The financial implications of COVID-19 on the manufacturing industry in Malta

Abstract

Purpose: The purpose of this study is to review the COVID-19 financial implications borne by Maltese manufacturers. The study aims to explore how financial controllers in the manufacturing industry assessed and responded to such implications of which some might have been anticipated in advance, whilst some others have developed throughout the course of the pandemic. Design: This study adopted a qualitative research approach. The objectives were attained by conducting interviews with 23 financial decision-makers in local manufacturing firms. Findings: Reduced turnover, supply chain disruptions and the increase in material prices were the major operational implications on the manufacturing industry in Malta, caused by COVID-19. Several internal strategies were adjusted to preserve and manage cash flow due to the disruption in operations. Decision-making in uncertain and volatile times forced companies to introduce new methods to their decision-making and budgeting approach. Government measures were tapped in by several manufacturers to help them survive these tough times. Conclusion: From the research conducted it was established that the majority of the manufacturers were affected negatively by the pandemic. Uncertainty affected the role and function of financial decision-makers severely. Companies adopted flexible working arrangements to avoid disruptions in productivity. Cost-containment measures were crucial to protect liquidity and control unessential spending. Government aid was key to help finance leaders to deal with the unfolding economic crisis, however some manufacturers believed that the government could have done more to aid the manufacturing industry throughout the pandemic. Implications: COVID-19 has been a massive stress-test to the local manufacturing companies. The study aims to bring out the importance of business diversification and not to rely on a few major sources, customers and products. The study emphases the importance of flexibility and value engineering in decision-making, particularly by always trying to anticipate what’s to come and how to respond to unexpected challenges, rather than trying to limit the pure financial losses only.