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Reopening US state government operations on a path to the next normal

State leaders must continue to address the COVID-19 challenges facing their own operations while also considering how to rebuild and reimagine for the next normal.

The COVID-19 crisis struck with terrifying speed. In a matter of weeks economic activity had slowed to a crawl. Government operations were pulled in two directions—needing to surge some services to meet the crisis, while needing to adjust others to physical distancing and stay-at-home orders. Recovery is going to be much more gradual and governments have the dual task of reopening and restarting not only their own operations, but also the economy. This article focuses on how US states can start preparing now for the next normal for their own operations and workforces. Already many states are beginning to pivot from focusing almost exclusively on crisis response to planning for a restoration of some services and functions, including their own operations.

As state leaders begin planning for this reopening, they must continue to address challenges to their own operations brought on by COVID-19, from strained budgets to work backlogs, while also considering how to rebuild in the context of an altered world.

The challenges are real, but there are also opportunities to reimagine our collective future. This moment has been an inflection point, pushing states to operate in new ways. States should take stock of knowledge gleaned from the crisis while the opportunity for change is highest. States must plan all the immediate steps necessary to reopen their own operations, while taking time for thoughtful reimagination of their place in the longer-term next normal.

The most pressing short-term needs are planning the government workforce’s safe return and restarting the delivery of essential government services. To some extent, restarting means redesigning. States will need to change how they operate to succeed within a changed environment. The optimal balance between planning immediate steps and architecting a new future will vary from state to state, but all states will benefit by doing both.

The state of the states

In most states, the state government is the biggest employer. It’s no surprise, therefore, that most have taken strong action to protect their workforces from COVID-19. While essential services such as transportation, health, and emergency services have continued (in a modified way) throughout, many other services have been scaled back and/or operated remotely, including most administrative services.

Clearly, recalling workers and returning government services to full throttle will not be as simple as pressing a start button. Powering up a large, multifaceted organization from a mostly dormant status is a complex task. States must find a systematic way to prioritize and sequence the various elements of their machinery as they are brought back online and identify and address the most pressing needs first. It’s a formidable challenge; compared with the private sector, many of the services provided by government, such as education, social services, and healthcare, are both critical and hard to provide remotely, safely, and effectively.

Even as they do this work, states should focus on longer-term issues that will better position them for the future. This includes accelerating plans to address long-standing needs, like building digital capabilities, as well as addressing new needs revealed by the COVID-19 crisis, such as weaknesses in remote service provision and talent gaps that impede nimble, data-driven solutions.

Restarting government services and operations

States will need to carefully balance the actions required to restore government services as quickly and as safely as possible with the unique opportunity this period offers to put in place much needed change programs. As states begin the job of restarting operations, they should consider focusing on four major workstreams (Exhibit 1). These four workstreams will help them find the right balance between solving for immediate needs and building a new, more resilient future state.

1. Build a new baseline of agency services and employees

To reopen services as quickly and safely as possible, states should consider segmenting and sequencing both services and employees. States can ask a series of questions to rapidly segment services according to those that are most urgently needed by the public, the health risk they pose to workers and the public, and size of the population they serve, as well as quickly classify employees for rapid deployment to fulfil these service needs.

Classification and prioritization of services

Most services will fall into four archetypes, which correlate with four waves for reopening (Exhibit 2).

The first wave consists of all essential, low-contact services, which can include vital IT or public-utilities services. These operations should be both low risk and high value and should therefore be at the head of the queue for reopening. Governments can think through the actions necessary to get these vital services up and running as quickly as possible, prioritizing those that have been most hurt during the period of remote operations.

Next in line are essential high-contact services, which can include corrections or mental-health services. Governments will need to think through additional safeguards necessary to reopen and restore services quickly while minimizing the health risk to workers and the public. This could include steps to reduce or defer demand for these difficult-to-deliver services.

The third wave includes all flexible, low-contact services, which can include human-resources services. In many cases, the task will be to develop processes and tools to sustain long-term remote operations. Governments should consider whether any services or workers can be transitioned to permanent remote work.

The final wave includes all deferrable, high-contact services, which can include documents and licenses services. The questions to consider here are whether these services can be deferred or reduced while viral transmission is active or whether the mode of service delivery can be reconfigured to reduce risk while still maintaining adequate service levels.

Classification and prioritization of employees

As governments plan which services to reopen when, they should also consider the best way to sequence and prioritize roles within agencies. One way to prioritize is by using a talent-to-value approach to identify the most critical teams and roles for specific high-priority services. This approach encourages leaders to look beyond traditional hierarchies to pinpoint where the true value of a service or function is being created and enabled.

Using this analysis, agencies can divide their workers into four categories, creating a detailed return-to-work plan for each.


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First are on-site critical workers. These workers can be recalled in stages based on local health conditions, but there should be a detailed plan that looks at virus spread, guidance from local public- health authorities, workforce readiness for returning to work, and legal liability.

Next are on-site flexible workers. Here, the ramp-up might be slower and include staggered shifts and retraining to build more flexible skill sets and a shift toward flexible work arrangements.

As states categorize their employees, it is important to assess which roles and teams are critical for delivering a service, regardless of where they sit in the hierarchy.

Virtual workers are those who can continue to carry out their roles effectively while working from home. Employment data from 2018 suggest that nearly 30 percent of state and local government employees can work virtually, including office clerks, assistants, and lawyers. Agencies should focus on providing any additional support necessary to ensure productivity, connectivity, and health. Again, work arrangements should shift where needed and possible to become more flexible.

Finally, governments and agencies should consider new demands and opportunities and provide the necessary transparency and reskilling to fill these new, reimagined roles.

As states categorize their employees, it is important to assess which specific roles and teams are actually critical for delivering a service, regardless of where they sit in the hierarchy.

2. Prepare safeguards for workplaces and employees

The return of the workforce to their places of work must be executed with care, making worker and public health a top priority. To provide adequate infrastructure to do so, governments need to have a clear understanding of the working conditions for each role, including level of contact with the public and level of control that can be exerted over the work environment (Exhibit 3). The measures taken to protect the health of teachers, for example, will be very different from what’s needed to protect judges or call-center agents.

States can think about the steps they will need to take in three ways.

First are the measures needed to ensure healthy humans, such as enforcing physical distancing and providing adequate sanitizing of materials and products that come into contact with the broader population.

Healthy business operations include practices and policies aimed at keeping workers safe, such as monitoring the temperature of workers, embracing policies to allow people to work from home, and instituting flexible sick leave.

Practices such as installation of barriers to limit physical contact between workers and ensuring adequate ventilation are aimed at creating a healthy work environment. Other steps include no-touch bathrooms, providing adequate supplies of hand sanitizer, and both routine and targeted cleaning and sanitizing.

3. Plan and execute return

State governments should work together with departments and agencies to define a clear approach for a safe return to sustainable operations. This road map for reopening includes the steps earlier outlined for segmenting workers and return-to-work plans for each. It also includes a sequence of steps to ensure that employees know how to return, how to resume their duties, and where they should focus their efforts first. Some elements of the job will remain the same, but others will change. All of this must be carefully communicated and monitored. The steps here fall into three areas.

Communication, planning, and scheduling

State central response teams can work together with departments and agencies to develop a schedule of major service and function reopenings and milestones, providing guidance and direction to department leadership, validating return-to-work plans from individual departments, and assessing related equipment and budget needs. Planning should be supported by a cadence of communication from the central response team to agencies, employees, and external stakeholders.

Measurement of reopening indicators and key performance indicators

Again, the first priority must be worker and public safety. Governments can develop dashboards and other mechanisms to monitor and address emerging risk areas. Designated agency leaders can ensure compliance with the state reopening effort and conduct regular check-ins to maintain a continued focus on safety.

Prioritization of backlogs, projects, and resources

States can also conduct an inventory of service backlogs for services that were slowed, paused, or limited during quarantine, creating lists of both essential and nonessential services and products that have been paused. They can then pivot staff and resources toward critical projects, such as improved IT services for remote delivery, and redistribute resources to bolster areas under strain. These decisions will be taken within the context of additional budgetary considerations given the crisis, and states will be pressed to consider efficiency opportunities across services.


How to restart national economies during the coronavirus crisis

Finally, as states work through the process of planning and operationalizing the next era of government, they should consider establishing a governance framework to facilitate smooth operations and coordinate all the tasks that will be part of this massive and wide-ranging undertaking. In addition to a steering committee and core working team that includes representation from health, technology, and other relevant agencies, they can consider including SMEs and representatives with backgrounds in economic recovery, emergency and disaster response, and other relevant fields, who can weigh in more occasionally on decisions related to their areas of expertise. Each of the areas of focus under each workstream should be assigned clear leadership, with agencies/leaders with expertise in the area deployed appropriately.

4. Reimagine a next normal for state service operations

The crisis has uncovered new work practices and opportunities for building a more responsive and resilient government. Even as administrators work through the complex process of “reboarding” their workforces and creating a safe environment for both workers and the public, they can think through ways to strengthen and support new ways of working as well as technologies that can support better provision of government services.

Some of the reinvention might be a matter of dusting off old ideas that have been stymied, while other initiatives might be based on new ideas born of the crisis. New, more flexible ways of working and remote working should be considered and evaluated based on their ability to increase productivity, rather than just insisting that everyone conform to traditional practices. Parts of the five-year plan may now become part of the five-week plan, and vice versa. Everything is on the table now, and governments should take the time to mine this recent period of enforced quarantine and remote working for practices that should be scaled to help society spring back better and stronger than before.

Focus areas for this reimagination include rethinking work, retooling talent, and redesigning customer experience.

Rethinking how work gets done

As states imagine their next normal, it is helpful to consider the new baseline of what work means in the context of this new landscape. This includes everything from baselining budgets based on post-coronavirus priorities such as safety and health to exploring automation and other digitization levers to make processes more resilient to future crises. Administrators should also take a hard look at the actual demand for services and reprioritize where appropriate. Some services that were paused may have been revealed to be of low value and may not need to be brought back on line. Other crisis-driven adjustments may be of much higher value and should be retained postcrisis.

Worker productivity is a rich area in this regard. There may well be important lessons from the crisis in how to support employees in working better and more productively, regardless of time or place. This should not be a matter of intuition; rather, governments can implement productivity- measurement tools to track outcomes.

Retooling worker talent and capabilities

Now is also the time for states to get serious about talent assessment and filling skills gaps. Carefully assess how the COVID-19 crisis may have changed the demand for certain roles, skills, and capabilities, and flag both higher- and lower-demand roles. Given the employment picture, there could be an opportunity to revisit job types that have previously been hard to source and explore outreach to talent who might not have previously considered government work. States may wish to explore opportunities to partner with large local employers that have been forced to lay off workers who can fill these high-demand needs. 

This is also the time to embed and reinforce new ways of working—and to flag new practices that are not desirable. States should assess which changes and new practices are most useful, and develop a training and communication plan to help agencies reinforce desired changes and revert away from less-desired behaviors. It is important to train agency leaders and supervisors to role model positive new ways of working. Finally, states should develop a plan to help agencies upskill and reskill workers to meet changes to their roles, postcrisis.

Redesigning customer experience

States are coming through a period of having to provide services under extreme stress. Despite best efforts, many services may have been delivered insufficiently or unsatisfactorily during the crisis, creating the need to restore public confidence.

By surveying residents and employers, states can determine where their systems held up—and where they need to be reinforced. In some cases, service provision may actually have improved and that, too, is important to know.

To streamline service delivery, states can then work with agencies to address the pain points for the highest-priority customer journeys. By surveying stakeholders they can also better project how service demands are likely to increase or decrease postcrisis—including demand for new types of services not regularly offered by states, such as remote education or childcare for essential workers. A short concept-ideation workshop can be useful in helping states uncover which areas to focus on, and answer the questions of how public behavior has changed in the wake of the COVID-19 crisis, and how service delivery can be reconfigured to meet change in service demand.

As they work through these customer-experience improvements, states and agencies can also align them with their broader digital road map. There may be an opportunity to invest or reallocate resources and projects toward strengthening digital and remote service capabilities.


Reopening government is a complex task unlike anything most states have ever undertaken, but it also presents a chance to institute new practices based on the enforced remote operations of the crisis or to accelerate long-standing plans that the crisis has made more urgent. The challenge is to balance the immediate necessary and difficult steps with the wider-ranging, longer-term shifts. It won’t be easy, but as the crisis abates, there is a clear path forward for states to reopen to a next normal and an opportunity to define a new and better future.

Restarting national economies during coronavirus

For weeks, most governments have focused on controlling the spread of the coronavirus, many of them by implementing a full lockdown strategy. That’s starting to change; in recent days, a few have moved to strike a better balance between “flattening the curve” and reviving the economy. But uncertainty is rampant. In our previous article, we outlined a selective lockdown strategy, in which certain regions and sectors can gradually return to work. Such a strategy makes it possible to define the optimal number of people allowed on the streets, making sure that lives are protected, while also minimizing the cost on livelihoods.

In this article, we explain the elements required for the selective lockdown approach to work: a fine-grained understanding of the virus’s spread in every part of a country; the economic relevance of every sector in every region; capabilities for testing, tracing, and isolation compliance (TTC); and protocols for physical distancing and safety. In some cases, expanded intensive-care unit (ICU) capacity is another key element. If governments can master these requirements and build the information systems needed to understand in real time what is working and what is not, then they will have found a way out of our collective nightmare.

Not all strategies are equal

Countries have used a wide array of physical-isolation strategies to fight the pandemic. Although each is unique, they can be grouped into two macro strategies, with different mindsets:

  • Full lockdown: a blanket nationwide lockdown to contain the virus and decrease rates of transmission where only essential sectors are allowed to operate, while citizens circulate only for basic needs, such as food and medicine. Several countries have followed this approach, including France, Argentina, and Colombia.

  • Selective lockdown: a partial lockdown with both essential sectors and some others allowed to operate, each with specific protocols. Countries have implemented this strategy in several ways; the most effective seems to feature a virus-tracing capacity that allows governments to isolate people who test positive and trace their movements to find corresponding chains of contagion. South Korea has used this strategy successfully.


While both strategies seek to manage the rate of contagion given a country’s healthcare capacity, they involve very different mindsets. Countries pursuing a full, prolonged lockdown are possibly betting on the development of a vaccine or an effective treatment; until one of those comes along, they seek to minimize rates of infection and expand healthcare capacity. A selective lockdown reflects the belief that a large percentage of the population will be infected before a vaccine becomes available. As we explain later, a selective lockdown strategy may require brief periods of full lockdown either to increase healthcare capacity, or if the speed of viral transmission becomes too fast to control.

If we plot the contagion curve over time, it becomes clear that in the absence of a vaccine or a cure, the number of people infected and of cases needing medical attention will be similar in all three scenarios: no response, full lockdown, or selective lockdown (Exhibit 1). But the cost in lives and livelihoods will differ significantly.

The idea of flattening the curve has become well established, but the two macro strategies do it in different ways. A prolonged, full lockdown could be very effective in flattening the curve, but it will also result in significant unused healthcare capacity (blue area of Exhibit 1) when compared with a selective lockdown, and will result in unnecessary costs to livelihoods due to excessive restrictions on economic activity.

Additionally, a prolonged full lockdown will increase the total time economic activity is restricted, which also represents an unnecessary cost in livelihoods (gray area in Exhibit 1). In our modeling for several countries, our directional estimates suggest that the economic cost of full lockdowns is at least twice as high as that of selective strategies. Furthermore, if a full lockdown strategy persists for several months, it could cost up to 20 percent of a country’s GDP. In many cases, that would undo decades of economic and social development.

A selective lockdown, on the other hand, allows countries to reduce the duration of government-mandated restrictions on economic activity by incorporating and optimizing the elements we describe in this article.

Even though a selective lockdown seems to be a smarter approach, many countries still remain in full lockdown, because too much remains unknown about how to transition successfully, and because each country’s context varies widely from others.

These uncertainties can be overcome. We argue that if countries strategically define who can be on the streets at any given time and have adequate tools to control the virus spread and manage the infected population, they will be better prepared to address the pandemic.

Who should be on the streets? The uncomfortable middle ground

A selective lockdown recognizes that the risk of contagion of COVID-19 varies from person to person, both because of their personal circumstances and the nature of their activities and interactions. Such a lockdown states that infected people and their chain of contagion must quarantine during the time of infection. It also advises that the more vulnerable populations (the elderly, people with preexisting health conditions), as well as others with a high risk of transmitting the virus, such as children, should stay at home until the rate of contagion is low enough to safely interact with other people. However, mandating physical isolation for everyone else is more difficult, as these people represent most of the economically active population. Isolating them has a severe effect on the general livelihood of the area.

If we leave aside those people who can work remotely, the question becomes what to do with the rest: in-person workers in nonessential sectors, who typically represent the majority of the population, particularly in emerging and often highly informal economies. Activities such as manufacturing, construction, commerce, professional services, and other key sectors can represent up to 80 percent of GDP in a given country. When should they go back to work? How many jobs will be lost if no action is taken early on?

In our recent article, we introduced the local response matrix, a framework to help leaders transition out of a full lockdown. Many countries have opted for full lockdown because of the difficulties encountered in preventing the spread of the virus in their major cities. A full lockdown buys time, to build health-system capacity and avoid country-wide collapse. The local response framework champions the idea that a country’s regions will differ in their rate of contagion and their healthcare capacity. A local response matrix, populated with projections based on real-time data to keep up with the virus’s exponential growth, allows leaders to unwind a full lockdown, region by region, and minimize the negative externalities of stringent blanket measures. Exhibit 2 shows an illustrative view of a given country’s regions.

Within each region, countries can prioritize sectors to reactivate gradually, according to their inherent risk of transmitting the virus and their economic relevance. The lower the risk and higher the economic relevance, the faster the sector could be reactivated.

After sectors have been earmarked for reactivation, they can be grouped together, and leaders can prepare them for a gradual economic restart—a process that will be rolled out in stages. Leaders will, at the same time, determine the health and behavioral protocols required for these groups of sectors to operate.


Countries following this approach will have a structured and orderly ebb and flow of people on the streets. However, as more people return to their daily activities, the risk of virus spread will naturally increase—and, if ignored, might generate a new peak of contagion, requiring a return to full lockdown measures. This is where TTC and health and behavioral protocols come in: they are the tools that allow selective lockdowns to be sustainable over time.

Why are testing capacities and protocols so important?

In addition to physical distancing, two variables could help to reduce the rate of contagion: TTC and strict, enforceable health and behavioral protocols that govern personal interactions in public spaces.

Testing allows for targeted containment of contagion chains. However, its deployment presents challenges, especially in capacity management. So far, many countries do not have adequate capacity to deploy an effective testing strategy. This, combined with the race for supplies and equipment in international markets, leads to a conundrum for leaders: how to allocate scarce testing capacity. Countries pursuing the selective lockdown could implement a testing strategy targeting specific segments of the population and expand it as more capacity becomes available. Segments could be defined based on the following logic:

  • Focused testing. Countries should use current testing capacity mainly for symptomatic patients and essential workers (especially medical personnel). This alone will exhaust available tests for countries in early stages of capacity building.

  • Selective testing for tracking. As more tests become available, countries should quickly identify and test people in contagion chains, thus preventing further infection among the population. This will eventually become the backbone of tracing and enforcement efforts during the pandemic, including the use of smart isolation through apps and georeferencing.

  • Random testing at large scale. Finally, as full capacity is reached, countries can randomly select inhabitants for testing with the aim of developing an early-warning system. This kind of testing can prevent high-volume outbreaks in the future.


In the second stage, governments would need to trace and contain the contagion chain. Best practices include a combination of manual tracing with the use of georeferenced applications that increase the scope of effective tracking. Governments might need to communicate to the population the collective and individual benefits of cooperating and participating in these efforts to increase its effectiveness.

Finally, enforcing the isolation of people required to stay at home is essential to limiting the contagion. Compliance poses difficult questions for governments. What should governments do about people who cannot comply? And what should they do about those individuals who are willing to comply but cannot quarantine at home, either because they don’t have one or they share it with several people (including vulnerable populations like children or grandparents)? Providing a government-sponsored hotel or apartment for isolation could be an effective solution, especially for people who are known to be infected and must be closely monitored to break the chain of contagion.

It goes without saying that all human interactions pose a risk of virus transmission. In this sense, general protocols like universal mask-wearing while outside from home and establishing minimum distances in public places like parks and grocery stores could become a requirement for all societies. However, given that some activities involve higher levels of risk, authorities should develop customized health and behavioral protocols for some of them. If these are developed and implemented effectively, they could substantially decrease the rate of transmission (Exhibit 3).

In order to complement the strategy of decreasing the virus spread, governments might want to ensure every infected person gets the medical attention that they require, therefore a region should also have a clear understanding of how to strengthen its healthcare system.

How much ICU capacity should we build?

Available capacity of ICU beds is an important variable for policy makers. Each new unit added to the health system translates to potential lives saved. Further, the more ICU capacity a country adds, the less time it will need to be in lockdown, reducing the cost in livelihoods.

Yet, expanded ICU capacity, as important as it might seem, only addresses the problem partially given that it is not a cost-effective solution. Deploying new ICU beds across a region requires significant investments in both time and money, not to mention a heavy call on other resources such as medical staff, medical supplies, and infrastructure, all of which are already limited. Policy makers must understand this dynamic to know the limits of their ICU-expansion policy and complement it with other measures. Rather than betting on significant increases in ICU capacity, the safest approach will be to clearly understand the maximum degree of virus spread that a region’s expanded ICU capacity can handle—and ensure that the increase in virus spread associated with economic restart stays within it.

The economic cost of lockdown strategies

With all variables in place, governments can deploy their resources to save both lives and livelihoods.

Lives matter more. We define lives saved as those that might be lost if healthcare systems were to become saturated and some patients could not access the critical care they need. In other words, the objective should be to guarantee that all lives that can be saved are actually saved with appropriate medical attention—and that is achieved by avoiding the collapse of the healthcare system. No economic-reopening strategy should tolerate even a single life lost in this way.

Defining livelihoods is a more complex exercise, as it goes beyond the economic impact of chosen measures. It could involve all the negative externalities, both physical and mental on people’s lives, for instance. But for practical purposes, we define the impact on livelihoods as the associated economic cost to the region of implementing a lockdown strategy. This could be estimated as the weekly GDP lost in a given region. That being said, as our colleagues recently noted, this economic impact may not be constant over time: prolonged and intense lockdowns might even break the social contract and send consumer expectations plummeting, leading to a deep economic recession.

Exhibit 4 shows how these definitions allow us to estimate the impact of each type of measure in each region. By definition, the impact on lives should be zero for any level of selective lockdown if properly implemented. If a full lockdown (stage 4, in our scheme) is needed as a response to either exhaustion of healthcare capacity and/or uncontrolled virus spread, then the number of patients without ICU access could be very high. In stages 1, 2, and 3, the spread of the virus is under control and healthcare capacity is guaranteed. Regions should use all available tools to move quickly to less stringent stages (3, 2, 1) to lessen the impact on livelihoods.

By calculating the weekly cost of any strategy, governments can more readily understand the direct effect of strategic changes to reduce the impact on livelihoods, while preserving lives.

Using different scenarios for healthcare capacity and virus spread, leaders can plot the days that a region will spend in each stage. Governments could also plot the effectiveness of their actions (such as expanding ICU capacity, or greater investment in measures to control virus spread) to minimize the time spent in critical stages, particularly in stage 4.


For instance, in the region analyzed in Exhibit 5, the government’s strategy centered on actions to improve both variables. But the analysis showed that implementing measures such as TTC to control the virus spread would be more effective in the short term than expanding ICU capacity. Arguably, this should be the case for most countries with reasonably good healthcare capacity—which, in turn, highlights the importance of having good TTC systems and correctly enforcing health protocols.

With this information, governments can allocate resources and provide guidance to leaders on what to do in each region. This might mean creating ICU capacity in regions with a higher at-risk population, enhancing TTC capacity at scale, enforcing health and behavioral protocols, or strengthening physical isolation when needed (as a last resort to control virus spread); most certainly, it would be some combination of all the above.


Effective decision making requires timely and accurate information

A basic requirement for responsible and timely decisions is accurate and real-time data. Policy makers need multiple sources—such as data from full-scale testing (once capacity is built) and systems for tracing contacts—to estimate the spread of the virus in different regions. And they need to rapidly collect, aggregate, visualize, report, and understand these data.

On that point, policy makers will benefit from a world-class information-management system, likely as part of their “nerve centers.” Such systems can feed a management dashboard, which can help to build projections for the next seven to 45 days (Exhibit 6). Delays in collecting and processing information could have massive negative consequences on virus control and could very quickly make the rate of transmission unmanageable. The ability of governments to quickly understand the effectiveness of their actions, learn what’s working, and improve methodologies and processes will be essential.

The selective lockdown strategy aims to jumpstart economic recovery while saving every life. To achieve this, resources and capabilities must be effectively implemented, and decisions must be based on robust information.

By proactively addressing the crisis and informing people of the expected future stages, governments can manage expectations and slowly restore consumer confidence, the key for economic recovery.

Leaders will need confidence, resilience, and grit to steer through this phase, as well as the next normal. Having a structured and well-thought-out approach to restarting the economy while continuing to protect lives will be critical. After all, this is only the beginning of our new reality.

Crushing coronavirus uncertainty: The big ‘unlock’ for our economies

Only eight weeks ago, we published “Safeguarding our lives and our livelihoods: The imperative of our time.” Back then, we worried about the supply of ventilators and critical-care capacity, the world’s ability to suppress the coronavirus, and how governments would respond to the pandemic’s economic fallout. So what has the world learned since?

We now know that we can curb the spread of the virus, can rapidly expand critical care, and are on our way to scaling the availability of testing. We have seen most governments and central banks rapidly move to implement stimulus and liquidity measures to cushion the economic impact. Unfortunately, we have also confirmed that lockdowns cause deep economic shocks: peak to trough, developed economies are likely to see GDPs decline by between 8 and 13 percent in the second quarter of 2020 (Exhibit 1). By the end of April, more than 20.5 million jobs have been lost in the United States since the start of the pandemic. Clearly, some of the initial uncertainty associated with the coronavirus has been reduced—but it remains high.

When we asked global executives how long they believe their economies will take to return to precrisis levels, their scenario choices indicated estimates ranging between three quarters and more than five years (Exhibit 2). Similarly, when we polled consumers about when they expect their lives to return to some level of normality, answers ranged from months to years.

Uncertainty about the continuing spread of the coronavirus makes people fear for their health and their lives. Uncertainty about their livelihoods makes them cautious about spending. Under high uncertainty, business leaders find it impossible to make reliable plans for investment.

This uncertainty is toxic for our economic recovery.

The objective now must be to crush uncertainty as soon as possible. As we have seen in previous crises, when uncertainty subsides, confidence returns and economic recovery unlocks—and the COVID-19 crisis has created the highest level of uncertainty in 35 years (Exhibit 3).

In many countries today, the uncertainty still starts with the virus. The path societies choose to control its spread as they strive to bring their economies back on line matters, and the stakes are high. We estimate that from now to the end of 2023, the difference—in lost global GDP—between economic scenarios with only partial virus-spread control and those in “near-zero virus” situations will be as much as $15 trillion.

There are three main paths forward that leaders around the world are exploring:

  • Balancing act. This path involves a staged reopening of the economy, controlling the virus spread within the capacity of the healthcare system.

  • Near-zero virus. This path means opening the economy while imposing virus-control measures that stop short of a lockdown; these appear to be effective in preventing virus spread.

  • Transition act. This path involves switching from a balancing-act path to a near-zero-virus path by implementing elements of near-zero-virus packages as soon as they are ready.


Each path implies very different outcomes for lives and livelihoods because each path’s trajectory determines the spread of the virus, the pace of economic recovery, and the speed at which it can help crush uncertainty.

Possible paths out of the crisis

Geographies that have already achieved near-zero-virus conditions without strict lockdowns will likely try to continue on that course. So far, this method appears to be working for Hong Kong, Malta, South Korea, and Taiwan, among others. These countries experienced much lower initial declines in GDP (in the range of 1–2 percent, in contrast to the likely 8–13 percent), and they now have much lower uncertainty levels about the virus, which is accelerating their economic recoveries.

Most other geographies, having used lockdowns to suppress the initial spread of COVID-19, are now exploring one of the three paths previously mentioned (Exhibit 4):

  • Balancing act. The goal often articulated by government leaders who have chosen this path is to lift lockdowns gradually while keeping the number of patients with COVID-19 within the capacity of their healthcare systems. If the public-health measures supporting the release of the lockdowns turn out to be sufficient to keep the virus spread at bay, this path could prove effective. But that is not assured. The virus could recur locally or regionally. After lockdown measures were recently eased in Germany, for instance, infection rates started to creep up again, and authorities are now discussing the risks of a second wave and even a new peak of infections.


Critically, the viability of this path to economic recovery is uncharted territory. Even if a specific version of the balancing-act path turns out to be successful, uncertainty and risk will remain high for an extended period. People may only feel fully confident about their safety when they see conclusive proof that this path does not cause a virus recurrence—an assurance that may not come until much later in 2020.

  • Near-zero virus. When releasing lockdowns on this path, the goal is to crush uncertainty by implementing a collection of measures that have been observed to control the virus and are realistic in a given context (see sidebar, “Elements of a ‘near-zero virus’ package”). By effectively communicating the scope of these measures and presenting a clear road map to economic recovery, uncertainty would be crushed faster. With the confidence of consumers and business leaders restored, the recovery process would accelerate.


Importantly, once a geography achieves a stable near-zero-virus situation—which implies its near-zero-virus package is working—some of these measures could be gradually eased. Of course, uncertainty about a government’s ability to implement such protocols will vary among locations.

  • Transition act. The goal of governments on this path may likewise be to reach near-zero-virus status, but the steps they take would reflect the time required to put the right package of measures in place. Obstacles might include a lack of testing capacity, personal protective equipment (PPE), or “intelligent border controls,” all of which may have to be procured and implemented.


Recognizing that only a few places are close to having a near-zero-virus package ready, there are several key questions to answer. When can such a package be put in place? How soon after that could you transition to the near-zero-virus path? And what implications would that hold for your road map to reopening the economy? As answers to these questions become clear, the future would grow more predictable and uncertainty would be reduced. At the point of transition to the near-zero-virus path, uncertainty would be crushed.

Elements of a ‘near-zero virus’ package

It should be noted that for many emerging markets, a near-zero-virus package may not be realistic for financial and other reasons. Additionally, in many developed countries, some measures may be socially or politically unacceptable. We also observe big differences in the level of intensity and quality of execution today. However, given the benefits of paths that drastically reduce uncertainty, even countries facing significant obstacles would benefit from exploring the viability of such packages.

Other epidemiological outcomes may yet materialize. The development of COVID-19 herd immunity (on which scientific evidence is so far inconclusive) could emerge as a side effect of the balancing-act path. The discovery of effective treatments or vaccines would, of course, crush uncertainty instantly. Unfortunately, it’s not clear whether and when such solutions may become available.

Which path? A ‘trillion dollar’ difference

  1. The reason for putting uncertainty squarely on the table in any discussion about the best path forward is that the stakes are high. No matter which scenario ultimately emerges, the economic cost of the coronavirus crisis will be unprecedented. In our earlier article, we laid out nine potential economic outcomes of the COVID-19 pandemic based on healthcare systems’ and policy makers’ responses (see Exhibit 2, above). Even a moderately favorable scenario (A3) could result in a global GDP decline from 2019 of $4 trillion to $5 trillion. The toll on individuals, in lost jobs and income, will be equally grave.


Importantly, the difference between ending up in a first-row scenario versus a second-row scenario (for example, A3 versus A1) is material. The reason is that in scenario A1, in which the virus recurs, more businesses will go bankrupt, more supply-chain bottlenecks will appear, and structural or even systemic damage to the economy is more likely to occur. The result would be a deeper drop in GDP and a different recovery trajectory. Scenario A3 would produce a recovery to precrisis levels in late 2020 or early 2021; scenario A1 would produce a muted recovery only after two to three years.

The cumulative difference in lost global GDP between scenarios A1 and A3 could be as high as $15 trillion to $20 trillion, with more than $5 trillion lost in the United States (equivalent to ten times the country’s annual military expenditure) (Exhibit 5) and more than €4 trillion in Europe (including the United Kingdom). Additionally, scenario A1 could produce approximately ten million to 15 million more unemployed people in the United States and seven million to ten million more jobs lost in Europe throughout the period of economic recovery than scenario A3 would.

Geographies pursuing a balancing-act path could end up in a second-row scenario on the matrix (A1, for example). Those on a near-zero-virus path are likely to emerge in one of the first-row scenarios (A3, for example), with those on a transition-act path landing somewhere in between.

One of the most important implications is that the financial cost of a near-zero-virus package of public-health interventions—aimed at changing the economic outcome from the second to the first row of the scenario matrix—is dwarfed by the heavy economic price of ending up in the second row. After all, consider how many test kits $5 trillion could buy. Accordingly, the financial cost of a near-zero-virus package could be irrelevant.

Is near-zero virus even possible without a lockdown?

We now know that stay-at-home lockdowns, with physical distancing in supermarkets and other public spaces, work to control the spread of the virus. We also know that lockdowns kill the economy. The consequences are not just financial: there is also a direct human toll. The silent victims of the coronavirus include people dying from other diseases because they are unable to access urgent care, individuals with mental-health issues, victims of domestic violence, people suffering from intensifying poverty, and the millions of newly unemployed.

We now know that stay-at-home lockdowns work to control the spread of the virus. We also know that lockdowns kill the economy. The consequences are not just financial: there is also a direct human toll.

Lockdowns also cause uncertainty to remain high, as the extent of the structural damage to the economy becomes less predictable the longer lockdowns stay in place. This uncertainty is paralyzing. Government leaders lack reliable data on which to base their decisions about safely relaxing lockdowns. Bankers don’t extend credit, because they don’t know when their clients’ businesses will be back in operation. Manufacturers reshape capital-investment programs because they don’t know how much cash they will need on their balance sheets to survive the crisis. Shopkeepers and restauranteurs are forced into bankruptcy because they don’t know when (and under what conditions) customers will return. And consumers continue to defer discretionary spending, as they are unsure when their lives will be back to some level of normality.

Fortunately, we have observed near-zero-virus outcomes in places that chose not to lock down their economies. For example, Hong Kong, Iceland, Malta, Shanghai, South Korea, and Taiwan all implemented locally adapted versions of near-zero-virus packages (Exhibit 6).

It does seem that near-zero-virus outcomes are possible even without running a depression-level economy. With virus spread under control, life can come back. In Hong Kong, for example, restaurants are open again. Yes, they require everyone to wear masks, limit seating to four per table, and maintain a distance between tables of two meters. Yes, there are clear rules—but just thinking about the possibility makes people long for a more normal life. That is exactly how it feels when uncertainty is crushed and confidence returns. But people will only resume their lives when they believe they are safe, not when they merely hope so.

Similarly, the economy cannot be forced to return to normal. People concerned about their safety will not go into their workplaces or flock to their favorite coffee shops and retail stores. We have seen many worker protests demanding PPE before employees would return to their jobs.

In a way, we are saying that lower virus levels are good for protecting lives (for example, you need fewer tests or can detect more with the same number of tests) and good for protecting livelihoods, as it is easier to feel safe “returning to normal.” Of course, there are many potential complications (for example, herd immunity may become the only alternative if a vaccine or better treatments fail to materialize).

The greatest difference achieving a near-zero-virus condition makes, relative to scenarios in which the virus is not fully under control, is that uncertainty is drastically lowered. Near-zero-virus packages and clear communication about the restrictions they require, along with fact-based justifications for them, encourage citizens and leaders alike to make decisions with more confidence. This, in turn, helps unlock economic recovery.

The choice of path depends on local context

We acknowledge that moving from high infection rates to a near-zero-virus situation is very hard and may be impossible in some geographies. National and local authorities are in the best position to judge how realistic it is to implement effective near-zero-virus packages short of lockdowns. But they can lean on the examples of some that have done it.

In January 2020, for instance, Taiwan launched its version of a near-zero-virus package. It included 124 distinct measures and successfully blocked even the initial spread of the virus without a lockdown. As of early May, it has recorded fewer than 100 cases of community transmission, fewer than 450 infections, and only six deaths. Similarly, South Korea successfully controlled its initial outbreak through its version of a near-zero-virus package, which relied heavily on testing and quarantines but avoided full lockdowns. The country is currently tracking fewer than 20 new infections per day and has had a total of 250 deaths in a population of 52 million.

You might say, “124 measures—that’s complex. How can that be the answer?” A general involved in the New York City coronavirus-relief effort recently said, “When uncertainty is high, answers need to be simple. If the answer is not simple and executable, it is not an answer.”

The simplicity inherent in near-zero-virus packages lies in their use of known measures—ones that have been observed to be effective in reducing the probability of virus transmission in a number of geographies and contexts. Nobody knows exactly how much each element of such a package contributes to slowing virus spread, but in combination, the measures push the transmission rate to a basic reproduction number (R0) of less than one.

The reason the packages work is rooted in one of the characteristics of the epidemic. Given that the coronavirus is very contagious (even before symptoms appear), each improvement in the infection chain makes a big difference. If physical distancing, for example, reduces viral spread by just 10 percent, then it cuts the total chain by 20 to 25 percent. This is a “convex” problem: every little bit helps, and the more things we do, the better—especially if the cost of those things is very low.

In the absence of both lockdowns and packages of measures, the risk of virus recurrence is just as high as when the COVID-19 pandemic arrived earlier this year. An 80 percent solution is no solution.

What does this mean for your organization or your country? That probably depends.

There are many reasons that implementing a near-zero-virus package in your context may be near to impossible. They might include a lack of testing capacity or PPE availability, legal challenges on civil rights, privacy concerns related to contact tracing, and other societal issues. It is evident that social acceptability of near-zero-virus packages is greater in some Asian countries. A high degree of physical distancing might already be culturally common, and there might be fewer sensitivities to accepting certain social measures in the interest of public health. It has been common for years, for example, for people in Asia with respiratory infections to wear surgical masks to avoid infecting others.

We don’t pretend to know what is legally, socially, or financially best suited to your specific circumstances. But we believe it is worth at least including the goal of reaching a near-zero-virus objective as one of the alternatives you consider. In strategy, you need to debate alternatives in order to avoid being led astray by biases.

The stakes are high and speed is of the essence—and we would argue that everybody can pitch in.


It has been a challenging time for governments and their citizens alike. Fighting off the initial spread of the virus, passing huge stimulus packages to support people and businesses, and navigating a complex situation have heavily taxed the public sector’s resources, both financial and human.

Now that we have learned more—and, in many places, infection curves have at least started to flatten—governments should start focusing on crushing uncertainty. Which path is the right one? Should you push for the near-zero-virus goal? You will know best. Whichever path you choose, however, you should try to provide as much clarity and certainty as possible. Restoring confidence must be a priority.

Businesses and other institutions

You will know best how many elements of a near-zero-virus package you can afford and can execute on your premises. We see many companies already calculating this and moving forward. Physical-distancing and PPE-wearing measures are widespread, and some companies are building on-site testing capabilities to try to ensure safe work environments for their employees.

All those elements can also play an important role in keeping communities safe. In many countries, business leaders are collaborating on government-led efforts by joining advisory councils and coordinating the corporate portions of public-health responses to ensure consistency—and thereby accelerate progress toward near-zero-virus conditions.

Speed and clarity: The only known ‘vaccines’ against the coronavirus crisis

In January 2020, hardly anybody took notice of COVID-19. Back then, most of those outside China who did notice shrugged their shoulders. Then, all of a sudden, the pandemic was upon us. Humans have innate difficulty in processing exponential events. That may explain why so many organizations are lagging behind in their preparations for getting people back to work safely. It is hard to blame anyone for not anticipating the full extent of the economic issues coming toward us—few of us have ever experienced an economic shock of this proportion.

We now know that speed is of the essence. It was for controlling the initial spread of the virus; it is for stopping its spread now; and it will be for decisively moving onto the path to recovery. Ultimately, speed helps reduce uncertainty, which, in turn, will revive economic growth and lessen human suffering.

Communicating clearly to citizens and employees about actions, timelines, and expected outcomes is another critical factor. The more factual and forward looking your messages are, the faster confidence will return—and the faster economic recovery can begin.


We slowed the virus. Now we need to crush uncertainty and rebuild confidence to avert structural damage to the economy—and do it fast. Lives and livelihoods will depend on it.

Stability in the storm: US banks in the pandemic and the next normal

The humanitarian and economic fallout of the COVID-19 pandemic has upset the global balance. No person, industry, or aspect of society remains untouched.

The banking industry can uniquely act as a primary source of stability. Banks guard savings and investments, provide sound credit and financing, deliver safe and secure payments and transaction services, and offer trusted advice. They are not simply commercial enterprises but providers of important services to individuals and communities, playing a vital role in the functioning of the economy.

Banks in the United States entered the COVID-19 crisis with the strength of ample capital and liquidity and have moved rapidly to protect their employees and customers. Most have shifted the majority of their workforces to remote work and have closed or reduced capacity at branches while also dedicating hours to serving high-risk customers. Individuals and businesses have received forbearance where needed, and banks have served as critical conduits for the liquidity provided by the Federal Reserve and for the credit and loan forgiveness offered via the Paycheck Protection Program and the Main Street Lending Program. As such, in the early phases of the pandemic, US banks have largely been living up to societal expectations.

Yet the challenge to come is daunting and the path uncertain. Unemployment has hit levels not seen since the aftermath of the Great Depression. More than 25 percent of small businesses anticipate declaring bankruptcy in the next six months. Hard-hit industries, such as oil and gas, travel, and retail, may be forever reshaped. For banks, near-zero interest rates and a flattened yield curve mean diminished net interest income. Credit losses could exceed $1 trillion. Recovery, when it comes, will vary in speed and intensity across industries and regions. The lasting effects will linger for many years—perhaps a decade or more.

As our colleagues have suggested, meeting the challenge will require disciplined thought and bold action. So far, banks have acted swiftly and with resolve to meet the first acute phase of crisis. Now, they must show resilience under great uncertainty, beginning the return from lockdown and reimagining their new postcrisis future. Amid widespread economic struggles and heightened disparities, banks have the opportunity to rediscover their purpose and reform their contract with society, providing stability in the pandemic storm.

Resilience: Strength in uncertainty

Banks will need to plan for the worst among reasonable outcomes while hoping for the best. Our colleagues have developed nine potential macroeconomic scenarios for the economy over the next five years, reflecting a range of virus-containment, public-health, and economic-policy responses (Exhibit 1). They surveyed more than 2,000 executives globally to understand which scenarios they believed to be most likely:

  • Scenario A1, a muted recovery, was selected by roughly one-third of surveyed executives. In this scenario, the virus recurs after loosening of physical-distancing measures. US GDP could diminish by 13 percent from peak to trough, with unemployment reaching roughly 20 percent.

  • More than one-quarter of surveyed executives are more optimistic, predicting more effective virus-containment or economic-policy response (scenarios A2, A3, and A4). Among these more positive scenarios, the most commonly selected is scenario A3, in which the virus is well contained and economic policy is somewhat effective. This scenario is nevertheless trying. US GDP suffers in 2020, falling 8 percent from peak to trough, returning to its previous peak level of economic activity at the end of 2020.

  • However, roughly 40 percent of surveyed executives are less sanguine, predicting that either virus containment or economic policy, or both, will be ineffective. Among these less optimistic scenarios, respondents most commonly selected those in which economic policy is ineffective although the virus is contained, potentially with some recurrence (scenarios B1 and B2).


Financial stability

The safety and soundness of the financial system depend on banks’ financial resilience. In our estimate, the US financial system would withstand scenario A1 or any of the more optimistic scenarios (scenarios A2, A3, and A4). Regardless of scenario, banks need to manage and allocate their capital carefully to sustain the shock while standing by their customers, employees, society, and regulators.

US institutions entered the current crisis with substantially greater capital and liquidity resources than they had at the onset of the global financial crisis. This is seen through the common-equity Tier 1 capital (CET-1) ratio, a core measure of bank financial strength. In 2007, US banks with more than $50 billion in assets had an average CET-1 ratio of roughly 7 percent, which fell to about 5 percent by 2010. During this period, 12 major institutions suffered erosions of 300 basis points or more; half did not survive as independent entities.

By contrast, at the start of 2020, US banks’ CET-1 ratio was about 12 percent. Over the course of this crisis, that figure might decline by one to four percentage points, resulting in an average CET-1 ratio of about 8 to 11 percent. This is in line with the diminution in capital that US banks prepare to withstand during the annual stress-testing exercise. Most leading US banks today are positioned to weather a capital depletion of this magnitude without falling below regulatory minimums.

We expect that two factors will be most material to banks’ finances over the next several years. Credit losses may range from $400 billion to $1 trillion between 2020 and 2024 (ranges cited here and later depend on the scenario) (Exhibit 2). Net interest income may decrease by up to $200 billion from its 2019 baseline. Overall, we foresee that the credit losses described later in this article will affect bank revenues the most in the next 18 months. And while we see those losses extending beyond the next two years, reduced demand and tightening of credit availability will most likely be major parts of the revenue impact in 2022–23.

Credit losses will come disproportionately from commercial and industrial (C&I) loans to the industries most heavily affected by lockdowns. For example, in retail, transportation, and automotive, more than half of issuers have already been rerated by the credit agencies.2 Oil and gas borrowers will also struggle: up to 40 percent of producers face insolvency if current prices persist.3 Correspondingly, we expect C&I loan losses to be significant, with cumulative charge-off rates between 2020 and 2024 ranging roughly from 4 percent to 10 percent, depending on the scenario. Commercial-real-estate loan-loss rates will reach similar levels, with hotels and retail properties most deeply and immediately affected.

Unsecured consumer lending will be even harder hit. In the first seven weeks of the crisis, 33 million Americans have filed initial jobless claims, which is more than in the entire global financial crisis. As people struggle financially, credit cards could see cumulative charge-off rates of 25 to 41 percent.4 Impact on mortgages and home-equity loans could vary widely—with charge-offs ranging from around 1 to 7 percent—depending on house prices, which are enormously uncertain at present, and governments’ and servicers’ actions, such as forbearance (see sidebar, “Credit-loss projections by asset class”).

Credit-loss projections by asset class

Ongoing resilience

Resilient institutions not only withstand threat or change but transform for the better. The COVID-19 crisis poses a significant test of financial resilience, as well as banks’ operational, organizational, reputational, and business-model resilience.

Remote-working models and broader environmental factors will challenge operational resilience. For example, remote working has given hackers and state actors more “attack surface,” increasing cyberrisk, with new malware campaigns and scammers posing as corporate help-desk teams. External fraud and technology risk have both also grown as more people work from home.


Banks have and will need to continue ongoing COVID-19-specific control testing, monitoring, and enhancement while also reinforcing their capabilities to respond quickly to new similarly unforeseen events.

Organizational resilience requires talent development, new measures in people management, and robust succession planning. Building the reskilling capabilities to promote greater agility and scalability helps banks build the organizational capacity to cope with rapid changes like the 80-fold increase in origination volume for small and medium-size bank (SMB) lending experienced recently. Development and succession planning for executive management is equally central for resilience. The COVID-19 pandemic is a grim reminder that no institution can assume its leadership team to be immune from mishap or worse.

Reputational resilience will confront significant tests in the face of COVID-19. Banks are not only the beneficiaries of government support but also major vectors for delivering government aid. As they do so, they must take care to funnel the funds appropriately, which can be a challenge under extreme pressures of time and throughput. At the same time, as loan delinquencies and defaults rise, so, too, will the reputational stakes. Adhering to bank rules and regulations on how to treat delinquent loans and ensuring that those who can pay do pay while also reckoning with new social movements, such as #NoRent, will be a reputational quagmire for which banks must prepare.

Finally, business-model resilience requires institutions to adapt to potentially significant shifts in customer demand, competitive landscape, and regulatory terrain, as we discuss next.

Return and reimagination: Toward a new future

Many banks are justifiably focused on returning to “normal” as quickly as possible. However, the halcyon days of 2018—with a more typical yield curve, low credit losses, consistent growth, controlled expenses, and paced evolution toward digital—will not return.

It is already clear that this crisis has accelerated change in the way banks interact with customers and undertake remote operations. At the same time, institutions are staring at multiple years of historically high credit losses while serving a customer base itself under enormous financial and psychic strain. Only banks that build sufficient resilience will be able to envisage renewed growth. But in this environment, even resilient banks will need to provide differentiated client relationships and to reduce their cost structures dramatically.

Three characteristics of banks that will succeed in this new future stand out. They will digitize customer interactions to address prolonged public-health risks. They will restructure their workforces and operations to become more agile and productive. And they will increase their pace of innovation to deliver those changes while evolving their value propositions to respond to rapidly changing customer needs.


Digitization out of necessity

Over the past two months, banks’ interactions with customers have become almost entirely remote, as people have self-quarantined and branches have closed or reduced their hours. Interestingly, during this time when phone interactions have increased substantially, consumers are using online and mobile banking only slightly more than they did before. In North America, online log-ons increased by 8 percent and mobile log-ons by 1 percent (compared with a 15 percent increase in call volume) since December 2019.

Many organizations have predicted that a tsunami of new customer demand would cause a swift shift to digital banking. In fact, The Jeeranont surveys suggest that retail-customer preferences are largely unchanged. For example, when asked how they expect their behavior to change after the pandemic, 13 percent expect to use mobile banking services more, while 7 percent expect to use them less (Exhibit 3).6 Nevertheless, previous investments in digital offerings are paying off for many banks, and a significant opportunity remains to upgrade digital capabilities so that they become more convenient than a phone call for a broader array of customer interactions.


While we don’t see evidence yet for a rapid groundswell of digital demand, the digital revolution will come of necessity. Even if customers would prefer to go back to the way things were, those days are likely gone, with public-health risks potentially continuing for months or years, particularly for older generations.

Beyond the immediate impact of the disease, as banks face likely lower revenues and greater pressure on productivity, they may also come to see that their branches are a cost that is not absolutely necessary. US bank branches (which numbered about 88,000 in 2019, roughly 8,000 fewer than in 2013) have been largely vacant for six weeks. Many banks will conclude, based on both branch economics and customer behaviors, that they should not reopen some of those shut branches. In that way, US banking might come to look more like other developed markets. The United States has 35 bank branches per 100,000 adults; by comparison, Canada and the United Kingdom have a density of 20 and 19 branches per 100,000, respectively.

Similarly, commercial banks will need to rely more heavily on digital channels to serve SMBs, to make it cost effective to serve them and their increased needs. That will mean increasing investment in digital and remote sales capabilities to replace in-person sales approaches. Interestingly, this could improve growth prospects for some smaller commercial banks struggling to cover large geographies, allowing them to access new markets further afield. It may allow some smaller banks to focus on industry niches or specific population segments at a regional or national level.

An agile and productive workforce

Lockdowns throughout the world have pushed companies quickly to remote and more agile ways of working. While the story is evolving, multiple indicators suggest that some remote work will persist even as COVID-19 abates. For example, in one survey, 74 percent of CFOs said they plan to keep at least 5 percent of their workforces remote.8 In another survey, 54 percent of professionals indicate that working from home during the COVID-19 pandemic has had a positive impact on their productivity.9

Those results may not be resounding proof of employee preference, but they do indicate the feasibility of retaining at least some remote work—and the more agile collaboration models that go with it. Banks now face a prolonged period during which co-locating large numbers of employees in small spaces will be inadvisable. In this context, many banks are reorganizing to promote greater agility and scalability.

Remote-work productivity typically increases when an entire team collaborates remotely, as compared with split-team models. Even in the immediate term, for remote employees struggling to work effectively, organizations that reimagine processes to help people collaborate more meaningfully will have a leg up on recruiting and keeping the best talent. For instance, some capital-markets leaders are learning how to manage remote teams across the deal flow on a virtual trading floor. Other banks are training relationship managers to engage with customers digitally.

When banks bring some people back to the workplace, they will need to consider the personal details of each team and each employee and their ability to return to the office based on factors such as disease susceptibility, transportation constraints, and local rules. Return plans will need to be highly detailed, spanning new designs for physical infrastructure to protect workers, safe transportation to the office, and childcare for those who need to come to work while schools remain closed.

As banks reimagine work-activity processes from the standpoint of employees, they have the opportunity to radically simplify and digitize each process, yielding welcome productivity benefits. Many tasks that were manually processed a year ago are already being quickly digitized to adapt to the new normal. The potential for automation will shift the role that banks need to fill. As banks rethink their operating models for the next normal, they can take a fresh look at expenses that previously seemed like givens, from third-party spend to unnecessary travel and meetings to their real-estate footprint. Many banks are already actively exploring changes to each of those areas.


Flexible and rapid innovation

The flexibility to address new realities will matter tremendously, with the spoils going to those that can meet the practical demands of the moment with creativity and a commitment to make the most of the inevitable. Flexible innovators that reimagine both customer interactions and underlying operations will be rewarded with customer-share gains and higher productivity in the next normal. Banks that try to wait it out, resist the change by trying to return to a previous normal, or get distracted by novelties are likely to suffer. The following are a few innovation examples:

  • For customers forced by branch closings into new interaction models, banks can create innovative experiences that address a wider variety of needs—for example, advice, problem resolution, and loan modification. Our surveys suggest that call-center volumes have spiked since the COVID-19 crisis began. Customers who cannot resolve issues through digital or physical channels are resorting to phone calls, with long hold times. Regardless of channel, banks that can rapidly innovate customer experience and underlying processes will gain superior customer-acquisition and -retention capabilities. The banking equivalent of the one-click purchase—for example, streamlined “one tap” financial-health advice—is not far in our future.

  • The most successful banks will shape value propositions as true partners, advisers, and sources of financial stability. Banks can reestablish trust in a context in which customers do not see them as the cause of the crisis but as a potential mitigant. Banks may see value in shifting their product mix and risk appetite—for example, away from subprime credit cards and toward personal loans, or even layaway products, combined with financial-health advice and budgeting.

  • Banks that rethink how they use data in risk decisions and personalization will emerge stronger. The pandemic has demonstrated the benefits of both broader data sharing and broader types of data. Because of the crisis’s suddenness and high variance in financial impact, historical traditional financial data will be of limited value in training credit and other risk models or in guiding banks on business decisions during the recovery. The most successful banks will reimagine how to tap their extensive data to understand customers’ risk and potential beyond the traditional markers of creditworthiness. At the same time, increased data availability and sharing will also transform the art of the possible for personalization. We anticipate that banks will accelerate efforts to use data to inform personalized offerings and interactions that take into account each customer’s unique financial situation rather than using a segmented view that is likely to miss critical nuances.


Another factor in a reimagined future bears mentioning: the potential to reshape a bank’s portfolio. Of today’s 5,177 banks10 and thousands of fintechs, many may not have the resilience to withstand such stress and uncertainty for a long time. As in the years after the financial crisis, stronger institutions will have the chance to acquire many weaker competitors and fintech capabilities at a relative discount, enabling new customer-value propositions, innovation, and productivity gains.

Reform: The new social contract for banks

Almost every economic and epidemiological indicator suggests that this pandemic will be a generational event, with potential to be even worse than the Great Depression. Twelve years ago, a crisis durably damaged the reputation of banks. Some called for banks to be broken up or left to fail. The banking industry has worked hard in the decade since to rebuild its strength and restore its reputation. Today, in the face of massive societal and economic change, such as shrunken global trade, large income disparities, and a potentially lost generation of small businesses, banks are well positioned to serve once again as pillars of stability for consumers, companies, and society as a whole.

Most immediately, banks could consider other means of supporting their communities to highlight their renewed role in a broader social contract. They might expedite financing for medical equipment and manufacturing. They might offer their branches as centers for free COVID-19 testing or, alternatively, for providing free advice on financial budgeting. Banks can also steer their charitable donations toward those hit hardest by COVID-19 and dedicate portions of their owned marketing channels to public-health information.

Many are calling for companies to demonstrate empathy with customers, some of whom have lost their loved ones or their livelihoods. In our view, the only useful form of empathy from banks is one that aligns the incentives of both bank and customer. To do this, banks will need to reform many aspects of their business. For example, metrics and incentives that may have previously emphasized sales would instead encourage a better experience and stronger financial health for customers. Banks would need to modify or eliminate certain financial products that may not align well with that new social contract.

In the bigger picture, the current crisis is a call to action for all businesses—and banks, in particular, given their role in society—to define anew why they exist and their desired impact on the world. Expectations for businesses role in society are at an all-time high: 73 percent of people say a company could take specific actions that both increase profits and improve the economic and social conditions in the communities in which it operates, up nine percentage points from 2018.11 Expectations for banks are especially high at this particular moment. So far, consumers see banks rising to the challenge. In fact, a The Jeeranont Consumer Survey indicates that 87 percent trust their banks to “do the right thing” during the crisis, and some two-thirds of consumers trust their banks more now than they did before the pandemic.12 Banks should seize this moment. As credit losses rise sharply in coming months, the challenge will also escalate. Banks need to use the platform provided by the crisis to clarify and communicate their role and assert a compelling purpose.

What exactly the future holds for society, the economy, and banks is deeply uncertain. The moves that banks make today will be critical, not only in safeguarding the lives and livelihoods of their customers and employees but also in reestablishing their role and preserving the trust of society for the years to come.

Reopening India: Implications for economic activity and workers 

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