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S&P survey finds 79% of companies affected by coronavirus

Liam Eagle, S&P Global Market Intelligence Research Vice President, joins Yahoo Finance Live to highlight a new survey revealing the impact COVID-19 is having on businesses.

Video Transcript

- Let's go now to Liam Eagle. He is a research vice president at S&P Global Market Intelligence. And Liam, you guys ran a survey of organizations and how they are already dealing with the impacts of the coronavirus outbreak, how it's upset a lot of their practices. Kind of walk us through some of the high-level findings that you guys came up with.

LIAM EAGLE: Yeah, sure. So, I mean, I should probably start by saying, we ran this survey from March 10th to March 19th. And during that time, the scale, if you could use confirmed infections in the US as the scale of the situation, that sort of increased tenfold during the time that the survey was in field. And has increased tenfold again since it's been out of field.

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So this is of a snapshot of the early experience of these businesses that are-- we can probably imagine these reactions have become more relevant to these businesses as the situation escalates.

One of the things that we captured was that most of the businesses we surveyed at that point already expected this to be a sort of major disruption to their business. And by major disruption, we meant they're not going to be able to meet their debt obligations, or they're not going to be able to deliver their services, or they're going to lose a major client. Larger businesses typically felt like they could sustain beyond six months. But most businesses said, we expect a major disruption within six months.

And then we had about a quarter of businesses say, they felt like they could go on indefinitely without that major disruption. But that number we saw dropped pretty significantly while the survey was in field.

- Liam when you say some of these companies not being able to meet their debt obligations, were there any particular sectors that you found were especially vulnerable? We've talked about the airlines, and the hotels, and sort of the travel industry broadly. But I'm wondering if you found maybe some other sectors that aren't being discussed that are finding a lot of vulnerabilities right now.

LIAM EAGLE: You know, I don't think that we saw any particular-- that's a good question. I don't think that when we saw that the variation within the survey response-- we saw a pretty consistent 50% across all those markets.

- When you break down what the hits have been to these companies, one of the things you pointed out was supply chains. In the initial days of the pandemic, the thinking was that because everything was focused in China, that was especially a big disruption given so many companies had a presence there. We've seen the geography shift to Europe and now in the US.

How do you think the thinking of these companies has shifted as a result? Does it does it help them that these Chinese factories are up and running? Or are there new issues that are now popping up?

LIAM EAGLE: Yes, so I think the initial question that we were sort of coming up with was, is your supply chain too focused on China right now? Are you going to need to diversify as a result of this?

And we actually didn't see a huge response to that kind of question. We're didn't see a ton of people saying, we're going to do less business in China as a consequence of this. But now that the focus of the epidemic isn't really on China anymore, we think that we're just going to see-- I guess we saw the same kind of curve when we asked businesses are you currently experiencing an interruption to your parts and materials or any interruption to the services that you require to do your business.

And it was pretty split between, we're experiencing it right now and we expect we're going to experience. But we saw that also escalate as things went on. So I think that now that the supply chain, some of the manufacturing is back online, that's going to begin to correct itself in a sense. But those supply chain effects sometimes take a little bit longer to be felt at the consumer end of things.

RICK NEWMAN: Liam, it's Rick Newman. Are you getting any sense for how this stimulus package, which just got signed so it's only going into effect now, how this might help firms that are going to have liquidity and solvency problems in any specific ways.

LIAM EAGLE: Yeah, I think that might be a little bit outside my area of expertise. And also certainly outside what we were trying to capture with the survey because it was prior to that announcement, right?

- Liam, one of the things that I guess is lost in all this because we've talked so much about the hit the economy's taking, the hit these companies are taking, there are still investments being made. And one of the things I thought was interesting about your survey is that there's a huge investment that's being made in IT, just tech in general. We heard from Micron a few days ago on their earnings call that they've gotten a big lift from a lot of these work from home operations. Can you speak a little to that?

LIAM EAGLE: Yeah, sure. So remember, we did this survey before some of these things were mandated. But we saw a significant majority of companies saying they were implementing travel bans. They were implementing enhanced or blanket work from home policies. They weren't attending events. They're shutting down offices temporarily.

And we also asked them whether we expected any of these policies to sort of remain in place over the longer term. And we did see about half of businesses saying, we do expect our expanded work from home policy to remain in place over the longer term. So that obviously leads to some investment in communication and collaboration tools, mobile devices and laptops, bandwidth, and network capacity information, security tools like VPNs, the things that you need to invest in to get your workforce set up and working at home.

- All right, Liam Eagle with S&P Global Market Intelligence. Thanks so much for the time.