Five hidden complications when converting factories to fight COVID-19

Author: Kate Barton

Businesses shifting their focus in response to the pandemic should understand how tax, law and workforce rules will affect their efforts.

From tiny liquor distilleries making hand sanitizer to large manufacturers producing ventilators for hospitals, businesses around the world have responded to the COVID-19 pandemic by converting their normal operations into manufacturing lines that produce desperately needed supplies such as personal protective equipment and ventilators.

These laudable initiatives have made a real difference in many communities and helped to save lives even as they won companies praise and goodwill from the press and consumers. But in many cases, the decision to act was pursued with urgency and with little understanding of, or concern for, the longer-term implications for their business.

In the months since the World Health Organization declared a pandemic, five areas in particular have emerged as key considerations for enterprises undertaking such benevolent activities. They include: tax implications, cash flow, logistical concerns, risk and law issues and the logistics of managing people.

“On the tax side, there are government incentives, credits, and grants that can potentially offset some start-up costs with these initiatives,” says Rob Weber, EY Global Business Tax Services Leader. “Businesses may also need support with cash-flow issues, logistical challenges along their supply chains and new legal risks. And, if they’re keeping their people working during the pandemic or looking to bring them back as things stabilize, they need to be concerned about how to keep them safe.”

More than 50 EY clients across the advanced manufacturing, hospitality and consumer products sectors have announced publicly that they are engaging in some sort of manufacturing line conversions to help in the COVID-19 fight. Companies like Singapore-based Razer, a leader in gamer and e-sports that converted a manufacturing line to make masks, say they felt compelled to help.

“We remain committed to grow, develop and give back to those around us,” says Lee Limeng, Chief Strategy Officer at Razer. “The pandemic has impacted businesses and individuals around us, and the need to galvanize support and make a difference is more apparent now than ever.” Limeng describes the company’s mask manufacturing line as a “rally call for the community to come together and give back to our frontline workers and those in need.”

It is a worldwide phenomenon, triggering responses from a diverse community of businesses across sectors. Some include Jabil, the Florida-based manufacturing services company; Unilever, the world’s largest maker of soap; and the Dow Chemical Company, which began making sanitizer at plants in multiple countries.