights from two leading scholars about the coming revolution in mental health in the workplace.

Also this week, our industry researchers focused on Europe, looking at three topics: decarbonization in various EU industries; new consumer behaviors in grocery shopping; and the impact of the second lockdown on automotive retail. We also outlined steps to help US state governments manage a growing budget crisis.

Finally, we asked a diverse range of our Gen Z consultants (born after 1996) from around the globe to tell us which of the more than 1,000 articles we published in 2020 struck a chord with them. Here’s what they said.

Executives everywhere are thinking about the critical next months of the pandemic. Start with the McKinsey Download Hub to find McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The Recovery Will Be Digital. The first three installments—a 172-page report on technology and data transformation, a 130-page report on the path to true transformation, and a 206-page report on reimagining the postpandemic organization—are available now. Two more are coming as part of Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #34, December 2, 2020

Pandemic fatigue is bad and getting worse. Here’s practical advice for leaders to help people reconnect with their jobs, their colleagues, and their purpose.

“I’m not sure how much longer I can keep going like this.” “I’m completely burned out.” Pandemic fatigue is here, and while almost everybody is feeling it, and more people are talking about it, no one knows exactly what to do about it. Our new research explains principles and sets out practical steps to get through a potentially prolonged period of disillusionment, grief, and exhaustion. Here’s a sampling of the tips on offer:

Leaders need to set and enforce work boundaries; violating these is one of the biggest energy drains.
They can help people see this time as a quest toward something new, not as a restitution of bygone days, and not as chaos to be muddled through.
Managers can encourage employees to take a zero-based approach to meetings, to help them choose which ones to attend.
And they can prioritize the work people do. Now is the time for organizations to finally tackle busyness and focus on the work that matters most. One global organization put a halt to new initiatives for a period of two months to allow for recovery, while another now examines which initiatives to “sunset” and how to intentionally limit the amount of work in progress.

In a companion piece, McKinsey experts spoke with Admiral John Richardson, former US chief of naval operations, about how to lead during long-term crises marked by deep uncertainty. Many of the naval analogies he shared translate well to civilian organizations. Captains rely on the “chief of the boat” to take the pulse of the crew and represent their needs. That’s one way the captain avoids being the ship’s “single point of safety.” If the captain is indispensable, he or she is also overstretched and will inevitably make a mistake. And “recovery is critical to mission effectiveness.” Organizations need structures that protect time off and teams that make it possible for even their busiest members to take extended time off.

Case counts are rising rapidly in many countries, straining hospital systems. Our new research assesses how much slack is left in the system. The answer is not encouraging. In many US localities, for example, COVID-19 beds will be full by December 7, based on current trends. We also offer ideas for hospital systems on how to use their resources to the utmost.

Few industries have been as deeply affected by the pandemic as fashion and retail. This week we published The State of Fashion 2021, our annual report on the industry, issued jointly with the Business of Fashion. Unsurprisingly, we estimate that revenues in 2020 will likely fall by 27 to 30 percent from the year before. Many global fashion companies may be at risk, and the pain extends to workers in low-cost sourcing and manufacturing hubs. But our research also finds that growth should resume in 2021.

This week, our industry researchers also looked at the factors spurring healthtech investment, considered the future of European payments, reviewed the potential for privately owned autonomous vehicles, and detailed ten priorities for governmental resilience.

Finally, our climate experts trained their sights on India, a country that faces a rapidly degrading physical environment. India could become one of the first places in the world to experience heat waves that, in extremis, exceed the survivability limit for healthy people. More generally, heat and humidity will reduce labor productivity and hurt growth in an economy that relies substantially on outdoor work.

Executives everywhere are thinking about the critical next months of the pandemic. Start with the McKinsey Download Hub to find McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The Recovery Will Be Digital. The first three installments—a 172-page report on technology and data transformation, a 130-page report on the path to true transformation, and a 206-page report on reimagining the postpandemic organization—are available now. Two more are coming as part of Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #33, November 25, 2020

What to make of the promising news on COVID-19 vaccines and new CEO insights on leading through the pandemic: here’s this week’s update.

The world has cheered recent announcements about COVID-19-vaccine candidates. Two are showing higher efficacy rates than many dared hope for. Higher efficacy provides greater benefit to any vaccinated individual and may help encourage uptake among some segments of the population. It also reduces the fraction of the population required to reach herd immunity.

While that’s highly positive news, McKinsey research also finds that the new vaccines are likely to accelerate only slightly the timetable to the end of the pandemic. In the United States, normalcy is not likely until the second quarter of 2021, and herd immunity is not likely until the third quarter. In other words, the pandemic will not be vanquished soon, and businesses will continue to be challenged. See our latest briefing materials—129 pages to guide leaders through the difficulties of the next few months.

Leaders can also take inspiration and new ideas from their peers. This week, McKinsey experts spoke with five top executives to learn more about how they are leading through the pandemic. Amrita Ahuja, CFO of Square, spoke about the future of payments, including the potential for a cashless society and frictionless exchanges made possible by machine learning and even cryptocurrency. Jaime Augusto Zobel de Ayala, CEO of Ayala Corporation, talked about how the Philippines’ oldest conglomerate has taken on society’s pain points in housing, electricity, medicine, and water and his optimistic outlook for Asia. His main concern? The potential for geopolitics to create several sets of technological standards, producing inefficiencies and raising costs.

Telemedicine is one of the extraordinary growth stories of the pandemic. Annie Lamont, managing partner of Oak HC/FT, shared her insights on what it and other trends mean for healthcare investing. Lisa Weiland, CEO of the Massachusetts Port Authority, spoke with us about what it means to run a major transportation hub when passenger volumes are down by two-thirds. Airports are preparing for contactless journeys and other means to improve the customer experience. And Tim Welsh, vice chairman of U.S. Bank, explained how new skills are helping the nation’s fifth-largest bank better connect with its customers.

This year’s McKinsey Global Survey on Artificial Intelligence finds “no increase in AI adoption.” But the technology is far from stalled: one-fifth of companies are deriving at least 5 percent of their earnings from AI, and they plan to further their investments in this still-promising technology. And in the latest installment of McKinsey’s series with CNBC, senior partner Mary Meaney speaks with IBM CEO Arvind Krishna and Unilever chief HR officer Leena Nair to discuss how companies can organize for the next normal.

Finally, as the United States heads into a pandemic-altered Thanksgiving holiday, many are counting their blessings even harder than usual—and just as many are hoping for better days to come. A collection of articles and multimedia outlines McKinsey’s views on food security and the ways that food banks, distribution partners, philanthropic foundations, and the private sector can ensure that people across North America have reliable access to nutritious meals. Pradeep Prabhala leads the initiative and offers his thoughts in the New at McKinsey Blog.

Executives everywhere are thinking about the critical next months of the pandemic. Start with the McKinsey Download Hub to find McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The Recovery Will Be Digital. The first two installments—a 172-page report on technology and data transformation and a 130-page report on the path to true transformation—are available now. Three more are coming as part of Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #32, November 18, 2020

In the pandemic, capitalism’s adherents are reconsidering its recent history and its future direction. Two new reports can illuminate the path.

This week, McKinsey experts took a step back to consider the effects of the COVID-19 crisis on the economic system in which much of the world operates: capitalism. Two new reports offer complementary views. In “Rethinking the future of American capitalism,” James Manyika, Gary Pinkus, and Monique Tuin trace the extraordinary achievements of the American system and the work still to come, including the need to rectify unequal and increasingly disparate outcomes for people and places, increasing “superstar” effects, and declining investment in public goods.

“The case for stakeholder capitalism” considers the role of business in society—a role that companies should not resist, lest they “find themselves on the wrong side of history … and also at a competitive disadvantage.” Vivian Hunt, Bruce Simpson, and Yuito Yamada examine the rising expectations for business, detail five principles for companies to follow, and offer many practical insights as they take action. One tactic is simply to publish your targets: a Danish power company put forth a ten-year plan to switch from coal to renewables; they did it in nine years, while simultaneously increasing profits by 43 percent.

Employees may be the stakeholders that need the most attention. According to our latest research, almost a year into the crisis, employees—especially women, LGBTQ+ employees, people of color, and working parents—are crying out for more support. Nearly all employers are aware of the challenges and have established polices to help, but they are finding it hard to execute their diversity, equity, and inclusion (DEI) strategies. Asking and answering a set of tough questions can help companies close the gap.

Our experts also considered the future of corporate training, an expensive and often ineffective activity—when it did succeed, it was through in-person, hands-on learning. The COVID-19 pandemic brought that to a halt, forcing companies to innovate. In our latest research, we chronicle the advances companies have made in the pandemic and the ways in which the new capabilities they have built have secured their competitive position.

Also this week, our industry researchers looked at data’s critical role in two transport industries, bulk and tanker shipping and airlines; considered the effects of the COVID-19 pandemic on supply chains in retail; and outlined our latest findings on consumer behavior, this time in Europe.

We have updated our comprehensive COVID-19 briefing materials. The new 129-page report is now available for download.

Executives everywhere are thinking about the potential for successful vaccines to deliver the next normal. Start with the McKinsey Download Hub to find McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The recovery Will Be Digital. The first two installments—a 172-page report on technology and data transformation and a 130-page report on the path to true transformation—are available now. Three more are coming as part of Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #31, November 11, 2020

A vaccine breakthrough and how companies are thinking about purpose: here’s the latest from McKinsey’s research.

This week saw some surprising news about a large COVID-19-vaccine trial: a leading candidate has an efficacy rate of about 90 percent. There’s a lot of green between this particular ball and the pocket, but the news was most welcome. COVID-19 vaccines have been a focus of our research, as seen in our July 2020 overview, which includes a full discussion of the key issues of manufacturing and distribution, and subsequent articles on the end of the pandemic, an optimistic scenario for the pandemic response in the United States, and the technology transfer that may be critical to beating the COVID-19 crisis.

With the end in sight, or at least in fuzzy focus, companies are thinking ahead. A critical challenge for companies in the postcrisis era will be articulating clear, meaningful, and authentic purposes. Some companies seem to have the answer: they know their reasons for being, communicate them easily to customers, and enjoy the results. Our new framework can help others think through these knotty issues.

Governments have not lost sight of their purpose, but fulfilling it has become much more difficult. The gap between incoming and outgoing funds may reach $30 trillion soon. Our latest research shows a particularly effective bridge for governments to consider: real estate. The public controls a vast amount of acreage, office space, and other assets, and governments can extract much more revenue from them without breaching the public trust. On a related note, as part of their purpose, many businesses will embrace sustainability; voluntary carbon markets can help them reach their goals.

Cost management may be the yin to purpose’s yang, but is no less essential. In our new survey of some 300 C-level executives, we look at the ways that the corporate center is evolving. Our latest observations find that many organizations are accelerating their cost-reduction targets, modifying their operating models on the fly, and redefining their functional priorities.

Our new regional research considers two large economies in Asia. China, the world’s growth engine for the past 25 years, has come back—in ways that may surprise you. Consumer behavior has changed, pockets of growth are shifting, and leadership and management practices are in flux; businesses that manufacture and sell in China must be alive to the changes. And in Australia, businesses would be wise to understand today’s more mindful consumers.

Finally, the McKinsey Podcast zeroed in this week on retail, where the talk was all about rapid revenue recovery. Say what? It’s true: winners are recognizing the shifts in consumer behavior, adjusting their offerings, and rebuilding their businesses. Successful companies have five traits in common.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #30, November 4, 2020

Scenario planning and a new decision tool are helping executives cut through the murk of the pandemic’s many confusions.

Executives have noticed the striking rise in COVID-19 cases in many parts of the world, yet they remain positive—if a trifle more wary. In the October edition of our monthly survey of more than 2,000 leaders around the world, fewer executives than in September say that better economic conditions are on the way. But the balance is still tilted toward a positive outlook, especially where profits and customer demand are concerned.

We also asked respondents to vote on which of McKinsey’s nine pandemic scenarios is most likely. As of October, they are solidly in favor of scenario A1 (a muted recovery) but also see B2 (a prolonged and insufficient recovery) as a scenario to consider. Unsure about the terminology? In a new interactive, we explain our scenarios, what executives are thinking, and how that thinking has changed over time.

For decades, McKinsey has advocated for the advantages of scenario planning while also recognizing the ways the approach can fall short. The pandemic has illustrated both sides of the equation. Enter a new approach: parametric analysis, in the form of an “uncertainty cube.” Right now, the businesses facing the greatest uncertainty are limiting themselves to three or four macrolevel scenarios that provide general direction but not much detailed guidance. The uncertainty cube uses several macroeconomic and financing parameters to generate highly specific advice by which to steer such a business.

Operating models, too, have come under pressure at companies facing great uncertainty. What’s needed are new structures designed to cope with the unprecedented conditions of 2020 and beyond. One way forward may be to embark, at last, on a true transformation. A new video explains the logic.

This week, we were delighted to sit down with two executives cutting remarkable paths through the pandemic. Aneel Bhusri, co-CEO of Workday, reveals the secrets of life in the pandemic for the finance- and HR-software powerhouse. And Sir Mark Lowcock, under-secretary-general for humanitarian affairs at the United Nations, explains the panoply of effects of the crisis on the United Nations and its missions.

Also this week, McKinsey experts assessed the potential for India’s manufacturing sector to deliver much-needed growth and jobs; reviewed the impact of the pandemic on the global petrochemical industry; and considered the moves that South Africa’s insurers can make to thrive in the long term.

Finally, in the pandemic, many of us are spending more time at home with our families. Children are naturally curious about what parents do—and it isn’t always easy to explain. At McKinsey, we took a crack at it and developed a new explainer for the younger crowd. Hint: it involves fishing.

Executives everywhere are thinking through the contours of the next normal. Start with the McKinsey Download Hub to find McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The Recovery Will Be Digital. The first two installments—a 172-page report on technology and data transformation, and a 130-page report on the path to true transformation—are available now. Three more are coming as part of Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #29, October 28, 2020

New views on the postpandemic futures of six sectors.

The old joke has it that nostalgia isn’t what it used to be. As the unrelenting COVID-19 pandemic rolls on, the future isn’t what it used to be, either. What used to be a simple idea now comes freighted with caveats, assumptions, and speculations. In the spirit of illumination, McKinsey researchers this week took a look at how things might develop in six sectors beyond the next few weeks.

The auto industry is one of the world’s largest and has been devastated by the pandemic: sales may drop by 20 to 30 percent in 2020, and we estimate that profits will fall by $100 billion. But automakers can respond. One example: software-subscription services, which enable people to pay for programs that unlock features from heated seating to full self-driving capabilities, allow dealerships to develop a better relationship with consumers while offering drivers additional flexibility and customization.

The US restaurant industry has given many iconic brands to the rest of the world. But today, the sector is in trouble. In our latest podcast, we review the industry’s predicament, which we explored earlier in some depth, and assess the innovative solutions that companies are devising. Takeout and delivery are here to stay, and restaurants are working to make those experiences better. Menus also need a rethink. People don’t order sides, appetizers, and desserts as frequently when they’re ordering for delivery—but as leaders know, those items are often the difference between profit and loss.

For banks, the pandemic has changed everything. Risk-management teams are running hard to catch up with cascades of credit risk, among other challenges. Down the line, we expect that automated underwriting will take hold for retail and small-business customers and will both reduce losses and save costs.

Asian insurers are looking at a more consolidated future. Our new report argues that insurtechs’ new, pandemic-oriented products and digital capabilities—not least the ability to reach millions of customers within a few months—mean that a programmatic approach to M&A is the surest strategy to overcome the industry’s structural weaknesses.

We recently hosted a panel discussion with Shobana Kamineni, executive vice chairperson of India’s Apollo Hospitals, to discuss the evolving nature of healthcare at scale. Apollo Hospitals comprises more than 7,000 physicians and 30,000 other healthcare professionals, and its app is downloaded about 30,000 times a day. Among the findings: public–private partnerships are working well and have the potential to influence the future of healthcare.

Finally, we consider five fundamental questions for US higher education, as colleges fashion their pandemic response. Also this week: a new survey of Europe’s small and medium-size businesses lays out the extent of the economic damage and owners’ muted outlook.

Executives everywhere are thinking through the contours of the next normal. Start with the McKinsey Download Hub to find McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The Recovery Will Be Digital, featuring a 172-page curated volume that you can download—the first of five edited collections that accompany Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #28, October 21, 2020

Geopolitics is back. Business leaders need to think through the implications.

In the 1990s, adherents of Francis Fukuyama came to believe in the “end of history.” The COVID-19 pandemic and a host of other factors—such as climate change, cyberattacks, and terrorism—have helped history stage a resounding comeback. Now, according to Richard Haass, president of the Council on Foreign Relations, the trick for businesses is to adjust and hope that history is just back for a visit and not for revenge. In a discussion with McKinsey senior partner and cochair of the McKinsey Global Institute (MGI) James Manyika, Haass speaks about the return of geopolitics to the top of the CEO agenda. Supply chains are another critical focus of the renewed attention, as covered in MGI’s new report and partner Susan Lund’s comments in the Economist.

McKinsey research has documented the disproportionate effects of the crisis on ethnic minorities, both in the United States and elsewhere. Our latest report on the topic looks at the United Kingdom. Key findings: over the past two decades, every ethnic minority group has made progress, in both absolute terms and relative to the white majority, on a range of economic indicators. But the COVID-19 crisis threatens that progress; not only do all ethnic-minority groups have higher age-adjusted COVID-19-related death rates than white people do, but Bangladeshis and Pakistanis, in particular, are concentrated in occupations that have been hard hit by furloughs and layoffs.

This week, our marketing experts zeroed in on B2B businesses and how they sell. The classic approach is person to person; think of pharma’s armies of “detailers.” However, the COVID-19 pandemic has moved almost all sales online, often to self-service digital platforms. Everyone seems to be happier with the new arrangements. Some 70 percent of buyers say they prefer digital interactions; sellers like the greater effectiveness. Videoconferences and live chats are helping companies seal the deal; traditional phone calls are now a last resort.

Also this week, our industry researchers examined the latest travel data from China to understand what it might mean for tourism and business travel elsewhere. They also considered the new challenges for innovation in consumer companies.

Executives everywhere are thinking through the contours of the next normal. Start with the McKinsey Download Hub to find McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The Recovery Will Be Digital, featuring a 172-page curated volume that you can download—the first of five edited collections that accompany Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #27, October 14, 2020

The stock market has many puzzled. Here’s our explanation.

In the middle of the deepest recession in memory, stock markets are reaching new highs. Why the disconnect? To understand the conundrum, McKinsey experts point to three factors. First, many investors still take a long-term perspective; they are looking ahead to the end of the pandemic. Another factor: five big-tech companies now make up 21 percent of the S&P 500, one of the world’s most-watched markets. And smaller, unlisted companies have absorbed a lot of the economic damage, such as the dramatic rise in unemployment. The overall stock market can do relatively well even when employment and GDP are severely depressed.

Investors may also be focused on the vast differences in resilience at companies. We interviewed leaders at several UK companies that have done better than others during the crisis. What distinguishes them, in a word, is agility. From a common purpose to rapid decision making to empowered local teams, these companies found ways to respond quickly to COVID-19. A key finding: war-gaming for a no-deal Brexit built a solid foundation for supply-chain resilience.

A new podcast this week examined those same supply-chain issues, in the context of McKinsey Global Institute’s August 2020 report on risk and resilience. Experts Ed Barriball and Susan Lund explain the research finding that, on average, companies can expect a disruption to their production lines of one to two months—a very long time—every three-and-a-half to four years.

Another podcast lays out the path forward for the US retail industry; our experts explain what it means for the industry when so many categories are tilting toward online shopping. Short answers, from senior partner Becca Coggins: “we’re in the foothills of what omnichannel-driven convenience will look like” and “some big innovations will scale, now that consumer expectations have been reset.” In another report, we examined the same forces and their effect on Middle East and Africa retailers.

Also this week: McKinsey researchers examined the potential for medtech innovation, and a more productive future for insurers.

Executives everywhere are thinking through the contours of the next normal. Start with The McKinsey Download Hub, with McKinsey’s latest research, perspectives, and insights on the management issues that matter most, from leading through the COVID-19 crisis to managing risk and digitizing operations. Also consider our special collection The Next Normal: The Recovery Will Be Digital, featuring a 172-page curated volume that you can download—the first of five edited collections that accompany Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #26, October 7, 2020

As the effects of the pandemic intensify gender inequality, further threaten the economy, and raise hurdles for the health industry, companies’ actions now could see them through the crisis.

In the sixth year of our Women in the Workplace study, conducted in partnership with LeanIn.Org, we find that the effects of the COVID-19 crisis have exacerbated gender disparities and their implications for women at work, especially for mothers, female senior leaders, and Black women across America. In addition to being laid off and furloughed at higher rates than their male counterparts during the pandemic, women are—notably, for the first time in our research on the topic—considering downshifting their careers or leaving the workforce altogether at staggering rates.

The exodus might include as many as two million women. That would raise a significant barrier to achieving gender parity in leadership roles in years to come. People are thinking about leaving the workforce for a variety of reasons. While many organizations are providing additional resources related to remote working and employee well-being, there is more to be done to meet employees’ needs for sustainable, flexible, and empathic work environments, especially for parents and caregivers.

Meanwhile, the global economic contractions resulting from the COVID-19 pandemic have far exceeded those of the Great Recession that ended in 2009 and have occurred at a much faster rate, hitting all sectors and many of the world’s largest employers. As companies plan for various outcomes in 2021, our research shows what companies seeking resilience can do today to achieve “escape velocity” from the crisis by focusing on EBITDA¹ margins, revenue, and optionality.

An area where companies have already adjusted well is using technology to address changing work environments and to stay competitive. Our new global survey finds that organizations that are successfully responding to the crisis have deployed more advanced technologies, digital products, and tech talent to speed up innovation—and they expect most of these changes to outlast the pandemic.

Our research this week sheds light on two important issues facing healthcare providers. First, similarities in flu and COVID-19 symptoms could lead to a threefold spike in demand for COVID-19 testing as flu season in the Northern Hemisphere approaches. Maintaining sufficient capacity for testing and contact tracing will be critical in curbing further outbreaks and protecting high-risk groups. Second, the crisis has also led to a surgical backlog for elective procedures because of lack of hospital capacity, workforce shortages, and new safety protocols. Health systems will need to optimize current clinical operations to address the discrepancies in supply and demand.

This week we also explored how European marketing-and-sales leaders are navigating the effects of the pandemic, the domino effect for improving sales returns on investment, disruption that is reshaping construction-material distribution, and steps that distributors can take to stabilize operations and outperform competitors.

Executives everywhere are thinking through the contours of the next normal. Consider our special collection The Next Normal: The Recovery Will Be Digital, featuring a 172-page curated volume that you can download—the first of five edited collections that accompany Our New Future, a multimedia series we created with CNBC.

This briefing note was edited by Dana Sand, an assistant managing editor in the Atlanta office.

COVID-19 and the great reset: Briefing note #25, September 30, 2020

Executives are more hopeful about the economy than they have been at any time so far during the COVID-19 crisis. Is an end to the pandemic at hand?

Six months after WHO declared COVID-19 a global pandemic, the responses to our latest McKinsey Global Survey suggest a positive shift in economic sentiment. More than half of all executives surveyed say economic conditions in their own countries will be better six months from now, while 30 percent say they will worsen. That’s the smallest percentage of pessimists we’ve seen since the survey in April 2020.

Taking a cue from those executives, our researchers delved deep into the US situation, emerging with an understanding of what it will take to deliver an optimistic outcome. The case depends on the progress made to date—and the potential for more. We’ve learned much about the natural history and epidemiology of COVID-19. We’re developing better diagnostics, including rapid point-of-care tests, a few of which can be completed in about 15 minutes. Case management has improved. And pharmaceutical companies have turned out a remarkably robust pipeline of vaccine and therapeutic candidates. Put it all together, and an end to the pandemic is potentially within range.

Another new survey reveals the extent of the COVID-19 crisis’s disruption in working practices and behaviors. One-third of surveyed companies have accelerated the digitization of their supply chains, half have sped up the digitization of their customer channels, and two-thirds have moved faster to adopt artificial intelligence and automation. Many other workforce changes are also in progress.

Managers need to process these changes and many others, and come to grips with the long-term strategic-planning agenda. The essential question: what is the right way to think about 2021 and beyond? Should companies unbatten the hatches, or is it too soon?

For many families, it isn’t the workplace but the school that occupies the most attention. McKinsey’s latest look at education examines the variables that factor into decisions to reopen schools. Also this week, McKinsey researchers focused on cash management through the crisis and on the problems of budgeting in healthcare systems.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #24, September 23, 2020

A potential end to the pandemic, a bright outlook for electric vehicles, and more.

In our latest public-health research, we assess the prospects for an end to the pandemic. Two standards must be met. In the United States and most other developed economies, herd immunity is most likely to be achieved in the third or fourth quarter of 2021. Key variables are the arrival, efficacy, and coverage of vaccines; we anticipate four scenarios. A return to normalcy might come sooner, possibly in the first or second quarter of 2021. Every day matters, for lives and livelihoods.

On the economic front, the COVID-19 crisis presents the greatest challenge in a decade for the auto sector. Global sales of light vehicles in 2020 might decline 20 to 25 percent from prepandemic forecasts. In the hardest-hit countries, sales could fall by 45 percent. Electric vehicles (EVs) have not been spared. But our new research finds that EV sales may come back quickly in the next couple of years, especially in Asia and Europe, for a few reasons.

The crisis has also set in motion a number of trends in mobility that will affect EVs, internal-combustion engines, and all the other ways that people get around. A second report considers five of these trends. One critical finding: as lives become hyperlocal, modes of transport will change. We expect a drastic decrease in private-car usage in some major European cities but only a slight decline in North America. Greater China will become even more reliant on public transit and rail as some drivers are coaxed out of their cars.

Our private-equity research teams chipped in a comprehensive look at the effects of the crisis on sectors, and what those mean for portfolio companies and firm strategy. Several analyses offer insights; one on debt-service coverage ratios finds that companies in industrial equipment and logistics are among the most vulnerable, along with real estate, travel, and retail. Telecom companies are better situated, as their business has been only mildly disrupted.

Also this week: McKinsey has long been committed to research into gender equality. In 2015, UN signatories set an ambitious target of achieving gender equality and empowering women and girls everywhere. Five years on, we assess the scant progress to date, blunted by COVID-19, and offer ten things that everyone needs to know about gender equality.

Finally, our researchers offer new views on the post-COVID-19 future of the global travel industry, graphic-paper producers, and the global gold industry. And, with disruption everywhere, people miss their old lives. That’s a problem for managers, who can take three practical steps to help people process their grief.

Executives everywhere are thinking through the contours of the next normal. Consider our special collection, The Next Normal: The recovery Will Be Digital, featuring a 172-page curated volume that you can download—the first of five edited collections that accompany Our New Future, a multimedia series we created with CNBC.

You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, our suite of tools to help leaders respond to the pandemic, and a look at how our editors choose images that help readers visualize the impact of an invisible threat.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #23, September 16, 2020

Companies return to work after an unusual summer—and grapple with an uncertain future.

What now? Over the past six months, business leaders have reorganized supply chains, set up remote operations, and made tough financial decisions. The world anxiously awaits an effective COVID-19 vaccine that can be readily distributed. Until then, the priority is to reenergize organizations—to act rather than react. Even as the uncertainties of the COVID-19 crisis multiply, the goal must be to rebuild for the longer term. There are many ways to lead, but regardless of the type of business or geography, ten actions can form a path to emerge stronger from the crisis.

We start with an idea—that returning is a muscle that needs to be exercised, not a plan to be executed once or a date to be achieved. We go on to more specific considerations, such as the need to make big moves fast and to be willing to rethink entire portfolios, including where work gets done.

Those are four of the ten actions, and they make for a good starting point. But companies must adjust for the particulars of their industry. Healthcare companies might want to pay strict heed to six trends that are affecting their business. Most were under way before the crisis. But a crisis has a way of bringing things to a head: the coming months might be the best opportunity in memory for healthcare companies to pursue exponential innovation, which could create an additional $400 billion in value by 2025. And now is the time to claim the hundreds of billions of dollars that could be saved through productivity gains.

McKinsey’s healthcare researchers also took a close look at the US blood supply, which was fragile before the pandemic and is now critical. Businesses have a big role to play in the solution. Blood donors frequently cite convenience and social pressure as prompts. Virtual campaigns for blood drives can help blood centers quickly reach large audiences and steer them to the locations most convenient for them.

CFOs have a critical task too: for many, it’s budgeting season. Our new research finds that the financial-planning process for 2021 presents an opportunity to turn hard-earned lessons from the COVID-19 pandemic into an enduring exercise in linking strategy to value. And leaders across organizations need to consider the problems of unresolved grief—another issue that the pandemic has dragged into the spotlight.

Our industry research this week looked at fintech, where the news is not altogether bad, though fintech companies may have to find a detour on the road to profitability. We also considered M&A in pharma, a long-running trend that should continue. Companies are advised to make sure that three capabilities—competitive advantage, capacity, and conviction—are up to snuff before pursuing COVID-19-era mergers.

Finally, the pandemic has forced a reckoning for many between the profit motive and a company’s social purpose. A team of McKinsey editors recaps how we got from there to here, and suggests where we might go next.

As summer turns to fall in the Northern Hemisphere, executives are thinking through the contours of the next normal. Consider our special collection, The Next Normal: The recovery Will Be Digital, featuring a 172-page curated volume that you can download—the first of five edited collections that accompany Our New Future, a multimedia series we created with CNBC.

You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, our suite of tools to help leaders respond to the pandemic, and how our editors choose images that help readers visualize the impact of an invisible threat.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #22, September 10, 2020

McKinsey research focuses on the postpandemic future of developing Asia.

No nation has escaped widespread disruption from the COVID-19 pandemic, but some have fared better than others. This week, McKinsey researchers examined the state of the recovery in some of the emerging Association of Southeast Asian Nations (ASEAN) countries—Indonesia, Malaysia, Philippines, Thailand, and Vietnam—that began the crisis at a disadvantage and have suffered disproportionate effects. Our new report explores a series of trends that the pandemic has caused or accelerated. Within each is a seed of recovery, but stakeholders must be prepared to reimagine their country’s economy in five areas: manufacturing hubs, green infrastructure, investments in digital, talent reskilling, and high-value food industries.

We also looked in detail at developments in two ASEAN countries. In Indonesia, the pandemic is still raging; case counts and fatalities are rising sharply. The first priority is to mitigate and contain the outbreak. But even amid the current hardship and profound uncertainty, Indonesia can reimagine and reform itself by increasing national resilience, accelerating economic transition, rebuilding the tourist sector, and enabling genuine change.

Vietnam, too, is contending with short-term challenges as it emerges from the pandemic, especially in tourism and manufacturing, two of the country’s strengths. For the long haul, our new report argues that one essential element of growth is renewable energy. As a country likely to be heavily affected by climate change, Vietnam could accelerate its journey toward a less carbon-intensive future. A new national energy plan is a good sign; now, the challenge is to execute it. (For Vietnam and many other countries, education is another important cog in the engine of growth. This week, we published a comprehensive report on a more equitable and resilient education system.)

Elsewhere in the region, our latest CEO interview, with Peter Harmer of Insurance Australia Group, reveals new insights into “the CEO moment” afforded by the crisis. Asked about crisis resilience, Harmer says, “You have to tether resilience to real beliefs. We have a deep commitment to our purpose, which is to make your world a safer place. Our purpose is the framework through which all our decisions are made.”

Also this week, a new McKinsey survey tapped the wisdom of hundreds of executives across a swath of industries on the need for speed. Most expect significant change across ten of 12 dimensions; surprisingly, only a few expect change in their corporate purpose. (Perhaps they have already embraced Peter Harmer’s view.) And our industry researchers looked at the promise of digital services at B2B service companies and contemplated the troubled present—and potential future—for downstream oil and gas in North America.

Summer may be over in the Northern Hemisphere, but great reading knows no season. It’s not too late to catch our annual summer reading list and our special collection, The Next Normal: The recovery Will Be Digital, featuring a 172-page curated volume that you can download—the first of five edited collections that accompany Our New Future, a multimedia series we created with CNBC.

You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, our suite of tools to help leaders respond to the pandemic, and how our editors choose images that help readers visualize the impact of an invisible threat.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

Preventing future waves of COVID-19: Briefing note #21, August 31, 2020

After seven months of responding to the pandemic, we have learned some things. Here are some of the key lessons and how to apply them.

By Sarun Charumilind, Matt Craven, Jessica Lamb, and Matt Wilson

When history books one day recount the COVID-19 pandemic of 2020, it may well be a tale of human ingenuity and adaptiveness. Although the novel coronavirus (SARS-CoV-2), the virus that causes COVID-19, has infected more than 24 million people and left more than 800,000 dead as of this writing, the early projections of mortality were much worse.

Fears of millions of deaths by June 2020 have proven wrong—not because the disease is less lethal than anticipated, but because those fears ignored the ability of people to learn and change behaviors. Pockets of resistance against wearing masks and complying with other measures notwithstanding, the global public-health response has saved millions of lives. Increasingly, countries are restarting more aspects of normal life while keeping case numbers tenuously in check.

Pockets of resistance against wearing masks and complying with other measures notwithstanding, the global public health response has saved millions of lives.

Yet the threat to lives and livelihoods persists. A COVID-19 vaccine may yet “save the world.” But even if one proves effective, it will be many months before we will have the capacity to vaccinate everyone—and there are new concerns about reinfection.² Therapeutics such as dexamethasone and remdesivir appear to provide important benefits for those with severe cases but are not alone sufficient to stop deaths from COVID-19.

New therapies are possible but by no means guaranteed. Countries will very likely need to plan for almost another year during which public-health measures are their primary tools for saving lives. In the meantime, the world cannot be idle. Societies have been upended, causing unprecedented disruption to economies, education systems, and the day-to-day lives of people everywhere. And as we and others have argued, saving lives and opening societies is a false trade-off.

In that area, too, our ability to learn and adapt is proving dispositive. Countries that have successfully reduced their number of COVID-19 cases have generally been more successful at reopening their economies. For them, controlling the virus ultimately has come down to two things: understanding what to do and executing well. Both have been challenging at various points. For example, the evidence base for the population-wide use of masks only became compelling a few months into the pandemic response. In contrast, the importance of testing has been clear from the earliest days, but many countries have faced operational challenges in ramping up their capacity.

While there is much more to learn, this article summarizes what response leaders have discovered so far about what to do and how to do it. Every jurisdiction is doing some of these things; none of them are new for experts in infectious diseases. But we have tried to describe specific considerations for practitioners looking to adopt and adapt best practices to their management of the COVID-19 pandemic. Given the outsize role that businesses are taking in the crisis response in numerous countries, many of the ideas are as relevant to private-sector leaders as to those in the public sector. Interventions are divided into three categories—detecting disease, reducing the number of new cases, and limiting mortality—and can be tailored for specific populations and settings.

Detecting disease

The ability to detect cases of COVID-19 is a critical prerequisite for effective public-health programs. A comprehensive program might include traditional disease surveillance, cluster analysis to understand local patterns of transmission, and wastewater surveillance for early warning of disease hot spots.

Disease surveillance

An ability to collect, analyze, and interpret data is fundamental to the management of infectious diseases. While many people have grown familiar with epidemiological metrics such as test-positivity rates and case-fatality ratios, many countries and regions still rely on 20th-century surveillance systems. The biggest gaps are in data collection and integration: there is no shortage of data-crunching horsepower in the world, but everyone is forced to work from the same imperfect data sets. Even seven months into the COVID-19-pandemic response, there is a surprising level of disagreement about questions as basic as the true number of people who have been infected with SARS-CoV-2 and the number of deaths attributable to it. Continuing to expand testing, as described later in this article, is a big part of improving surveillance.

The best surveillance systems seamlessly combine data from traditional sources with newer data sets, such as anonymized mobility tracking—and do so in near real time. They provide a high level of detail and transparency around the characteristics and location of those infected while protecting individual privacy. And they improve over time as a design principle, incorporating new sources of data and improving quality to reduce friction in the response.

The best surveillance systems seamlessly combine data from traditional sources with newer data sets, such as anonymized mobility tracking—and do so in near real time.

Cluster analysis

The medical community has learned much about how COVID-19 is passed from person to person and therefore how to prevent transmission. But there is more to learn about the specific nature of transmission in particular geographies. The examination of chains of infectious-disease transmission, or cluster analysis, helps medical professionals understand how, when, where, and between whom transmission occurs.

Locally relevant information can focus public-health measures on steps that will make a difference and deemphasize those that won’t. A study of more than 3,000 cases across 61 clusters in Japan, for example, identified healthcare facilities and retirement centers as among the most important centers of transmission.³ Similarly, clusters in the United Kingdom have been identified around retirement homes, in hospitals, and in meatpacking factories—the latter also being a source of clusters in Germany.

Cluster analysis has revealed the importance and characteristics of so-called superspreaders (infected individuals who pass the disease to many others). A deeper understanding of transmission dynamics may allow some regions to move from broad-based interventions to targeted ones. It can also allow for more nuanced risk assessments, for example, to determine who can safely access senior-care facilities.

Wastewater surveillance

An important advance in surveillance capabilities came with the discovery that SARS-CoV-2 is present in the stool of infected people and is detectable even in highly diluted samples, such as municipal wastewater. Wastewater sampling, used for decades to monitor for polio, appears to detect viral increases of COVID-19 up to six days earlier than diagnostic tests of individuals do.⁴ While a number of locations, including Queensland in Australia, Ashkelon in Israel, and Boise in the United States,⁵AFP and Toi Staff, “Israeli tech firm successfully tracks down COVID-19 in Ashkelon’s sewers,” Times of Israel, July 30, 2020, timesofisrael.com; Misty Inglet, “Boise city officials work to flush out coronavirus data through continued wastewater testing,” KTVB-TV, July 27, 2020, ktvb.com; University of Queensland, “Australian researchers trace sewage for early warning COVID-19 spread,” Medical Xpress, April 16, 2020, medicalxpress.com. are piloting or using this approach to monitor for COVID-19, wastewater remains an underutilized tool globally.

The wastewater-surveillance approach is most applicable in low-prevalence settings where an increase in cases is more noticeable and testing of individuals might otherwise be limited. Ideally, public-health leaders would have the ability to work upstream when increases in viral concentration are detected—for example, from testing town sewers to determining which neighborhoods are the source of the virus.

Reducing the number of new cases

Preventing new cases of COVID-19 ultimately requires reducing the opportunity for infected individuals to pass the disease to others. That can be done by identifying and isolating those who have been infected or are at high risk, ensuring physical distance and airflow management, reducing the risk of the encounters that do happen, and reducing case migration from higher-prevalence areas. The basic tool kit for the reduction of new cases is well understood by experts and nonexperts alike. It includes canceling mass events, restricting capacity in social settings (particularly indoors or with large numbers of people), implementing confinement measures, and restricting internal movement. Those measures can be reinforced through effective behavior-change communication and focused implementation for high-risk groups or specific geographies. And since COVID-19 vaccines are likely to be approved eventually, leaders may want to start now in preparing to deploy one effectively. In this section, we highlight some second-order or less appreciated lessons from the pandemic response so far.

Identifying and isolating those infected

Widespread, accurate, efficiently managed testing and contact-tracing programs allow countries to isolate those who have or are at high risk of contracting COVID-19. Testing and tracing have played major roles in the successful response to various phases of the pandemic in a number of countries, including Austria, Iceland, New Zealand, and South Korea.

Despite the apparent simplicity of testing and tracing, practitioners learned the hard way through early missteps. Among their many lessons are the following:

Communicate clearly with the public about the appropriate uses and limitations of different types of tests, including antigen, molecular, and antibody testing.
Address supply-chain and logistical challenges to keep expanding testing access until most cases are being detected. Test-positivity rates above 5 percent suggest that too many cases are being missed.
Make use of pooled testing to boost capacity where needed, especially in low-prevalence settings. Combine testing for surveillance with testing for positive-case identification.
Accelerate testing turnaround time by ensuring that those performing tests are compensated based on speed and accuracy, not just volume. Accelerate the application of test results by integrating data platforms for testing with those for contact tracing, shortening the time to quarantine.
Staff enough personnel, as the core of contact-tracing programs is human-to-human conversation. Overinvest in community sensitization to the value of tracing and importance of contact quarantine. Digital contact-tracing tools with high adoption can also accelerate contact identification and shorten the time to quarantine.
Don’t expect contact tracing to work perfectly initially; take a data-centric approach to improving operations and effectiveness over time.
Recognize that isolating for ten to 14 days is onerous, especially for low-income individuals. Social services and options for out-of-home isolation, such as in converted hotels, can improve the effectiveness of quarantine and make it more tolerable.

Managing risk in encounters between people

COVID-19 is spread primarily from person to person, including from those not showing symptoms, through the air (either on droplets or by truly being airborne). Close proximity and poor airflow increase the risk of transmission, while the use of facial coverings decreases it. Specific considerations for risk reduction vary depending on risk, context, and other conditions.⁶

Limited evidence from US states suggests that mask mandates are correlated with greater reductions in new cases than mask recommendations are. Different masks offer varying levels of protection. N95 respirators fitted to users provide the greatest protection,⁷ protecting both the wearer and those around them. Supply constraints, cost, and user comfort mean that universal N95 use is not practical in many settings. Three-layer surgical masks provide the next greatest protection. Goggles and other eye protection may provide incremental protection to the wearer relative to a mask alone.⁸

Frequent hand washing and environmental cleaning reduce the transmission of COVID-19. However, the relative emphasis on environmental cleaning has decreased, as evidence suggests that transmission primarily occurs from person to person rather than via objects in the environment.

Reducing case migration

Across the world, countries are taking different approaches to restricting importation of COVID-19 cases. They range from complete bans on international travel to targeted bans on travel from locations with high caseloads to screening and quarantine requirements for arriving travelers. In some countries, including Australia and the United States, some of those measures also apply for travel within countries. In many cases, companies and other institutions are implementing their own policies beyond those required by governments. Measures that are based on consistent, easily understood criteria are more likely to maintain high levels of public buy-in and participation.

Changing behaviors

A successful response to the COVID-19 pandemic requires convincing large numbers of people to change their behaviors. Some countries have seen significant resistance to such changes, particularly those around physical-distancing measures and facial-covering mandates. A lack of trust in governments, information overload, and inconsistent messaging over time have all contributed to that opposition. Effective public-health communication can accelerate the adoption of new behaviors.

Effective communication includes segmenting populations based on the combination of channels, influencers, and messages most likely to resonate with individual groups. While there are positive examples from the response to the COVID-19 pandemic, the public-health community could learn more from experts in targeting and tailoring political and consumer-marketing messages. The influence model can help. It suggests that people are most likely to change behaviors when four elements are in place:

Understanding and conviction in what is being asked. “I believe that wearing a face mask will help protect me and my community from COVID-19.”
Reinforcement with formal mechanisms, which may include both ‘carrots’ and ‘sticks.’ “The grocery store has both a sign, which I can see as I approach, saying that masks are required and a greeter handing them out.”
Confidence and skill building in the new behavior. “I’ve worn a mask enough times that I’ve stopped worrying about looking silly.”
Role modeling the new behavior. “The mayor of my town and almost everyone around me are wearing masks. Those not doing so look like the exceptions.”

Applying insights from the influence model to COVID-19-related communications is an area in which collaboration might help. Many jurisdictions are enlisting the help of partners, celebrities, and influencers to amplify their messages. For example, in the United States, basketball star Stephen Curry asked questions of infectious-disease expert Anthony Fauci live on Instagram. That served to bring evidence-based public-health information to audiences less likely to access official sources.

Protecting vulnerable populations

The COVID-19 pandemic has a disproportionate impact on a number of vulnerable populations. Such groups include people whose age or health puts them at increased risk and those at greater risk because of socioeconomic factors. Communities with severe housing problems, unemployment rates, incarceration rates, poverty levels, and food insecurity suffer 1.4 to 4.0 times as many COVID-19-related deaths as other communities. Vulnerable populations are less likely to have access to healthcare in most countries and are more likely to have underlying health conditions.

In addition to measuring and tracking the impact of the COVID-19 pandemic on vulnerable populations, designing protective interventions requires identifying what makes those groups more vulnerable to infection. Approaches might include prioritizing access to testing, targeting communications, and providing additional support for quarantine and isolation. Interventions will likely need to be multipronged, since the most vulnerable communities are often vulnerable for multiple reasons. Furthermore, the stakeholders best positioned to implement interventions effectively will need resources, which would ideally be allocated proportionately to the outsize impact of COVID-19 infection on vulnerable communities.

Planning for a vaccine

It is reasonable to hope that Emergency Use Authorization (or its equivalent) may be granted to one or more COVID-19-vaccine candidates before the end of 2020.⁹ While vaccines will be valuable new tools, their approval will bring a whole new set of questions for leaders.

Planning now will increase the chance of a successful vaccine rollout. Those on point will need to monitor closely the technical characteristics of the most promising vaccine candidates. Such monitoring includes understanding the likely dosing regimen, potential efficacy, and side effects. From there, they will need to develop a clear, scenario-based strategy for prioritizing vaccine access, recognizing the range of potential vaccine outcomes and combinations available.

Every jurisdiction is likely to be vaccine-supply constrained in the short term, so agreeing on grounding principles in advance will make allocation decisions easier down the road. So will designing the end-to-end supply and delivery systems that will be needed. The plan should include systems for ensuring series completion in the case of a multidose vaccine and data systems for tracking those who have been vaccinated. It may include temporarily expanding the roles of medical practitioners—for example, by allowing those with lower levels of qualification to administer vaccines, after training, in uncomplicated cases.

Finally, planners may need to overinvest in addressing vaccine hesitancy in areas where surveys suggest it is a significant concern. Communications around vaccines will be both challenging and important given the likely complexity of information around efficacy, safety, and dosing across multiple vaccine candidates.

Limiting mortality

In addition to limiting case numbers, reducing the mortality associated with COVID-19 is a key element of the fight against the disease. Clinicians and health-system leaders have learned much about both the specific clinical management of COVID-19 and how to prepare health systems to manage surges in cases while maintaining essential services.

Health-system preparedness

In the early days of the COVID-19 pandemic, the world anxiously witnessed many countries’ health systems strain under the exponential onslaught of cases. Critical-care capacity was a bottleneck, given that one in five patients, initially, were dependent on ventilators. Healthcare supply chains, especially for personal protective equipment, were overwhelmed.

To create surge capacity, health systems and consumers ceased elective care—seemingly overnight. That resulted in an imbalance of capacity, with overloaded health systems in COVID-19 epicenters transformed into disaster-response hubs. In areas where the disease had not yet spread, care centers sat empty, waiting for an outbreak they were unsure would ever arrive.

We know now that health systems in any developed country should be able to anticipate, plan for, manage, and successfully navigate the pandemic adequately both for patients with COVID-19 and for patients with other diseases. Some require focused action, especially surge capacity, supply availability, workforce readiness, clinical-operations processes, structure for COVID-19-case governance, and financial resiliency.¹⁰

Use of therapeutics and clinical management

The search for effective therapies for COVID-19 has yielded two important advances, so far, but no breakthrough transformative enough to obviate the need to limit cases. Dexamethasone, an injected corticosteroid, was shown to reduce mortality by 35 percent in patients requiring mechanical ventilation and by 18 percent in those requiring oxygen only.¹¹ Remdesivir has been shown to reduce recovery time by an average of four days.¹²

Both drugs emerged from the medical community’s initial focus on repurposing drugs that were already approved or in late-stage development for the treatment of other diseases. The focus is now shifting to new R&D. In the months ahead, additional evidence may support therapies based on other antivirals and monoclonal antibodies. In addition to specific therapeutics for COVID-19, there have been advances in the nonpharmaceutical management of the disease. For example, there is some evidence to support the use of “proning”—placing patients face down—to reduce the need for mechanical ventilation.¹³

Policy makers can continue to keep a close eye on both the evidence for new therapeutics and the standards of clinical practice. Over time and with further advances, strong health systems may succeed in reducing COVID-19-related mortality to the point at which the disease is far less feared.

Public-health measures to control the COVID-19 pandemic will be relevant for as long as its risk continues. Many countries and regions have risen to the challenge by combining multiple public-health measures that work for them, although almost all have some room to improve. As we consider what it will take to respond to current and future waves of COVID-19, we can take some comfort from the fact that far more is known about controlling SARS-CoV-2 than was understood seven months ago. It is up to all of us to learn, adapt, and apply those lessons effectively.

Download the article (PDF–435KB).

About the authors

Sarun Charumilind is a partner in McKinsey’s Philadelphia office, where Jessica Lamb is a partner; Matt Craven is a partner in the Silicon Valley office; and Matt Wilson is a senior partner in the New York office.

The authors wish to thank Damien Bruce, Penny Dash, Pooja Kumar, and Taylor Ray for their contributions to this article.

This article was edited by Dennis Swinford, a senior editor in the Seattle office.

COVID-19 and the great reset: Briefing note #20, August 27, 2020

Amid one of the greatest bull markets ever for technology, semiconductor fabs must find ways to keep up. And all advanced-industry companies should organize for speed to sustain their current pace.

This week, McKinsey healthcare researchers documented the shortage of medical oxygen in developing countries, a long-standing problem made worse by COVID-19. New ideas can help these regions meet short-term needs and set the foundation for a better long-term future.

Our industry research focused on semiconductors and the industries that make and use advanced electronics. Chips control everything from toys and smartphones to laptops and thermostats. In the pandemic, demand has soared for many of these products—even as supply chains have faltered and geopolitical tensions have risen. But will the boom last? Such questions have semiconductor companies thinking about their manufacturing plants. In a winner-take-all industry, even a slight edge in manufacturing can help a company capture an outsize portion of revenues. Our new report outlines the essential ingredients of tomorrow’s successful fab.

Chipmakers and other advanced manufacturers have been running hot for six months now, with some notable notches in their belts. One factory recently ran at more than 90 percent capacity with only about 40 percent of the typical workforce. But few leaders think the pace is sustainable. Our new report lays out what it will mean for companies to switch from running on adrenaline to making organizational speed a permanent part of their cultures.

The pace is unlikely to slacken soon. As our new global survey suggests, the appetite for automation has not dimmed. Instead, the factors for success are shifting. More and more, successful organizations are finding ways for people to work in concert with new technologies.

In fact, automation is among the key themes that can lift India to prosperity. That’s the conclusion of a new report from McKinsey Global Institute published this week. The pandemic has sounded a clarion call for India to accelerate growth. Our analysis suggests that a program of targeted reforms, including greater productivity in several sectors, can help the country produce the 90 million nonfarm jobs it needs to create by 2030.

This week, McKinsey researchers also examined cash management at privately owned companies and reviewed lessons from the past for US governors and mayors planning a second term.

Download the full briefing materials.

Download the article.

We are in the thick of August, the time of year when many people take a break, or at least slow down—even in a pandemic. With that in mind, McKinsey broadened its annual summer reading list and asked 60 diverse leaders to share books that have inspired them, that have provided a much-needed respite, or that they look forward to reading. We hope you draw some inspiration from this list and find ways to restore yourself during these unusual times.

Speaking of reading, our special collection, The Next Normal: The recovery Will Be Digital, has a 172-page curated volume that you can download—the first of five edited collections produced to accompany Our New Future, a multimedia series we created with CNBC.

You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, our suite of tools to help leaders respond to the pandemic, and a look at how our editors choose images that help readers visualize the impact of an invisible threat.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #19, August 20, 2020

McKinsey’s latest research looks at restoring economic activity, today and tomorrow.

This week, we returned to the overarching story of the pandemic: the twin imperatives of saving lives and livelihoods. Our latest research builds on reports we published in April and May 2020, and on recent academic findings that the stringency of national lockdowns is not well correlated with changes in GDP. In our new report, we find that successful control of the virus is the key to unlocking the economy, by restoring the confidence consumers need to reengage in economic activity. In countries that have successfully controlled the coronavirus (“near zero” countries), economic activity (in the form of discretionary mobility) has returned to normal; in those that have not (“balancing act”), it is still about 40 percent lower than before the pandemic.

It seems that controlling the virus can get countries back to where they were at the start of the year. But where do we go from there? A companion report outlines the future of economic growth in the United States, by looking back at what worked well in the years after the 2008–09 recession. Federal, state, and local governments can take a range of actions to both improve productivity and stimulate demand. Among the most powerful is investment in inclusive growth and unlocking the maximum productive potential of all people in communities. For example, achieving gender equality could add $4 trillion to the US economy, and closing the Black–white wealth gap could add a further $1.5 trillion.

Businesses, too, are eager to boost productivity and demand. Consumer companies may feel these needs more acutely than most, as two reports published this week demonstrate. McKinsey experts outlined the five bold moves that consumer companies should make to adapt their organizations to the exigencies of the crisis. Another requirement is to meet the next-normal consumer. Seemingly every consumer behavior has been altered by the crisis; companies need to adapt to big changes in how people get their information, what and where they buy, and how they experience shopping.

This week, we also surveyed executives at cell and gene therapy companies about the effects of the pandemic; reviewed the challenges of securing digitally savvy talent at aerospace and defense companies; calculated the significant impact of COVID-19 on mining operations; considered the prospects of upstream oil and gas operations; and surveyed liquefied natural gas buyers on their changing preferences.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #18, August 13, 2020

As consumer needs change with the ups and downs of the pandemic, and companies look for signs of recovery, McKinsey continues to explore ways to approach the next normal from leadership and operational perspectives.

The abrupt halt of global travel during the COVID-19 crisis, aside from delaying personal trips and vacations, has had a major impact on businesses across sectors. Companies with workforces used to frequent travel—along with the airlines and hotels that depend on revenue from that travel—have been particularly affected. As companies continue to enforce travel restrictions and workers resort to virtual meetings, travel-industry players are looking to rebound from the crisis, but it may be a years-long road to recovery. Our latest research shows that, historically, business travel rebounds from crises at a slower pace than leisure travel. As outbreaks in some regions stabilize and travel resumes, travel providers can work to accommodate changing needs and, in turn, boost customer confidence.

Our research this week explores how business operations may change as the travel industry and other sectors reimagine the next normal in a world of physical distancing and evolving consumer behaviors. For operationally intensive sectors, our analysis suggests that the COVID-19 crisis has accelerated automation and digitization. Upskilling and reskilling the workforce will become even more of a priority. For consumer-goods leaders, reshaping the sales function and fostering collaboration between retailers and manufacturers will be critical.

More broadly, our conversations with executives this week demonstrate that successfully weathering the pandemic will also require a people-centered approach to internal and remote leadership. Our interview with Steve Collis, CEO of AmerisourceBergen, considers how a daily executive meeting can be used not only for decision making but also as an opportunity to extend empathy to colleagues. Mike Henry, CEO of BHP, similarly tells us that prioritizing people and building strong relationships has boosted the company’s resilience. He says, “Against the backdrop of COVID-19, there’s a premium on getting out, demonstrating empathy, and engaging with people to understand what their concerns are.”

This week we also analyzed how companies can mitigate risks in industrial supply chains and utilize their procurement functions and spend analytics to bolster resilience; explored ways behavioral-health leaders can build on the current momentum for change in the industry; and looked at how Australia can gauge the scope of the pandemic’s effects on different industries and workforces and address cautious consumers.

Also this week: we’ve added a special collection, The Next Normal: The recovery Will Be Digital. This 172-page volume is the first of five edited collections produced to accompany Our New Future, a multimedia series we created with CNBC. You can download it here.

We’ve now reached August, the time of year when many people take a break, or at least slow down—even in a pandemic. With that in mind, McKinsey broadened its annual summer reading list and asked 60 diverse leaders to share books that have inspired them, that have provided a much-needed respite, or that they look forward to reading. We hope you draw some inspiration from this list and find ways to restore yourself during these unusual times.

We continue to track economic and epidemiological developments around the world. For an overview, read our latest briefing materials (July 6, 2020). In 54 pages, we document the current situation, the economic outlook, the forces shaping the next normal, and the new organizational structures that can help companies keep pace sustainably.

This briefing note was edited by Dana Sand, an assistant managing editor in the Atlanta office.

COVID-19 and the great reset: Briefing note #17, August 6, 2020

Banks are using new techniques to find out who’s ‘swimming naked.’ And new MGI research looks at the cost of disruption in global supply chains.

Millions of employees have lost their jobs and cannot pay their credit cards. Restaurants and shops are only slowly reopening; many cannot pay their rent. Industrial companies can’t make payments on their equipment leases. Landlords have less income and cannot keep up with their mortgages. Suddenly, the world is awash in credit risk. Our new research shows how banks are tending to a radical surge in demand for one of their most ancient practices: measuring and monitoring credit risk. Leading banks are deploying a new configuration of sector analysis, borrower resilience, and high-frequency analytics. They are moving past sectoral analysis to take subsector views of the probability of default. Some are going even deeper, to understand what’s happening in the financial life of their borrowers.

Like credit risk, supply chains have experienced intense disruption. This week, the McKinsey Global Institute looked at the effects not only of COVID-19 but of all manner of disruptions, including natural disasters, geopolitical uncertainty, climate risk, cyberattacks, and more. A key finding: over the course of a decade, companies can expect disruptions to erase half a year’s worth of profits.

This week, McKinsey also had the privilege of speaking with three CEOs about what is shaping up to be the defining moment in their careers. Alain Bejjani, CEO of Majid Al Futtaim, told us about the resilience needed to keep this Dubai-based operator of shopping malls and other consumer real-estate businesses vital and relevant during the crisis. Lance Fritz, CEO of Union Pacific Railroad, talked with us about tactics to stay present in video calls and keep the board informed. Kristin Peck, the brand-new CEO of animal-health company Zoetis, reflected on the core beliefs that have kept her company on track through the crisis.

Also this week: a new report documents the disproportionate effect of the pandemic on Asian-American communities. And McKinsey’s industry research examined the potential for greater collaboration with government in global tourism, outlined the moves that European restaurants are taking to thrive in the next normal, considered how life insurers can use artificial intelligence to better underwrite risk, and reviewed the nascent Tech for Good movement in the United Kingdom.

McKinsey continues to track economic and epidemiological developments around the world. For an overview, read our latest briefing materials (July 6, 2020). In 54 pages, we document the current situation, the economic outlook, the forces shaping the next normal, and the new organizational structures that can help companies keep pace sustainably. You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, our suite of tools to help leaders respond to the pandemic, and a look at how our editors choose images that help readers visualize the impact of an invisible threat.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #16, July 30, 2020

Our latest executive survey reveals a darkening outlook. But our review of vaccine research provides a ray of hope. This week, McKinsey covers the yin and yang of the pandemic.

In North America and in developing markets, executives have become less hopeful about their countries’ economies and more cautious in their views on potential scenarios for COVID-19 recovery. That’s a key finding from our latest poll of more than 2,000 global executives. Leaders in China and India, on the other hand, are growing more upbeat.

One thing that will certainly improve expectations in every country is news of a safe and broadly available vaccine. Our latest research looks at global vaccine development and finds that early data on safety and immunogenicity in Phase I and II trials are promising, though limited. Our review of historical attrition rates suggests that the current pipeline may yield more than seven approved products over the next few years, with some available for emergency use late this year or early in the next. A new interview with Microsoft’s chief technology officer explains how artificial intelligence is aiding vaccine development. After development, it’s on to production, where we argue that tech transfer may be critical to beating the disease.

Our new research on leadership in the crisis turned up several intriguing developments this week, starting with the idea of creating a “to be” list. Our interview with the CEO of Cincinnati Children’s Hospital talks about how leaders can choose to be generous and genuine with some colleagues, and collaborative and catalytic with others. Leaders can also acquaint their teams with lessons from the past. We looked at the post–World War II era, when countries rebuilt from the ashes, to extrapolate ideas that are just as relevant now. Finally, we identified the ways that leaders can shift mindsets and behaviors to reopen safely.

In the COVID-19 crisis, many companies are finding new leaders in unexpected places, well down the org chart. Some young middle managers are defying the problems and frustrations of this difficult period to achieve far more than others. Leading companies are capitalizing on this by installing four talent-management practices to thrive beyond the pandemic. These companies are also revisiting the playbook of chief HR officers, to understand how the crisis has changed the game.

McKinsey’s industry-research teams were active this week, publishing new reports on the resiliency of national banking systems; the future of US freight and logistics; the lessons of past crises for mining companies; the recovery of Germany’s travel industry; and the next normal for European bancassurance. Readers interested in banking should also see our interview with the chairman of the State Bank of India, India’s largest lender and the world’s largest digital bank. And bankers, retailers, and others should consult our must-see guide on how to understand and shape consumer behavior.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #15, July 23, 2020

Economic recovery depends on the return of the consumer—but shopping will never be the same. New McKinsey research considers the possibilities.

McKinsey continues to track economic and epidemiological developments around the world. For an overview, read our latest briefing materials (July 6, 2020). In 51 pages, we document the current situation, the economic outlook, the forces shaping the next normal, and the new organizational structures that can help companies keep pace sustainably.

The ubiquitous face mask does more than protect against viral spread; it also changes the way we look at one another—and thus symbolizes the mystery of customer behavior in the pandemic. Several new McKinsey research efforts analyze the changes taking place in the homes of consumers, on their phones, and in stores. “Reimagining marketing in the next normal,” for example, documents six of the biggest shifts emerging from COVID-19. One of the most intriguing is the rising importance of neighborhoods: with travel largely shut down, marketers must figure out how to localize their outreach.

Another momentous shift: customers care more about sustainability: our survey finds that European consumers want fashion firms to act responsibly by considering their social and environmental impact. This survey is part of McKinsey’s comprehensive effort to document customer sentiment across dozens of countries throughout the pandemic.

Both consumer-goods makers and retailers have everything at stake in understanding these shifts. For consumer companies, the future is about three things: getting better at predicting demand, being alive to all the ways they might increase their sales, and using agile techniques to sustain the hard-won momentum. For retailers—particularly grocers, apparel companies, and restaurants—the way forward starts with new ideas about revenue management (a fundamental rethink of products, pricing, and promotions might be in order) and about operating models (especially store footprints, which will depend on how soon cities reopen). Such operational issues are paramount in Africa and Asia; our latest research collects useful innovations from those regions and around the world.

B2B customers too are changing, and their providers must adapt. Our latest insights, based on a detailed survey, suggest that B2B companies may be too focused on the here and now. In times like these, first movers do better than the competition by finding new pockets of growth and reshaping go-to-market approaches to serve them.

Chief executives can help their marketing chiefs meet these goals, and much more besides. As some of our most senior colleagues argue, this may be the CEO moment of our times. Companies can reset themselves and their potential by embracing four shifts: unlocking bolder (“10x”) aspirations, making their “to be” lists just as important as their “to do” lists, fully embracing stakeholder capitalism, and harnessing the full power of CEO peer networks.

This week, McKinsey researchers also considered the future of mobility in India, reviewed the changes underway in Europe’s private banks, surveyed physicians about their employment prospects, looked at the reset that supply chains need, and explored two hot topics in tech: how to get value from cloud computing and the shifting priorities of cybersecurity.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #14, July 16, 2020

As many countries struggle to control the pandemic, McKinsey remains tightly focused on the global healthcare response to it.

This week, we reviewed the potential for South Africa’s small businesses to survive during the pandemic and to thrive after it, considered the case for more M&A as corporate India seeks to recover from the crisis, looked at the ways shared mobility might come back after it ends, offered recommendations on pricing for property and casualty insurers, and pondered the future of packaging design (including an interview with the CEO of Sealed Air).

But we focused mainly on healthcare systems. Testing is critical for containing COVID-19, yet many countries still struggle with shortages of the necessary materials. Our new article looks at five parts of the testing process and examines the bottlenecks in each. Some US laboratories, for example, have reported unused capacity to conduct tests, even as patients and healthcare workers report difficulty securing them. Similar mismatches have arisen in the United Kingdom, and they are also showing up in supplies of reagents, test kits, and other consumables. To fix the problems, countries will have to make capacity more visible by establishing information nerve centers.

Another focus of research is airborne transmission of the coronavirus. World Health Organization guidelines now state that it may be possible indoors, especially for people who spend significant amounts of time in crowded, poorly ventilated rooms. Our new article not only offers a primer on air purification, air filtration, and airflow management but also examines the steps that building managers, safety experts, and others might take to optimize airflows and ventilation indoors and to limit the spread of the virus.

This week also saw news about a successful vaccine trial. Thanks to that, the world may be able to look ahead to the pandemic’s end. But as a McKinsey team writes, this is not the last pandemic. To correct deficiencies in the surveillance of and response to infectious diseases, governments will have to make substantial investments—but they will be well worth the money. Our research outlines the shifts needed in healthcare systems.

Ara Darzi, director of the United Kingdom’s Institute of Global Health Innovation, has similar aspirations: he is simultaneously focusing on new ideas that can help tame COVID-19 and on the longer term beyond it. In an interview with McKinsey’s Rodney Zemmel, Lord Darzi explains how healthcare can transition from a “sickness service” to a “health and well-being service.” One critical step is to recognize that “we have many pandemics—only we don’t call them pandemics. We have the pandemics of obesity, cardiovascular disease, and diabetes.” McKinsey Global Institute covered the substantial upside of addressing these chronic conditions in a new report published last week.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19 and the great reset: Briefing note #13, July 9, 2020

As lockdowns lift, businesses are thinking about their next moves. McKinsey research offers insights into the near future.

McKinsey continues to track economic and epidemiological developments around the world. For an overview, read our latest briefing materials (July 6, 2020). In 51 pages, we document the current situation, the economic outlook, the forces shaping the next normal, and the new organizational structures that can help companies sustainably keep pace. You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, our suite of tools to help leaders respond to the pandemic, and a look at how our editors choose images that help readers visualize the impact of an invisible threat.

Around the world, economies are cautiously reopening. Businesses are keeping one eye firmly on the here and now but also tentatively looking ahead to what’s shaping up as a great reset. Our new research this week offers several takes on this theme.

Start with the global pandemic’s front line: the healthcare sector. This week, the McKinsey Global Institute published a new report, Prioritizing health: A prescription for prosperity, which measures the potential of proven interventions to reduce the global burden of disease. Taking advantage of them would not only alleviate a problem exposed by COVID-19—people with diabetes, hypertension, chronic obstructive pulmonary disorder, and obesity have been hit hardest—but also add, in our estimate, $12 trillion to global GDP in 2040.

Reimagining the workforce is another pressing task. Executives everywhere wonder how to bring people back to the workplace and how they will do their jobs. Our new research takes a look at the challenges of creating a sense of belonging, common purpose, and shared identity when some people work in their homes and some in offices and factories. Another article considers the great reset’s tactical challenges, such as guarding against cyberattacks on remote workers.

Small businesses confront some of these problems. But much as Ginger Rogers danced the same steps as Fred Astaire—only backward and wearing high heels—small businesses must make the necessary changes at a greater relative cost and with less working capital. Our new research examines the struggles of US small businesses in three sectors (restaurants, manufacturing, and retailing) that could be facing a long, hard recovery.

Another sector thinking hard about its future is infrastructure. In the United States, two scenarios are possible: a boom spurred by a government stimulus or a bust as tax revenues and user fees dry up. Agencies and investors alike must prepare for both outcomes. One key to generating a rapid impact from infrastructure spending is to repair existing assets.

This week we also look at global freight flows (down 13 to 22 percent this year) and the varied potential for recovery, reviewed the implications of COVID-19 for the US food supply chain, and considered the challenges of pricing in a pandemic.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #12: July 2, 2020

One step forward, two steps back: the pandemic is giving new depth of meaning to that well-worn expression. Our new research explores both parts of it.

McKinsey continues to track economic and epidemiological developments around the world. For an overview, read our latest briefing materials. In 94 pages, we document the situation, show how countries and companies can transition toward the next normal, and offer planning advice across multiple horizons. You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, and our suite of tools to help leaders respond to the pandemic. New this week: a look at how our editors choose images that help readers visualize the impact of an invisible threat.

In a week when the global pandemic seemed to gather strength, our new research both shows the grim economic news and reveals a streak of optimism that many are starting to feel. Our monthly global economic conditions snapshot indicates that 52 percent of executives now say that their national economies are doing substantially worse, up from 10 percent in March 2020. Yet the proportion of executives who expect profits to rise within six months rose by four percentage points, and leaders in retail, high tech, and telecom are increasingly optimistic about the return of customer demand. In June, many more executives around the world said that the economies of their home countries would soon be doing better than had said so in May.

Another new global survey examined sentiment among people who make financial decisions for their households. Across the globe, they are reporting lower income, savings, and spending. In most countries, 20 to 60 percent of these decision makers say they fear for their own jobs. Roughly half have no more than four months of savings.

These grim statistics present a challenge for banks and other consumer-facing businesses, such as telecom companies, retailers, health systems, and utilities. A delicate balancing act awaits these organizations as they work to ensure that customers receive the necessary support—and that lenders can continue to cultivate relationships with their borrowers—while preserving shareholder value in the longer term. A detailed perspective on utilities considers this and other conundrums. So does a new look at African banks.

The virus’s spread is accelerating, but businesses everywhere are both coping with their urgent needs and looking ahead to the time when their employees can safely return to work. As that moment comes closer—let us hope—three new research efforts show, first, how leaders can seize the moment to support their employees by building on the trust their early efforts have engendered and, second, how they can engage employees through clear and inspiring communication. And our survey of US companies shows that same insistent streak of optimism: respondents expect most employees to be working onsite by December.

One lesson of the crisis is the need for speed: the pandemic obeys no speed limits, so businesses have had to adapt through quick fixes and workarounds. How can they keep these successful innovations going over the long term? Our new research suggests nine ways to reinvent the organization for speed.

This week, we also looked at how companies can reset their capital spending, demystified the role of quantitative models, and talked with two McKinsey experts about how to choose the right path to unlock the economy.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #11: June 25, 2020

Every industry is adapting to life during a pandemic. New McKinsey research examines the implications for six sectors.

McKinsey continues to track economic and epidemiological developments in Europe and around the world. For an overview, read our latest briefing materials. In 94 pages, we document the current situation and show how countries and companies can transition toward the next normal and plan across multiple horizons. You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, and our suite of tools to help leaders respond to the pandemic.

This week we zeroed in on critical developments in six major industries, starting with consumer goods. Research we published last year (here and here) documented the recent trends in consumer M&A and the ways that successful companies used acquisitions to accelerate revenues and profits at a time when growth was elusive. Our latest research reveals that COVID-19 has accelerated some of these trends and created new realities. One critical finding: consumers are returning to big brands they know and trust. While these companies accounted for only 16 percent of the industry’s growth in 2015–18, that figure rose to 39 percent in 2018–19—and reached 55 percent in the first three weeks of April 2020.

In times of crisis, all eyes focus on the insurance sector. This week, we surveyed insurance agents in China, the first country to reopen. The outlook there is complex: some lines, such as health insurance, fared well, while others, such as property and casualty, suffered significant declines and are just now recovering.

At semiconductors companies, the pandemic has posed questions for every aspect of the business model. Our April 2020 research outlined the potential shifts in demand. This week’s update offers scenarios in which demand might revive, and the ways that companies can adapt while also preparing the enterprise to emerge stronger in the next normal.

Software makers are also in the midst of (yet another) disruption. For the past ten years, the rise of software as a service (SaaS) has reshaped the enterprise-software industry. Growth accelerated, but industry profitability tumbled. Our research finds that the next ten years will be just as tumultuous. SaaS companies are at a crossroads: COVID-19 will accelerate the footprint of SaaS, given the growth of remote working, the rapid deployment of digital solutions, and the lower up-front costs.

Like many other industries, engineering and construction has had to reimagine how work gets done. This week, we spoke with an industry leader, who revealed the ways that his company has adapted.

Finally, while small business might not be an industry, it is a mighty economic sector that employs tens of millions of people in the United States. Our new research finds that between 1.4 million and 2.1 million US small businesses could close permanently as a result of the first four months of the pandemic. Certain sectors are particularly at risk.

This week, we also examined the priorities for companies in India to thrive in the next normal; reviewed the early returns on post-COVID-19 discretionary spending in China, India, and Indonesia; and considered the lessons of the past that might prove helpful as policy makers seek to revive the US economy. Finally, we were privileged to speak with two remarkable leaders, Mellody Hobson of Ariel Investments and Hubert Joly of Best Buy, about the challenges of leadership in extraordinary times.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #10: June 18, 2020

Our latest research focuses on recovery in Europe.

Governments worldwide have already allocated more than $13 trillion to stabilize economies in freefall and restart growth. These measures, written and delivered at speed, have succeeded in many ways. But as the crisis drags on, new questions are arising. Is the money directed in the best possible way? And is more needed?

This week, McKinsey researchers looked at ways to fill the gaps that COVID-19 has created in US state budgets. Worldwide, we estimate that government deficits could reach $30 trillion by 2023. That’s a sobering figure. But we believe that if governments and the private sector work together as never before, they can avoid the disastrous consequences of massive deficits, lay the foundations for a new social contract, and begin to shape a postcrisis era of shared, sustainable prosperity.

Our new research on Europe suggests that governments can start by distinguishing between sectors that can navigate the crisis safely, and others, such as those that were already in decline and were then badly hit by the crisis, that may need structural change. In Germany, for example, you will find both types of sectors in abundance.

McKinsey continues to track economic and epidemiological developments in Europe and around the world. For an overview, read our latest briefing materials. In 94 pages, we document the current situation and show how countries and companies can transition toward the next normal and plan across multiple horizons. You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, and our suite of tools to help leaders respond to the pandemic.

This week we documented many of the COVID-19-related shifts taking place in Europe. A critical issue now coming to a head concerns privacy: How do companies comply with the European General Data Protection Regulation and also support contact tracing and testing measures? Another is mobility: transportation systems may be permanently altered in the crisis. Our new research on the United Kingdom outlines the implications.

Some of those concern the many UK start-ups offering novel transport solutions. This week, our new research found that small and medium-size businesses in the United Kingdom face dire prospects: one in five may not survive past August 2020. In the recovery, European governments cannot do all the heavy lifting; our analysis suggests that European foundations have a window of opportunity to step up their actions and play an essential role in national rebuilding and recovery efforts. And we interviewed a leading UK dealmaker on the potential to restart major capital projects through standby agreements and other moves that keep projects on track.

This week, we also presented ideas for retailers to redefine value and affordability for newly strapped consumers, addressed big shifts in physicians’ behavior, explained why insurers need to revamp their distribution models, and considered a safer, better future for travel.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #9: June 11, 2020

Our latest research examines the social risks of COVID-19.

Even as societies and businesses race to reopen, the global pandemic still poses significant problems. This week, we documented an accelerating one: loneliness. In many parts of the world, the social fabric was already fraying before the pandemic. Now, as former US surgeon general Vivek H. Murthy, MD, points out, COVID-19 is disconnecting us further from our human relationships. That might cause a “social recession, with profound consequences for our health, for our productivity in the workplace, for how our kids do in school.”

McKinsey is tracking developments on all these fronts. For an overview, read our latest briefing materials. In 94 pages, we document the current economic and epidemiological situation and show how to transition toward the next normal and to plan across multiple horizons. You can also see the full collection of our coronavirus-related content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, and our suite of tools to help leaders respond to the pandemic.

This week, we investigated loneliness and other effects of the lockdown and physical distancing in Europe. Across the Continent, the proportion of people who say that they feel lonely “most or all of the time” has nearly tripled. Loneliness is higher in countries, such as Bulgaria and Greece, where trust and satisfaction with relationships were already at low levels in 2018.

For many, the cure for loneliness might be a return to the office, the subject of some of our latest research. Many people say they are happy working from home. But could their happiness be running on fumes of the social capital built up through years of water-cooler conversations, meetings, and social engagements? Has working from home succeeded only because it is viewed as temporary, not permanent? Hundreds of billions in real-estate investment are riding on these questions.

Most industries are engaged in similarly momentous discussions. This week we published new perspectives on the fashion, hospitality, infrastructure, institutional-investing, nursing, and public-transport sectors. We also reviewed developments in Spain and Africa (payments and food supplies), as well as trillion-dollar ideas for governments around the world.

Although the news is bleak, Vivek Murthy sees cause for optimism: “I think that this could be an extraordinary opportunity for us to step back and ask ourselves if we’re leading the kind of lives that we really want to lead. This is our chance to ask ourselves where people fit in our priority list and whether there’s a gap between our stated priorities and our lived priorities.”

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #8: June 4, 2020

This has been an extremely painful time for communities across the United States and beyond, even as the pandemic continues to take its toll. We are amplifying our commitment to do our part to ensure that black lives are spoken for and valued, both inside our firm and beyond. Our ongoing research on the US racial-wealth gap and on diversity and inclusion is intended to clarify some of the underlying issues and potential paths forward.

Research we published in April called out the disproportionate effects of COVID-19 on black Americans, who are almost twice as likely to live in the counties where the risk to health and economic activity is highest if and when contagion strikes. Many of these places were the scene of this week’s anguished protests.

Our newest research looks at the pandemic’s effects on US minority-owned small businesses. Vulnerable even before the pandemic, it has struck them disproportionately hard. Many of them are in the industries most susceptible to health and economic problems, such as accommodations and food services, retail, and healthcare. Owners are innovating and staying flexible, helping their communities to cope with the crisis. But these businesses are highly vulnerable; they need help from the private, public, and social sectors.

Similar dynamics afflict US minority students. Previous McKinsey research has demonstrated the costs of a sizable achievement gap between white students and black and Hispanic ones. Our latest research, published this week, finds that the pandemic not only threatens to widen the achievement gap but also poses problems for all learners. The hurt could last a lifetime.

People of color are vulnerable to yet another effect of the COVID-19 crisis as it affects large companies. Previous crises show there is a very real risk that as companies adapt to new ways of working, inclusion and diversity may unintentionally recede as strategic priorities. Yet as our latest report on inclusion and diversity argues, that would place companies at a disadvantage: they could not only face a backlash from customers and talent now but also, down the line, fail to better position themselves for growth and renewal.

McKinsey continues to research many aspects of leadership through the crisis. This week, we reported on dozens of our new research efforts, including the emerging themes dominating boardrooms; the post-COVID-19 future for US rail and trucking companies; the lessons learned from Asia’s manufacturing and supply chains; a new approach to tracking demand for travel; the potential for telehealth; and the safety protocols that hospitals, grocery stores, and others have used to stay open.

Our latest briefing pack details, across 94 pages, the current economic and epidemiological situation, how to transition to the next normal, and planning across multiple horizons. Please also see the full collection of content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, and our suite of tools to help leaders respond to the pandemic.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #7, May 27, 2020

New insights on consumer sentiment and the return to work.

The Memorial Day weekend in the United States, always a somber occasion and never more so than this year, seemed to mark a turning point in the COVID-19 crisis. As spring turned to summer, many US regions started to reopen, as did others in Europe, Latin America, and Asia. Despite ongoing public-health concerns, the desire to spend and shop is palpable. This week, McKinsey published new surveys of consumers in Argentina, Australia, Brazil, Central America, and the United States, detailing the strength of the consumer urge in each country. The outlook is brighter. Consumers are less anxious and depressed about health concerns. Business executives are a bit more optimistic this month than last. And our new surveys of global B2B buyers and those in Asia and Europe suggest that confidence is holding firm.

That said, the picture these surveys paint is complex. In a sense, the world is turning from “resilience” to “return”—the third of the five pandemic elements we sketched out in late March. To get back to business, many companies are running spreadsheets to see how many people spaced six feet apart will fit in an office, planning one-way paths through the workplace, and figuring out adaptations to restrooms, lunchrooms, and entrances. All of those are critical tasks, but they are not enough. What’s needed is a return “muscle”: an enterprise-wide ability to absorb uncertainty and incorporate lessons into the operating model quickly.

One of the skills that will help with that urgent need is surely analytics, widely recognized for its problem-solving and predictive prowess, which is becoming a modern-day sextant to navigate the COVID-19 crisis. Analytics can help tackle numerous urgent tasks facing businesses today: forecasting demand, identifying potential supply-chain disruptions, targeting support services to at-risk workers, and determining the effectiveness of crisis-intervention strategies, to name a few.

Also on that list: improving the experience of customers, many of them frightened, some jobless, and all of them deeply uncertain about the next normal. To renew and refresh their connections to the people they serve, companies need to recognize what’s happening now, and respond in three ways: digital excellence, safe and contactless engagement, and dynamic customer insights.

These are just a few of the issues McKinsey has researched and written about in recent days to help companies and countries lead through the crisis. Please see the full collection of content, visual insights from our “chart of the day,” a curated collection of our first 100 coronavirus articles, and our suite of tools to help leaders respond to the coronavirus outbreak.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #6, May 13, 2020

Emerging evidence provides some tantalizing glimpses into the epidemiology of the global pandemic.

By Matt Craven, Mihir Mysore, and Matthew Wilson

As the reopening of economies continues across much of Europe and North America, it’s worth taking stock of the epidemiological situation and trends that will define the months ahead. At the time of this writing, the official counts of cases and deaths from COVID-19 have passed four million and 280,000, respectively. Recent studies have made increasingly clear that each of these figures is a significant underestimate. Population antibody surveys suggest that official counts are underestimating the true number of cases by a factor of five or more (although in several cases the methodology has been called into question).

Comparisons of 2020 and 2019 mortality rates show that substantially more people are dying this year, although we don’t know how much of this is due to missed deaths from COVID-19 rather than excess mortality from other causes.

The pandemic and public health—five trends to watch

With lives at stake, a thoughtful approach is paramount. Here are the five emerging trends that private-sector leaders need to monitor.

There are still many places where the epidemic is getting worse

While much of the media narrative is about reopening, many countries, including several of the largest emerging economies, are still on the “upslope” of the epidemic, with daily case counts increasing. While an increasing number of countries and regions have proven that they can use lockdowns to drive a reduction in cases, to date, we have few examples of success outside higher-income countries. The next few weeks will be critical tests of our ability to “bend the curve” in more countries with varying contexts and healthcare capacity. In some of these countries, the absolute number of deaths is relatively low; interventions against COVID-19 will need to be viewed through the lens of both lives and livelihoods.

Reopening is a massive natural experiment—make sure you learn from it

We have never before attempted to shut down the modern global economy, much less reopen it in the setting of an ongoing pandemic. We have a few examples of strategies that seem to work better, or worse, but none of us know with any certainty the best actions. Even places with strong initial responses like Hong Kong and Singapore have faced challenges as they reopen.¹⁴Jill Terreri Ramos, “Fact-check: Did countries that reopened see a spike in coronavirus?,” Austin American-Statesman, April 20, 2020, statesman.com; Suzanne Sataline, “Covid-19’s resurgence in Hong Kong holds a lesson: Defeating it demands persistence,” Statnews, March 26, 2020, statnews.com; Scott Neuman, “Emergency declared in Japanese prefecture hit by 2nd wave of coronavirus infections,” NPR, April 13, 2020, npr.org; “Japan’s Abe extends state of emergency to May 31,” Al Jazeera, May 4, 2020, Aljazeera.com; Abigail Leonard, “This Japanese island lifted its coronavirus lockdown too soon and became a warning to the world,” Time, April 24, 2020, time.com; “AP photos: Beijing slowly reopens amid falling virus cases,” Associated Press, March 25, 2020, ap.com; Philip Oltermann, “Germans urged to stay at home amid fears Covid-19 infection rate is rising again,” Guardian, April 28, 2020; theguardian.com; Adam Rogers, “The Asian countries that beat Covid-19 have to do it again,” Wired, April 6, 2020; wired.com. China has also seen an increase in cases in the past few days.¹⁵

In the United States, there is only a loose correlation between disease prevalence and plans for reopening. States with more cases generally plan to reopen later, but there are exceptions.

A similar point can be made about businesses’ plans to reopen. Companies are planning different approaches, even based on the same underlying fact base. This implies that leaders across the public and private sectors should build learning and adaptation into their reopening plans from the start. Relevant lessons might come from other geographies, other sectors, or from peers and competitors. Leaders should be prepared to incorporate new information and alter their approaches, either incrementally or radically, as new information becomes available.

Resurgence seems to be not a question of if but when, where, and how bad. Many experts are focused on a potential second wave of COVID-19 in the northern hemisphere this autumn.¹⁶ This is certainly possible. But focusing on the risks of autumn and winter causes us to look past the summer, which is risky because it is sooner and because it is when many jurisdictions will be reopening and testing.

R is important, but so is the absolute number of new cases

Over the past few months, many have become more familiar with epidemiological concepts like the reproduction number (R) of a virus. R defines the transmissibility of a pathogen, as measured by the average number of people to whom each infected person transmits. R is a measure of change; it tells us how fast the epidemic will expand or shrink. Values greater than one define a growing epidemic, while those less than one define a shrinking one.

R has been getting a lot of attention, for example, in defining the packages of interventions that can yield R<1 in a given setting. But the absolute number of cases is also important. Imagine two cities, each with an R of 0.9, implying a slightly declining epidemic. But one of the cities has 1,000 new cases per day and the other has ten. The former faces a far higher risk in reopening than the latter.

In practice, we are seeing countries and regions take divergent approaches to this question. Hubei Province in China waited until reported cases were near zero to reopen, whereas Italy and Spain took the first steps to reopening with daily case counts at more than 1,000. Every location needs to balance public-health and economic imperatives; we can’t say which approach is better, but we are likely to learn more about what works in the weeks and months ahead.

It’s (still) all about testing, tracing, and targeted quarantine

Significant resources are required to run a program of testing, contact tracing, isolation, and quarantine at the required scale, but relative to the economics of lockdowns or global recession, these costs are trivial. Many countries are still far short of where they need to be on testing, and contact-tracing programs remain a patchwork. Our recent article provides more details on contact tracing. Strengthening these programs remains an urgent priority for many geographies. This point is no less important for having been made frequently.

In any country, here are the four metrics to watch in assessing the strength of test, trace, and quarantine efforts:

Test positivity rate, which measures (imperfectly) the extent to which testing systems are capturing all cases. The World Health Organization recommends a target of less than 10 percent positivity.
Tests per million population, a measure of the depth of testing.
Average number of contacts identified per case, which measures how effective contact-tracing systems are at identifying and isolating the likely next generation of cases. The figure will tend to be lower in lockdown settings than when people are moving and interacting freely.
Fraction of cases arising from contact lists, a measure of the portion of cases arising from known sources versus undetected community transmission.

An element of transmission dynamics now beginning to receive more attention is transmission within households.¹⁷ We may need to rethink the current model of home isolation and develop modified strategies for mild and asymptomatic cases given that isolation can prove difficult for many. Any new model should of course ensure a comfortable experience for those who test positive, so that they’re strongly inclined to follow the recommended approach.

Innovation—and clinical evidence—leads to hope

The speed and scale of the R&D response to the COVID-19 outbreak is unprecedented in human history, with billions of dollars being spent and committed in pursuit of drugs, vaccines, and diagnostics for the virus. Today, there are more than 150 vaccines in the pipeline, and 200 drug candidates. On diagnostics, beyond the RT-PCR¹⁸ and classic lateral-flow immunoassays already in use for many viral and antibody tests, new technologies such as CRISPR¹⁹ have already been granted emergency-use authorization by the US Food and Drug Administration.²⁰

The past few months have seen the launch of numerous trials in an effort to find therapies and vaccines—with some challenges from studies that are too small in size, or not randomized or controlled. As of early May, more than 1,700 trials are in progress targeting COVID-19 and related complications. More of these are randomized and controlled clinical studies—and some are starting read out results, providing evidence to support new approaches to prevent and manage COVID-19 infection and associated complications. The expert consensus is that enhanced treatments for COVID-19 will likely be available by the end of 2020; and only 12 to 18 months will likely be needed²¹ to bring a vaccine to market at sufficient scale for widespread immunization, compared with the typical five or more years. Some developers have even indicated a vaccine may be available sooner for limited use, with an emergency-use authorization for health workers issued as early as this fall.²²

Here are five areas to watch:

The great vaccine-platform race. At the time of writing, 13 vaccines are already in clinical trials, and the full pipeline spans a massive range of platforms, including RNA, DNA, inactivated viruses, protein subunits, and virus-like particles (VLPs). The virus and viral-vector approaches are traditional; others are nascent. Each platform will start to produce data in the months ahead, starting with evidence of vaccine safety and then potentially demonstrations of immunogenicity (and even efficacy) toward the end of the year, though we still need to better understand the link between immunogenicity and correlates of protection. While having multiple platforms in development increases the likelihood of a successful vaccine, each platform has different competitors, ranging from smaller biotech companies to multinationals, as well as distinct manufacturing requirements, with implications for the scale-up of capacity.
A more nuanced understanding of the uses of different therapeutics. The initial discussion on drugs has focused almost exclusively on repurposed antivirals and antimalarials for treatment. The 200-plus candidates currently in development cover a broad range of use cases—from postexposure to prophylaxis, and from mild and moderate to severe cases. The more than 1,700 active trials are expanding the focus from drugs that directly attack the virus to those that confer immunity and to those that target complications of COVID-19 such as cytokine-release syndrome (CRS) and, more recently, acute respiratory distress syndrome (ARDS). Labs are deploying a wide array of platforms, from repurposed antivirals (as mentioned above) to monoclonal and polyclonal antibodies to neutralize the virus to immune modulators for ARDS/cytokine storms, and even cell-therapy approaches for late-stage disease. The emergency-use authorization for remdesivir is an important milestone for COVID-19 drug development as well. In the coming months, we anticipate that a more nuanced understanding of the different use cases and the types of approaches being tested will help reduce the mortality rate of COVID-19 and also change the standard of care.
A new normal and unrealized opportunity for data sharing. Unlike the experience with prior epidemics (including Ebola), COVID-19 has been characterized by unprecedented sharing of prepublication data, analyses, and results via medRxiv, a collaborative platform. This proliferation of information can support innovation and has been rapidly integrated into both the media and policy discussions—sometimes, however, to unfortunate effect. Looking forward, as the scientific community seeks to make meaningful interpretations of the thousands of running studies, we need to bring together the patient-level data from the hundreds of small, undersize, not-well-controlled, compassionate-use, and observational studies, in a responsible way. Meta-analyses of such studies will help us know if therapies actually work, at what dosing and clinical regimen. There are efforts underway in the ecosystem to address this—and hopefully a collaborative model emerges that could remain with us postpandemic.
The impact of novel R&D models. Competitors are collaborating in ways never expected.²³ Companies are banding together in multilateral collaborations, some formal and some informal, to advance innovation. For example, leading plasma manufacturers are partnering in novel ways to produce a single unbranded immunoglobulin product; more than 15 pharmacos are collaborating in a COVID-19 R&D forum to advance, individually and collectively, the most promising drugs and vaccines; and decades-long competitors Sanofi and GSK are partnering on COVID-19 vaccine development. Novel master protocols, often with inspired names (such as Solidarity, Recovery, and ACTT), are being used to simultaneously test multiple drugs.²⁴ Innovators are deploying novel development plans and trial designs as well; for example, Pfizer and BioNTech are simultaneously testing four vaccines in their combined Phase I/II study. These approaches are not without risk given the parallel work in traditionally sequential stage-gated processes.
The challenge of separating the signal from the noise. With Ebola, a substantial R&D mobilization ran into difficulties recruiting patients to test all of the approaches being considered. Some of these same challenges are happening with COVID-19. Ensuring that studies are well controlled and appropriately powered will be critical to understanding what actually works. Further, data sharing will hold the key to advance our understanding and interrogation of the benefit/risk trade-off. Multiple prioritization efforts are attempting to do this but are still in the early stages. In some ways, the scale of the mobilization may be the biggest challenge.

About the authors

Matt Craven, MD, is a partner in McKinsey’s Silicon Valley office. Mihir Mysore is a partner in the Houston office. Matt Wilson is a senior partner in the New York office.

This article was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #5, April 13, 2020

Our latest perspectives on the coronavirus pandemic.

By Matt Craven, Mihir Mysore, Shubham Singhal, and Matt Wilson

In this note, we offer some of our latest insights on the COVID-19 pandemic, starting with a survey of the current epidemiology and the five dynamics leaders need to watch: the efficacy of the surge in critical care, the expansion of testing and other traditional approaches, the development of antibody testing, the unknown nature of immunity, and a wave of innovation that might produce treatments and vaccines.

We then highlight four of our many recently published articles, each designed to help senior executives think through the challenges of restarting economies. These and many more articles are available in our collection of coronavirus thinking.

The outbreak is moving quickly, and some perspectives here may soon be out of date. This article reflects our perspective as of April 13, 2020. We will update it regularly as the crisis evolves.

COVID-19: Where we are, and where we might be heading

COVID-19 continues to spread rapidly around the world. Almost every country has reported cases, but the burden is asymmetrically distributed. In the past seven days (April 6–12), 46 percent of new confirmed cases have been reported in Europe and 39 percent in the United States. To an extent, that’s because countries are at different stages of the pandemic. Some that were effective at initial containment, such as Singapore and Hong Kong, have seen resurgence and are implementing additional measures to address it. Others, such as many countries in Western Europe, have seen the number of new cases plateau or begin to decline and are debating the right approach to reopening their economies. Some countries appear to be at the peak of infection and are urgently building surge capacity in their health systems. In other parts of the world, the number of cases is rising rapidly. Countries such as Russia and Turkey are seeing a recent acceleration. India too has experienced a significant increase in the number of cases since the beginning of April and has evolved its response strategy, including extending the nationwide lockdown.

The public-health tools and approaches to be deployed vary considerably based on this status. Measures including physical distancing, travel restrictions, effective use of personal protective equipment (PPE), testing and tracing, and healthcare surge capacity require more or less emphasis, depending on epidemic phase and local context. Local use of these measures varies considerably—physical distancing may be near-impossible in crowded urban settings, for example, and the apps and digital tools for contact tracing like those used in China may not be acceptable in other parts of the world. Another challenge is the dependencies among these measures: to take one example, the timeliness and stringency of physical distancing measures substantially influences how other tools should be deployed.

Although a consensus has emerged around the use of physical distancing to slow transmission in many high-prevalence settings, a few countries, such as Sweden, are pursuing an alternative “herd immunity” strategy focused on protecting the most vulnerable populations while using only limited distancing measures to flatten the curve for others. The goals are to maintain many aspects of economic and social life today and, over time, to develop a large enough pool of exposed people (about 70 to 80 percent) to “protect the herd.” Other countries are closely watching the outcome of this approach.

The months ahead will probably be quite volatile and dynamic. It now appears likely that some places will experience a local resurgence as restrictions are lifted and economies reopen. That will influence countries at the earliest stages. For example, Singapore has seen a resurgence mainly from imported cases, which have led to local transmission; this suggests that restrictions on international travel may continue. As China gradually reopens, the tactics it used (including group-based isolation models and setting a norm of wearing masks in the workplace) and their efficacy will inform approaches around the world. Western Europe’s experience in relaxing restrictions, and the most successful approaches there, will inform the approaches deployed in the United States.

Considering the variety of approaches in use, public understanding and consensus will evolve day by day. We will continue to find out more about the coronavirus—how it is mutating, the duration of immunity, its transmission dynamics, and so on. For example, it now appears that the virus probably won’t be highly seasonal, given the recent rapid growth in a number of hot spots in the Southern Hemisphere. But it is still possible that the arrival of summer in the Northern Hemisphere will slow transmission somewhat, as some studies in both labs and natural contexts suggest.²⁵

With all this in mind, we believe that leaders should closely watch five health-response dynamics in the coming weeks:

The efficacy of the health-system surge and how it is maintained over time. Countries with rapidly increasing numbers of cases are finding ways to expand their critical-care capacity massively. Their ability to do so, and to push mortality from COVID-19 to lower levels, will not only save lives but also engender confidence in their health systems’ ability to manage a resurgence. Over time, as cases plateau and then decline, there will be questions about how long to maintain surge capacity while also guarding against resurgence. Providers will be under pressure to consider the broader context of a capacity surge; for example, in the United States, the mass cancellation of elective medical procedures and the associated financial hardship for many providers is likely to force difficult discussions about which procedures should be allowed to restart, and when. Other effects of surge capacity, on vaccine-preventable diseases and maternal and child health, will also be critical to monitor.
The scaling of traditional public-health approaches. In parallel with the surge in critical care, countries also need to think about building surge capacity in traditional public-health approaches—disease surveillance, contact tracing, and targeted quarantines. Such a surge must build on current efforts to scale viral testing rapidly, mostly through RT-PCR²⁶ machines. There's a somewhat surprising relationship between testing and the number of cases—generally, countries that have tested more people have diagnosed fewer cases per thousand people. Moreover, to detect and control flare-ups quickly, widespread access to viral testing will become increasingly important as countries and cities prepare to relax distancing measures. In some countries, this testing capacity could be paired with at-scale contact tracing, with privacy-by-design embedded; and quarantine facilities to help localize hot spots and prevent a broader resurgence.
The development of antibody testing and understanding of sero-prevalence. We have little idea how many people have been exposed to this coronavirus. One recent study in a hard-hit area of Germany showed that about 14 percent of the population has been—far from the levels of exposure required for herd immunity to emerge but higher than many had expected.²⁷ A lot of other studies are underway to assess the portion of the population exposed to COVID-19. If individual or herd immunity is to play a meaningful role in reopening, antibody tests to measure exposure must be widely available. While many such tests are being developed, their accuracy and availability have been challenged. The arrival of accurate, widely available antibody tests will help countries understand how close they are to achieving herd immunity and whether they can use immunity as a meaningful signal to start reopening.
The nature of immunity. People exposed to other coronaviruses have exhibited durable immunity for several years after exposure. Everyone hopes the same holds true for the novel coronavirus, but we don’t know for sure. Emerging reports of recovered patients testing positive again on RT-PCR acute-infection tests raise questions about reactivation, as do studies in China showing very low levels of antibodies among some infected people. While it is unlikely that the duration of immunity is short, any new information about this issue would require a significant shift in strategy.
Innovation. There has been an unprecedented burst of global pharmaceutical R&D related to COVID-19. Today, more than 130 therapeutic candidates and 80 vaccine candidates are under consideration across a range of modalities and use cases, such as treatment of severe disease and pre-exposure prophylaxis. If drugs already approved for other indications prove effective in treating COVID-19, they could be deployed most quickly, but in coming months readouts on experimental new drugs will also arrive. The massive scale-up of clinical trials—especially randomized placebo-controlled studies—will provide evidence to guide clinical decisions. Similarly, the unprecedented consortium of plasma companies generates hope that hyperimmune immunoglobulin can be developed quickly. Seven vaccines are already being tested in humans.²⁸ Although at-scale production and distribution is not likely for 12 to 18 months after a successful trial, these vaccines would provide a critical element in the armamentarium against COVID-19. For all these innovations, a central challenge will be rapidly scaling up production to meet global needs.

Getting back to work: Four insights

The pandemic’s economic challenges are unprecedented. Since the crisis began, McKinsey has published more than 70 articles on the extraordinary public-health and economic impact, as well as the ideas that government and business leaders need to safeguard lives and livelihoods. In the past week, four articles have captured the attention of leaders around the world. We summarize these articles here and invite you to take in the full collection.

‘How to restart national economies during the coronavirus crisis’

by Andres Cadena, Felipe Child, Matt Craven, Fernando Ferrari, David Fine, Juan Franco, and Matthew Wilson

The threat of COVID-19 to lives and livelihoods will fully resolve only when enough people are immune to the disease to blunt transmission, either from a vaccine or direct exposure. Until then, governments that want to restart their economies must have public-health systems that are strong enough to detect and respond to cases.

The first and most obvious factor in determining readiness is the number of new cases in a given area. Regions with significant ongoing transmission should expect that restarting economic activity will only lead to more transmission. Case numbers and, more importantly, hospitalizations need to be low enough for a health system to manage individually rather than through mass measures. A second factor in thinking about this is the strength of the systems in place for detecting, managing, and preventing new cases, including adequate medical capacity, especially of intensive care units (ICUs), for those with severe disease; the ability to perform a diagnostic test for COVID-19 with a fast turnaround time; and several other elements.

If we combine a system’s level of strength with an assessment of the intensity of virus transmission, we can evaluate any region’s readiness to restart activity. These two dimensions determine four stages of readiness to reopen the economy, with Stage 4 the least ready and Stage 1 the most.

‘Europe needs to prepare now to get back to work—safely’

by David Chinn, Hauke Engel, Daniel Härtl, Milena Quittnat, Pal Erik Sjatil, Marja Seidel, Sven Smit, Sebastian Stern, and Eckart Windhagen

As European countries begin to consider how to exit lockdowns, local leaders are often the people best placed to evaluate conditions and impose measures that maximize economic recovery while protecting public health. Decisions about which measures to deploy, when and where, should be made locally—if possible, district by district—because there are material differences in the severity of the crisis and economic circumstances.

Authorities will need three essential elements to ensure robust implementation. First, leaders will require effective, ready-to-act local-authority structures. In Italy, regional governments collaborated with Rome to establish a national lockdown that allowed regions to apply more stringent rules as necessary.

Second, solutions and directives must be clear and simple, so that the public and businesses can understand them. This might require using new communication channels, such as mobile messaging.

Third, measures must be consistent. If the guidance one day is that shops can admit five people at a time for six hours a day and in the next week that rule changes to two people for eight hours, the results will be irritation, noncompliance, and the erosion of trust in public authorities.

‘Winning the (local) COVID-19 war’

by Tom Latkovic, Leah Pollack, and Jordan VanLare, MD

Local US leaders, such as mayors and governors, have an outsized role in the fight against COVID-19. We see six domains for engagement:

Foundational public health. We assessed 23 public-health interventions and identified the most fundamental ones.
Societal compliance. We monitored different approaches to ensure compliance and found a steeper decline in infections where communities enforced policies tightly (through arrests, for example) than in those that used only fines.
Health-system capacity. To prevent demand for healthcare services from outstripping supply, we found that at least a doubling of critical-care capacity is probably possible and necessary, at least temporarily, across most parts of the United States.
Industry safeguards. If the risk of contagion continues for 12 to 18 months, public- and private-sector leaders should promote the most effective adaptations and safeguards to economic activity, including physical barriers, face guards, physical distancing, health screenings before entry, and generous and flexible sick leave. Sectors will vary in how critical they are and their ability to safeguard.
Protection of the vulnerable. COVID-19 is especially destabilizing for vulnerable populations, including people with chronic physical- or behavioral-health conditions, limited mobility, advanced age, and unmet health-related social needs, such as food and housing insecurity. Each will require targeted interventions.
Economic health. Local leaders need to develop a fact base on their economies and then ensure that money from new and current programs gets into the hands of citizens quickly and easily.

‘Could the next normal emerge from Asia?’

by Oliver Tonby and Jonathan Woetzel

The COVID-19 outbreak began in Asia—but so have early indications of containment, new protocols, and the resumption of economic activity. Although the risk of another outbreak remains, economic-activity indicators in China suggest that urban activities are returning to pre-outbreak levels. Traffic congestion and residential-property sales are close to where they stood in early January 2020. Air pollution and coal consumption have returned to 74 and 85 percent, respectively, of their January 1 levels. A recent McKinsey survey of 2,500 Chinese consumers indicates “cautious optimism”—a gradual regaining of confidence, which should increase spending. At this moment, strong public-health responses in China, Singapore, and South Korea appear to have been successful. Significant evidence indicates that the curve of cumulative confirmed COVID-19 patients in Asia is becoming flatter.

As companies in the region resume activity, they may be the world’s first to shape the “next normal.” What will that look like? Four dimensions could define it:

Rethinking social contracts. In crises, the state plays an essential and expanded role, protecting people and organizing the response. This power shift transforms long-held expectations about the roles of individuals and institutions.
Defining the future of work and consumption. The crisis has propelled new technology across all aspects of Asian life, from e-commerce to remote-working and -learning tools, including Alibaba’s DingTalk, WeChat Work, and Tencent Meeting. New working and shopping practices will probably become a permanent fixture of the next normal.
Mobilizing resources at speed and scale. Within weeks, China added tens of thousands of doctors and hospital beds. Several governments invested in new tools to map transmission and rolled out huge economic-stimulus plans. Asia has a proven ability to mobilize resources in a crisis.
Moving from globalization to regionalization. The pandemic has exposed the world’s risky dependence on vulnerable nodes in global supply chains. China, for example, accounts for about 50 to 70 percent of global demand for copper, iron ore, metallurgical coal, and nickel. We could see a massive restructuring as production and sourcing move closer to end users and companies localize or regionalize their supply chains.

About the authors

Matt Craven, MD, is a partner in McKinsey’s Silicon Valley office. Mihir Mysore is a partner in the Houston office. Shubham Singhal is a senior partner in the Detroit office. Matt Wilson is a senior partner in the New York office.

This article was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #4, March 30, 2020

Our latest perspectives on the coronavirus pandemic.

By Matt Craven, Mihir Mysore, Shubham Singhal, Sven Smit, and Matt Wilson

The pandemic continues to expand. More than 175 countries and territories have reported cases of COVID-19, the disease caused by the coronavirus (SARS-CoV-2). Case growth has accelerated to more than 735,000 cases and 35,000 deaths as of March 30. Some geographies have a handful of cases, others with early community transmission have a few hundred, and those with uncontrolled, widespread transmission have tens of thousands. Governments have launched unprecedented public-health and economic responses. The situation evolves by the day.

In this note, we offer some of our latest insights, starting with five likely epidemiologic swing factors that will largely determine the contours of the pandemic in the next year. We then summarize two new articles designed to help senior executives lead through the crisis. In “Beyond coronavirus: The path to the next normal,” we outline five time frames to help leaders organize their thinking and responses. And in “Safeguarding our lives and our livelihoods: The imperative of our time,” we explain how business and society can and must take on both spheres of action, right away. These and many more are available in our collection of coronavirus thinking. We conclude with a short list of the areas in which executives should be concentrating their thought and attention.

Epidemiological swing factors for COVID-19

Every country is looking to join the few that have controlled the epidemic for now and are focusing on preventing a resurgence. The next stages in every country are unknowable. But in our view, the spread or control of the virus in the next year comes down to five factors:

Growth of new transmission complexes and evidence of seasonality. While most countries in the world have at least one case, most counts are relatively low. The extent to which these countries follow the path of countries such as Singapore that have achieved rapid control, versus that of western Europe and the United States, will be a major driver of outcomes. Moreover, these geographies also skew to more tropical climates and will provide some evidence on how much of a mitigating effect heat and humidity will have on the coronavirus. If the virus proves to be seasonal, this has the potential to shape both emerging and existing transmission complexes.
Impact of physical-distancing measures. We know that rigorous, at-scale physical-distancing measures can drive a significant reduction in the number of new COVID-19 cases. However, given the range of approaches in use—and the varying stringency with which they are being applied—there’s much still to learn about what exactly works and how long it takes. In the next one to two weeks, we will learn much more, as we begin to see evidence of the impact of physical distancing in Europe and the United States.
Efficacy of health-system surge. As the world has awakened to the potential risks of COVID-19, there has been a massive effort to add capacity to the healthcare system rapidly. This has rightly focused on adding acute-care capacity, providing ventilators, and building stocks of other critical medical supplies, such as personal protective equipment. If this surge (combined with efforts to reduce the demand on the health system) can prevent health systems from being overwhelmed, mortality from COVID-19 will be significantly lower. The development of clinically validated treatments could be a similar boon, but the emerging evidence on that front is mixed, thus far.
Readiness of the health system to navigate recurrence. As authorities begin to think about what’s needed to navigate a postpeak environment, the public-health tools deployed will have a different emphasis from today’s focus in Europe and the United States. They will include at-scale testing, sophisticated real-time surveillance, rigorous contact tracing, and rapid, targeted quarantine to isolate cases and contacts. This mix of tools is how Korea, Singapore, and Taiwan have rapidly contained COVID-19. An antibody test would be a powerful tool in this arsenal, since it would show which people are at risk and which aren’t. Even as public-health authorities negotiate an unprecedented period of demand on the health system, they will need to design and build systems to prevent resurgence of the disease as we pass the peak.
Emergence of herd immunity. Herd immunity occurs when a sufficient portion of the population isn’t susceptible to an infectious disease; at that point, transmission doesn’t propagate, for lack of available hosts. It typically occurs through either widespread exposure or immunization. With a disease as infectious as COVID-19, experts believe that more than two-thirds of the population would need to be immune to create herd immunity.²⁹Assumes reproductive number greater than two. A number of recent publications assert this. See, for example, Zhang, S., Diao, M., Yu, W., Pei, L., Lin, Z., and Chen, D., “Estimation of the reproductive number of novel coronavirus (COVID-19) and the probable outbreak size on the Diamond Princess cruise ship: A data-driven analysis,” National Center for Biotechnology Information, February 20, 2020, pubmed.gov. But there’s much that we don’t know about the possibility of multiple strains of the virus—and about the duration of human immunity. Answering those questions will have important implications for the course of the pandemic.

Two new insights

We have recently published several new articles on the pandemic. Two have captured the attention of leaders worldwide. We summarize them here and invite you to take in the full case in our collection.

‘Beyond coronavirus: The path to the next normal’

By Kevin Sneader and Shubham Singhal

What will it take to navigate this crisis, now that our traditional metrics and assumptions have been rendered irrelevant? More simply put, it’s our turn to answer a question that many of us once asked of our grandparents: What did you do during the war?

Our answer is a call to act across five stages, leading from the crisis of today to the next normal that will emerge after the battle against coronavirus has been won: Resolve, Resilience, Return, Reimagination, and Reform.

Collectively, these five stages represent the imperative of our time: the battle against COVID-19 is one that leaders today must win if we are to find an economically and socially viable path to the next normal.

‘Safeguarding our lives and our livelihoods: The imperative of our time’

By Sven Smit, Martin Hirt, Kevin Buehler, Susan Lund, Ezra Greenberg, and Arvind Govindarajan

We see enormous energy invested in suppressing the coronavirus, while many urge even faster and more rigorous measures. We also see enormous energy expended on stabilizing the economy through public-policy responses. However, to avoid permanent damage to our livelihoods, we need to find ways to “timebox” this event: we must think about how to suppress the virus and shorten the duration of the economic shock.

To aid decision makers, we have developed scenarios, based on three likely paths for the spread of the virus and the public health response, and three potential levels of effectiveness for governmental economic response.

Many leaders currently expect one of the scenarios to materialize. In each of these, the COVID-19 spread is eventually controlled, and catastrophic structural economic damage is avoided. These scenarios describe a global average, while situations will inevitably vary by country and region. But all four of these scenarios lead to V- or U-shaped recoveries.

Other, more extreme scenarios can also be conceived, and some of them are already being discussed. One can’t exclude the possibility of a “black swan of black swans”: structural damage to the economy, caused by a yearlong spread of the virus until a vaccine is widely available, combined with the lack of policy response to prevent widescale bankruptcies, unemployment, and a financial crisis.

Steps to take now

Amid the chaos and all the incoming advice, it’s hard to know exactly what leaders should do today. We suggest they focus their time on four areas:

Support and protect employees in this brave new world. Many institutions have put basic protections in place for their employees and customers. Companies have activated no-travel and work-from-home policies for some workers and physical-distancing-at-work measures for others. The challenge is evolving. For remote workers, interruptions are more frequent than in the office. Making a mental separation from a sometimes-chaotic home life is tough. Workers are finding that they don’t have the skills to be successful in an extended remote environment, from networking to creating routines that drive productivity. They worry that staying remote could make them less valuable, especially in a recessionary environment.

As our colleagues recently explained, three goals are essential. Companies need to increase communication, balancing the needs of the business with expectation setting and morale building, so employees know that their well-being is top of mind. They also need to change working norms, making remote work practical and simple whenever possible. And of course, they must protect people’s health, with whatever measures are appropriate to the workplace: positive hygiene habits, personal protective equipment, amended sick-leave policies—whatever it takes to ensure health and safety.
Monitor leading indicators of how and where the pandemic is evolving and conduct scenario planning using both epidemiological and economic inputs. Earlier, we sketched out the swing factors to watch to understand how the coronavirus pandemic might develop. As companies develop scenarios, they might want to consider the article “Safeguarding our lives and our livelihoods: The imperative of our time,” which details McKinsey’s nine epidemiologic and economic scenarios.
Think about the next horizons of COVID-19. In the urgency of the moment, it’s easy to lose sight of the actions that might be needed tomorrow—and the day after that. The article “Beyond coronavirus: The path to the next normal,” explains the five horizons that every executive should use to ensure an organization’s rapid response, adaptation to change, and reemergence in a position of strength.
Evolve the nerve center to plan for the next phase. Every assumption underpinning a business is open to question. To take one example, we might be in the midst of the largest drawdown in demand since the Second World War. The pendulum might not swing back fully once the outbreak has relented. Having experienced a new way of living, consumers are recalibrating their spending, increasing the likelihood that spending may permanently shift between categories and that online services could get adopted far faster. Decoding this new normal—and ensuring that the company has a strategy to navigate it—is an important part of the work of a nerve center. Approaches such as using a portfolio of initiatives and planning for decision making under uncertainty can go a long way toward creating a compass for business leaders to follow.

The next normal will look unlike any in the years preceding the coronavirus, the pandemic that changed everything. In these briefing notes, we aim to provide leaders with an integrated perspective on the unfolding crisis and insight into the coming weeks and months.

About the authors

Matt Craven is a partner in McKinsey’s Silicon Valley office, Mihir Mysore is a partner in the Houston office, Shubham Singhal is a senior partner in the Detroit office, Sven Smit is a senior partner in the Amsterdam office, and Matt Wilson is a senior partner in the New York office.

This article was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #3, March 16, 2020

Current perspectives on the coronavirus outbreak.

At the time of writing, there have been more than 160,000 confirmed cases of COVID-19 and more than 6,000 deaths from the disease. Older people, especially, are at risk. More than 140 countries and territories have reported cases; more than 80 have confirmed local transmission. Even as the number of new cases in China is falling (to less than 20, on some days), it is increasing exponentially in Italy (doubling approximately every four days). China’s share of new cases has dropped from more than 90 percent a month ago to less than 1 percent today.

WHO declared COVID-19 a pandemic on March 11, 2020. In its message, it balanced the certainty that the coronavirus (SARS-CoV-2) will inevitably spread to all parts of the world, with the observation that governments, businesses, and individuals still have substantial ability to change the disease’s trajectory. In this note, we describe emerging archetypes of epidemic progressions; outline two scenarios for the pandemic and its economic effects; and observe some of the ways that business can improve on its early responses.

Our perspective is based on our analysis of past emergencies and our industry expertise. It is only one view, however. Others could review the same facts and emerge with a different view. Our scenarios should be considered only as two among many possibilities. This perspective is current as of March 16, 2020. We will update it regularly as the outbreak evolves.

Archetypes for epidemic progression

Many countries now face the need to bring widespread community transmission of coronavirus under control. While every country’s response is unique, there are three archetypes emerging—two successful and one not—that offer valuable lessons. We present these archetypes while acknowledging that there is much still to be learned about local transmission dynamics and that other outcomes are possible:

Extraordinary measures to limit spread. After the devastating impact of COVID-19 became evident in the Hubei province, China imposed unprecedented measures—building hospitals in ten days, instituting a “lockdown” for almost 60 million people and significant restrictions for hundreds of millions of others, and using broad-based surveillance to ensure compliance—in an attempt to combat the spread. These measures have been successful in rapidly reducing transmission of the virus, even as the economy has been restarting.
Gradual control through effective use of public-health best practices. South Korea experienced rapid case-count growth in the first two weeks of its outbreak, from about 100 total cases on February 19 to more than 800 new cases on February 29. Since then, the number of new cases has dropped steadily, though not as steeply as in China. This was achieved through rigorous implementation of classic public-health tools, often integrating technology. Examples include rapid and widespread deployment of testing (including the drive-through model), rigorous contact tracing informed by technology, a focus on healthcare-provider safety, and real-time integrated tracking and analytics. Singapore and Taiwan appear to have applied a similar approach, also with broadly successful results.
Unsuccessful initial control, leading to overwhelmed health systems. In some outbreaks where case growth has not been contained, hospital capacity has been overwhelmed. The disproportionate impact on healthcare workers and lack of flexibility in the system create a vicious cycle that makes it harder to bring the epidemic under control.

There are also other approaches being considered (such as a focus on reaching herd immunity); the impact of these is unclear.

Two scenarios

Based on new information that emerged last week, we have significantly updated and simplified our earlier scenarios. A number of respected institutions are now projecting very high case counts. The most pessimistic projections typically give the virus full credit for exponential growth but assume that humans will not respond effectively—that is, they assume that many countries will fall into the third archetype described earlier. We believe this is possible but by no means certain. The scenarios below outline two ways that the interplay between the virus and society’s response might unfold and the implications on the economy in each case. There are a number of critical indicators that may provide early notice of which scenario is unfolding.

Delayed recovery

Epidemiology. In this scenario, new case counts in the Americas and Europe rise until mid-April. Asian countries peak earlier; epidemics in Africa and Oceania are limited. Growth in case counts is slowed by effective social distancing through a combination of national and local quarantines, employers choosing to restrict travel and implement work-from-home policies, and individual choices. Testing capacity catches up to need, allowing an accurate picture of the epidemic. The virus proves to be seasonal, further limiting its spread. By mid-May, public sentiment is significantly more optimistic about the epidemic. The Southern Hemisphere winter sees an uptick in cases, but by that point, countries have a better-developed playbook for response. While the autumn of 2020 sees a resurgence of infections, better preparedness enables continued economic activity.

Economic impact. Large-scale quarantines, travel restrictions, and social-distancing measures drive a sharp fall in consumer and business spending until the end of Q2, producing a recession. Although the outbreak comes under control in most parts of the world by late in Q2, the self-reinforcing dynamics of a recession kick in and prolong the slump until the end of Q3. Consumers stay home, businesses lose revenue and lay off workers, and unemployment levels rise sharply. Business investment contracts, and corporate bankruptcies soar, putting significant pressure on the banking and financial system.

Monetary policy is further eased in Q1 but has limited impact, given the prevailing low interest rates. Modest fiscal responses prove insufficient to overcome economic damage in Q2 and Q3. It takes until Q4 for European and US economies to see a genuine recovery. Global GDP in 2020 falls slightly.

Prolonged contraction

Epidemiology. In this scenario, the epidemic does not peak in the Americas and Europe until May, as delayed testing and weak adoption of social distancing stymie the public-health response. The virus does not prove to be seasonal, leading to a long tail of cases through the rest of the year. Africa, Oceania, and some Asian countries also experience widespread epidemics, though countries with younger populations experience fewer deaths in percentage terms. Even countries that have been successful in controlling the epidemic (such as China) are forced to keep some public-health measures in place to prevent resurgence.

Economic impact. Demand suffers as consumers cut spending throughout the year. In the most affected sectors, the number of corporate layoffs and bankruptcies rises throughout 2020, feeding a self-reinforcing downward spiral.

The financial system suffers significant distress, but a full-scale banking crisis is averted because of banks’ strong capitalization and the macroprudential supervision now in place. Fiscal and monetary-policy responses prove insufficient to break the downward spiral.

The global economic impact is severe, approaching the global financial crisis of 2008–09. GDP contracts significantly in most major economies in 2020, and recovery begins only in Q2 2021.

Responding to COVID-19: What companies are missing

Our conversations with hundreds of companies around the world on COVID-19 challenges have allowed us to compile a view of the major work streams that companies are pursuing.

While this list is fairly comprehensive, some companies are taking other steps. However, we have seen evidence that many companies are finding it hard to get the major actions right. We have consistently heard about five challenges.

Having an intellectual understanding isn’t the same as internalizing the reality

Exponential case-count growth is hard to internalize unless you have experienced it before. Managers who haven’t experienced this or been through a “tabletop” simulation are finding it difficult to respond correctly. In particular, escalation mechanisms may be understood in theory, but companies are finding them hard to execute in reality, as the facts on the ground don’t always conform to what it says in the manual. Crisis case studies are replete with examples of managers who chose not to escalate, creating worse issues for their institutions.

Employee safety is paramount, but mechanisms are ineffective

Policy making at many companies is scattershot, especially at those that haven’t yet seen the coronavirus directly. Many, such as professional-services and tech companies, lean very conservative: their protection mechanisms often add to a perception of safety without actually keeping people safer. For instance, temperature checks may not be the most effective form of screening, given that the virus may transmit asymptomatically. Asking employees to stay at home if they are unwell may do more to reduce transmissibility. Such policies are more effective if employees receive compensation protection—and insulation from other consequences too.

Some companies aren’t thinking through the second-order effects of their policies. For example, a ban on travel without a concomitant work-from-home policy can make the office very crowded, leading to higher risk of transmission. Others are adopting company-wide policies without thinking through the needs of each location and each employee segment.

Optimism about the return of demand is dangerous

Being optimistic about demand recovery is a real problem, especially for companies with working-capital or liquidity shortages and those veering toward bankruptcy. Troubled organizations are more likely to believe in a faster recovery—or a shallower downturn. Facing up to the possibility of a deeper, more protracted downturn is essential, since the options available now, before a recession sets in, may be more palatable than those available later. For example, divestments to provide needed cash can be completed at a higher price today than in a few weeks or months.

Assumptions across the enterprise are misaligned

Some companies are pursuing their coronavirus responses strictly within organizational silos (for example, the procurement team is driving supply-chain efforts, sales and marketing teams are working on customer communications, and so on). But these teams have different assumptions and tend to get highly tactical, going deep in their own particular patch of weeds rather than thinking about what other parts of the company are doing—or about what might come next.

The near term is essential, but don’t lose focus on the longer term (which might be worse)

Immediate and effective response is, of course, vital. We think that companies are by and large pursuing the right set of responses. But on many of these work streams, the longer-term dimensions are even more critical. Recession may set in. The disruption of the current outbreak is shifting industry structures. Credit markets may seize up, in spite of stimulus. Supply-chain resilience will be at a premium. It may sound impossible for management teams that are already working 18-hour days, but too few are dedicating the needed time and effort to responses focused on the longer term.

The coronavirus crisis is a story with an unclear ending. What is clear is that the human impact is already tragic, and that companies have an imperative to act immediately to protect their employees, address business challenges and risks, and help to mitigate the outbreak in whatever ways they can.

For the full set of our latest perspectives, please see the attached full briefing materials, which we will update regularly. We welcome your comments and questions at coronavirus_client_response@mckinsey.com.

For more of the latest information on COVID-19, please see reports from the European Centre for Disease Control and Prevention, the US Centers for Disease Control and Prevention, and WHO; and the live tracker of global cases from Johns Hopkins University.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #2, March 9, 2020

A range of outcomes is possible. Decision makers should not assume the worst.

Less than ten weeks have passed since China reported the existence of a new virus to the World Health Organization. This virus, now known as SARS-CoV-2, causing COVID-19 disease, spread quickly in the city of Wuhan and throughout China. The country has experienced a deep humanitarian challenge, with more than 80,000 cases and more than 3,000 deaths. COVID-19 progressed quickly beyond China’s borders. Four other major transmission complexes are now established across the world: East Asia (especially South Korea, with more than 7,000 cases, as well as Singapore and Japan), the Middle East (centered in Iran, with more than 6,500 cases), Europe (especially the Lombardy region in northern Italy, with more than 7,300 cases, but with widespread transmission across the continent), and the United States, with more than 200 cases. Each of these transmission complexes has sprung up in a region where millions of people travel every day for social and economic reasons, making it difficult to prevent the spread of the disease. In addition to these major complexes, many other countries have been affected.

The next phases of the outbreak are profoundly uncertain. In our view, the prevalent narrative, focused on pandemic, to which both markets and policy makers have gravitated as they respond to the virus, is possible but underweights the possibility of a more optimistic outcome. In this briefing note, we attempt to distinguish the things we know from those we don’t, and the potential implications of both sets of factors. We then outline three potential economic scenarios, to illustrate the range of possibilities, and conclude with some discussion of the implications for companies’ supply chains, and seven steps businesses can take now to prepare.

Our perspective is based on our analysis of past emergencies and on our industry expertise. It is only one view, however. Others could review the same facts and emerge with a different view. Our scenarios should be considered only as three among many possibilities. This perspective is current as of March 9, 2020. We will update it regularly as the outbreak evolves.

What we know, and what we are discovering

What we know. Epidemiologists are in general agreement on two characteristics of COVID-19:

The virus is highly transmissible. Both observed experience and emerging scientific evidence show that the virus causing COVID-19 is easily transmitted from person to person. The US Centers for Disease Control and Prevention estimates that the virus’s reproduction number (the number of additional cases that likely result from an initial case) is between 1.6 and 2.4, making COVID-19 significantly more transmissible than seasonal flu (whose reproduction number is estimated at 1.2 to 1.4).
The virus disproportionately affects older people with underlying conditions. Epidemiologists Zunyou Wu and Jennifer McGoogan analyzed a report from China Centers for Disease Control and Prevention that looked at more than 72,000 cases and concluded that the fatality rate for patients 80 and older was seven times the average, and three to four times the average for patients in their 70s.³⁰ Other reports describe fatality rates for people under 40 to be 0.2 percent.

What we are still discovering. Three characteristics of the virus are not fully understood, but are key variables that will affect how the disease progresses, and the economic scenario that evolves:

The extent of undetected milder cases. We know that those infected often display only mild symptoms (or no symptoms at all), so it is easy for public-health systems to miss such cases. For example, 55 percent of the cases on board the Diamond Princess cruise ship did not exhibit significant symptoms (even though many passengers were middle-aged or older). But we don’t know for sure whether official statistics are capturing 80 percent, 50 percent, or 20 percent of cases.
Seasonality. There is no evidence so far about the virus’s seasonality (that is, a tendency to subside in the northern hemisphere as spring progresses). Coronaviruses in animals are not always seasonal but have historically been so in humans for reasons that are not fully understood. In the current outbreak, regions with higher temperatures (such as Singapore, India, and Africa) have not yet seen a broad, rapid propagation of the disease.
Asymptomatic transmission. The evidence is mixed about whether asymptomatic people can transmit the virus, and about the length of the incubation period. If asymptomatic transfer is a major driver of the epidemic, then different public-health measures will be needed.

These factors notwithstanding, we have seen that robust public-health responses, like those in China outside Hubei and in Singapore, can help stem the epidemic. But it remains to be seen how these factors will play out and the direct impact they will have. The economic impact too will vary considerably.

Economic impact

In our analysis, three broad economic scenarios might unfold: a quick recovery, a global slowdown, and a pandemic-driven recession. Here, we outline all three. We believe that the prevalent pessimistic narrative (which both markets and policy makers seem to favor as they respond to the virus) underweights the possibility of a more optimistic outcome to COVID-19 evolution.

Quick recovery

In this scenario, case count continues to grow, given the virus’s high transmissibility. While this inevitably causes a strong public reaction and drop in demand, other countries are able to achieve the same rapid control seen in China, so that the peak in public concern comes relatively soon (within one to two weeks). Given the low fatality rates in children and working-age adults, we might also see levels of concern start to ebb even as the disease continues to spread. Working-age adults remain concerned about their parents and older friends, neighbors, and colleagues, and take steps to ensure their safety. Older people, especially those with underlying conditions, pull back from many activities. Most people outside the transmission complexes continue their normal daily lives.

The scenario assumes that younger people are affected enough to change some daily habits (for example, they wash hands more frequently) but not so much that they shift to survival mode and take steps that come at a higher cost, such as staying home from work and keeping children home from school. A complicating factor, not yet analyzed, is that workers in the gig economy, such as rideshare drivers, may continue to report to work despite requests to stay home, lest they lose income. This scenario also presumes that the virus is seasonal.

In this scenario, our model developed in partnership with Oxford Economics suggests that global GDP growth for 2020 falls from previous consensus estimates of about 2.5 percent to about 2.0 percent. The biggest factors are a fall in China’s GDP from nearly 6 percent growth to about 4.7 percent; a one-percentage-point drop in GDP growth for East Asia; and drops of up to 0.5 percentage points for other large economies around the world. The US economy recovers by the end of Q1. By that point, China resumes most of its factory output; but consumer confidence there does not fully recover until end Q2. These are estimates, based on a particular scenario. They should not be considered predictions.

Global slowdown

This scenario assumes that most countries are not able to achieve the same rapid control that China managed. In Europe and the United States, transmission is high but remains localized, partly because individuals, firms, and governments take strong countermeasures (including school closings and cancellation of public events). For the United States, the scenario assumes between 10,000 and 500,000 total cases. It assumes one major epicenter with 40 to 50 percent of all cases, two or three smaller centers with 10 to 15 percent of all cases, and a “long tail” of towns with a handful or a few dozen cases. This scenario sees some spread in Africa, India, and other densely populated areas, but the transmissibility of the virus declines naturally with the northern hemisphere spring.

This scenario sees much greater shifts in people’s daily behaviors. This reaction lasts for six to eight weeks in towns and cities with active transmission, and three to four weeks in neighboring towns. The resulting demand shock cuts global GDP growth for 2020 in half, to between 1 percent and 1.5 percent, and pulls the global economy into a slowdown, though not recession.

In this scenario, a global slowdown would affect small and mid-size companies more acutely. Less developed economies would suffer more than advanced economies. And not all sectors are equally affected in this scenario. Service sectors, including aviation, travel, and tourism, are likely to be hardest hit. Airlines have already experienced a steep fall in traffic on their highest-profit international routes (especially in Asia–Pacific). In this scenario, airlines miss out on the summer peak travel season, leading to bankruptcies (FlyBe, the UK regional carrier, is an early example) and consolidation across the sector. A wave of consolidation was already possible in some parts of the industry; COVID-19 would serve as an accelerant.

In consumer goods, the steep drop in consumer demand will likely mean delayed demand. This has implications for the many consumer companies (and their suppliers) that operate on thin working-capital margins. But demand returns in May–June as concern about the virus diminishes. For most other sectors, the impact is a function primarily of the drop in national and global GDP, rather than a direct impact of changed behaviors. Oil and gas, for instance, will be adversely affected as oil prices stay lower than expected until Q3.

Pandemic and recession

This scenario is similar to the global slowdown, except it assumes that the virus is not seasonal (unaffected by spring in the northern hemisphere). Case growth continues throughout Q2 and Q3, potentially overwhelming healthcare systems around the world and pushing out a recovery in consumer confidence to Q3 or beyond. This scenario results in a recession, with global growth in 2020 falling to between –1.5 percent and 0.5 percent.

Supply-chain challenges

For many companies around the world, the most important consideration from the first ten weeks of the COVID-19 outbreak has been the effect on supply chains that begin in or go through China. As a result of the factory shutdowns in China during Q1, many disruptions have been felt across the supply chain, though the full effects are of course still unclear.

Hubei is still in the early phases of its recovery; case count is down, but fatality rates remain high, and many restrictions remain that will prevent a resumption of normal activity until early Q2. In the rest of China, however, many large companies report that they are running at more than 90 percent capacity as of March 1. While some real challenges remain, such as lower than usual availability of migrant labor, there is little question that plants are returning back to work quickly.

Trucking capacity to ship goods from factories to ports is at about 60 to 80 percent of normal capacity. Goods are facing delays of between eight and ten days on their journey to ports.

The Baltic Dry Index (which measures freight rates for grains and other dry goods around the world) dropped by about 15 percent at the onset of the outbreak but has increased by nearly 30 percent since then. The TAC index, which measures air-freight prices, has also risen by about 15 percent since early February.

In the next few months, the phased restart of plants outside Hubei (and the slower progress of plants within Hubei) is likely to lead to challenges in securing critical parts. As inventories are run down faster, parts shortages are likely to become the new reason why plants in China cannot operate at full capacity. Moreover, plants that depend on Chinese output (which is to say, most factories around the world) have not yet experienced the brunt of the initial Chinese shutdown and are likely to experience inventory “whiplash” in the coming weeks.

Perhaps the biggest uncertainty for supply-chain managers and production heads is customer demand. Customers that have prebooked logistics capacity may not use it; customers may compete for prioritization in receiving a factory’s output; and the unpredictability of the timing and extent of demand rebound will mean confusing signals for several weeks.

Responding to COVID-19

In our experience, seven actions can help businesses of all kinds. We outline them here as an aid to leaders as they think through crisis management for their companies. These are only guidelines; they are by no means exhaustive or detailed enough to substitute for a thorough analysis of a company’s particular situation.

Protect your employees. The COVID-19 crisis has been emotionally challenging for many people, changing day-to-day life in unprecedented ways. For companies, business as usual is not an option. They can start by drawing up and executing a plan to support employees that is consistent with the most conservative guidelines that might apply and has trigger points for policy changes. Some companies are actively benchmarking their efforts against others to determine the right policies and levels of support for their people. Some of the more interesting models we have seen involve providing clear, simple language to local managers on how to deal with COVID-19 (consistent with WHO, CDC, and other health-agency guidelines) while providing autonomy to them so they feel empowered to deal with any quickly evolving situation. This autonomy is combined with establishing two-way communications that provide a safe space for employees to express if they are feeling unsafe for any reason, as well as monitoring adherence to updated policies.

Set up a cross-functional COVID-19 response team. Companies should nominate a direct report of the CEO to lead the effort and should appoint members from every function and discipline to assist. Further, in most cases, team members will need to step out of their day-to-day roles and dedicate most of their time to virus response. A few workstreams will be common for most companies: a) employees’ health, welfare, and ability to perform their roles; b) financial stress-testing and development of a contingency plan; c) supply-chain monitoring, rapid response, and long-term resiliency (see below for more); d) marketing and sales responses to demand shocks; and e) coordination and communication with relevant constituencies. These subteams should define specific goals for the next 48 hours, adjusted continually, as well as weekly goals, all based on the company’s agreed-on planning scenario. The response team should install a simple operating cadence and discipline that focuses on output and decisions, and does not tolerate meetings that achieve neither.

Ensure that liquidity is sufficient to weather the storm. Businesses need to define scenarios tailored to the company’s context. For the critical variables that will affect revenue and cost, they can define input numbers through analytics and expert input. Companies should model their financials (cash flow, P&L, balance sheet) in each scenario and identify triggers that might significantly impair liquidity. For each such trigger, companies should define moves to stabilize the organization in each scenario (optimizing accounts payable and receivable; cost reduction; divestments and M&A).

Stabilize the supply chain. Companies need to define the extent and likely duration of their supply-chain exposure to areas that are experiencing community transmission, including tier-1, -2, and -3 suppliers, and inventory levels. Most companies are primarily focused on immediate stabilization, given that most Chinese plants are currently in restart mode. They also need to consider rationing critical parts, prebooking rail/air-freight capacity, using after-sales stock as a bridge until production restarts, gaining higher priority from their suppliers, and, of course, supporting supplier restarts. Companies should start planning how to manage supply for products that may, as supply comes back on line, see unusual spikes in demand due to hoarding. In some cases, medium or longer-term stabilization may be warranted, which calls for updates to demand planning, further network optimization, and searching for and accelerating qualification of new suppliers. Some of this may be advisable anyway, absent the current crisis, to ensure resilience in their supply chain—an ongoing challenge that the COVID-19 situation has clearly highlighted.

Stay close to your customers. Companies that navigate disruptions better often succeed because they invest in their core customer segments and anticipate their behaviors. In China, for example, while consumer demand is down, it has not disappeared—people have dramatically shifted toward online shopping for all types of goods, including food and produce delivery. Companies should invest in online as part of their push for omnichannel distribution; this includes ensuring the quality of goods sold online. Customers’ changing preferences are not likely to go back to pre-outbreak norms.

Practice the plan. Many top teams do not invest time in understanding what it takes to plan for disruptions until they are in one. This is where roundtables or simulations are invaluable. Companies can use tabletop simulations to define and verify their activation protocols for different phases of response (contingency planning only, full-scale response, other). Simulations should clarify decision owners, ensure that roles for each top-team member are clear, call out the “elephants in the room” that may slow down the response, and ensure that, in the event, the actions needed to carry out the plan are fully understood and the required investment readily available.

Demonstrate purpose. Businesses are only as strong as the communities of which they are a part. Companies need to figure out how to support response efforts—such as by providing money, equipment, or expertise. For example, a few companies have shifted production to create medical masks and clothing.

This briefing note was edited by Mark Staples, an executive editor in the New York office.

COVID-19: Briefing note #1, March 2, 2020

The following is McKinsey’s perspective as of March 2, 2020.

What we know about the outbreak

COVID-19 crossed an inflection point during the week of February 24, 2020. Cases outside China exceeded those within China for the first time, with 54 countries reporting cases as of February 29. The outbreak is most concentrated in four transmission complexes—China (centered in Hubei), East Asia (centered in South Korea and Japan), the Middle East (centered in Iran), and Western Europe (centered in Italy). In total, the most-affected countries represent nearly 40 percent of the global economy. The daily movements of people and the sheer number of personal connections within these transmission complexes make it unlikely that COVID-19 can be contained. And while the situation in China has stabilized with the implementation of extraordinary public-health measures, new cases are also rising elsewhere, including Latin America (Brazil), the United States (California, Oregon, and Washington), and Africa (Algeria and Nigeria). The US Centers for Disease Control and Prevention has set clear expectations that the United States will experience community transmission, and evidence is emerging that it may be happening already.

While the future is uncertain, it is likely that countries in the four mature transmission complexes will see continued case growth; new complexes may emerge. This could contribute to a perception of “leakage,” as the public comes to believe that the infections aren’t contained. Consumer confidence, especially in those complexes, may erode, and could be further weakened by restrictions on travel and limits on mass gatherings. China will mostly likely recover first, but the global impact will be felt much longer. We expect a slowdown in global growth for 2020. In what follows, we review the two most likely scenarios for economic impact and recovery and provide insights and best practices on how business leaders can navigate this uncertain and fast-changing situation.

Economic impact

In our base-case scenario, continued spread within established complexes, as well as community transmission in new complexes, drives a 0.3- to 0.7-percentage-point reduction in global GDP growth for 2020. China, meanwhile, continues on its path to recovery, achieving a near-complete economic restart by mid-Q2 (in spite of the current challenges of slow permissions and lack of migrant-worker capacity). As other geographies experience continued case growth, it is likely that movement restrictions will be imposed to attempt to stop or slow the progression of the disease. This will almost certainly drive a sharp reduction in demand, which in turn lowers economic growth through Q2 and early Q3. Demand recovery will depend on a slowing of case growth, the most likely cause of which would be “seasonality”—a reduction in transmissions similar to that seen with influenza in the northern hemisphere as the weather warms. Demand may also return if the disease’s fatality ratio proves to be much lower than we are currently seeing.

Regions that have not yet seen rapid case growth (such as the Americas) are increasingly likely to see more sustained community transmission (for example, expansion of the emergency clusters in the western United States). Greater awareness of COVID-19, plus additional time to prepare, may help these complexes manage case growth. However, complexes with less robust health systems could see more general transmission. Lower demand could slow growth of the global economy between 1.8 percent and 2.2 percent instead of the 2.5 percent envisioned at the start of the year.

Unsurprisingly, sectors will be affected to different degrees. Some sectors, like aviation, tourism, and hospitality, will see lost demand (once customers choose not to eat at a restaurant, those meals stay uneaten). This demand is largely irrecoverable. Other sectors will see delayed demand. In consumer goods, for example, customers may put off discretionary spending because of worry about the pandemic but will eventually purchase such items later, once the fear subsides and confidence returns. These demand shocks—extended for some time in regions that are unable to contain the virus—can mean significantly lower annual growth. Some sectors, such as aviation, will be more deeply affected.

In the pessimistic scenario, case numbers grow rapidly in current complexes and new centers of sustained community transmission erupt in North America, South America, and Africa. Our pessimistic scenario assumes that the virus is not highly seasonal, and that cases continue to grow throughout 2020. This scenario would see significant impact on economic growth throughout 2020, resulting in a global recession.

In both the base-case and pessimistic scenarios, in addition to facing consumer-demand headwinds, companies will need to navigate supply-chain challenges. Currently, we see that companies with strong, centralized procurement teams and good relationships with suppliers in China are feeling more confident about their understanding of the risks these suppliers face (including tier-2 and tier-3 suppliers). Others are still grappling with their exposure in China and other transmission complexes. Given the relatively quick economic restart in China, many companies are focused on temporary stabilization measures rather than moving supply chains out of China. COVID-19 is also serving as an accelerant for companies to make strategic, longer-term changes to supply chains—changes that had often already been under consideration.

To better understand which scenario may prevail, planning teams can consider a set of leading indicators.

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COVID-19: Implications for business in 2020

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By Sarun Charumilind, Matt Craven, Jessica Lamb, and Matt Wilson

Detecting disease

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About the authors

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