SMEs around the world: Resilience and innovation to survive in times of pandemic
Small and medium-sized enterprises (SMEs) have been hard hit by the COVID-19 pandemic. The damage to their income and labor composition has been significant. But, at the same time, the crisis represented an opportunity for many SMEs to make the leap to digital transformation and move forward in modernizing their operations.
According to the United Nations Development Programme (UNDP), in 2021 SMEs account for 99.5% of all existing businesses in Latin America and the Caribbean. Sixty percent of employed people work in SMEs, which contribute 25% of the region’s GDP.
According to the UNDP, SMEs are a “critical source of employment and a lifeline of economic prosperity,” which is why it is necessary to support them “on the path to recovery.”
The negative impact of the pandemic
The figures speak for themselves: research by the International Trade Centre found that 60% of SMEs were affected by the pandemic. Meanwhile, ECLAC estimated that 2.7 million companies closed in Latin America, most of them SMEs. The region’s GDP fell by 9% in 2020 and unemployment rose to 13.5%. Many of those left without work had been employed in an SME.
One of the main problems faced by SMEs in Latin America was that very few had achieved the digitization of all their processes. A study by the Development Bank of Latin America showed that less than 40% had created digital sales channels.
SMEs face different challenges in order to survive in times of pandemic. The most important of all is digital transformation. Only those that are able to make progress in this transformation will be able to continue to grow.
Another challenge is that of securing customer loyalty. The pandemic has forced many SMEs to modify their business models in order to retain or attract more customers. The relationship with them is not the same as it was before COVID-19. Those that manage to understand this change and are able to interact better with these new types of customer, who tend to be increasingly critical and less loyal, will be able to hold their own.
Human resource management and work organization will continue to be a challenge. Many large companies had taken the first steps in teleworking before the pandemic; however, for SMEs, working from home was not a priority.
COVID-19 made telework a necessity and forced SMEs to reinvent themselves. Now comes the time for a more careful study of what is the best strategy to follow with teleworking, because this is a trend that is here to stay.
SMEs cannot neglect environmental sustainability in their business model. The search for energy efficiency and the application of circular economy concepts should be a focus for their leaders.
In times of crisis, governments adopted a series of actions to mitigate the damage to SMEs. As the pandemic becomes more under control and the economic situation improves, many of these measures will disappear. Nevertheless, UNDP defended the need to invest in SMEs so that they can become a “strong engine of sustained economic recovery in the region.” Among the organization’s suggestions to governments is to facilitate access to financing, increase investment in digitalization and innovation, and reduce regulatory burdens.