Alain Lacasse
Partner | CPA, CA | Assurance

When public gatherings were banned, the lights went dark on the entertainment and culture industry. Many companies suddenly found themselves facing serious financial troubles and an uncertain future.

Like many economic sectors in Quebec, the entertainment and culture industry has had to reinvent itself in recent months and find creative ways to reopen. Even though the industry has always had to contend with changing conditions, this is the first time it has had to close its doors on a global scale.

And yet, demand for content has increased. People locked down at home have taken their social activities online. Television viewership and online gaming consumption has spiked. The crisis has highlighted the importance of culture in social wellbeing and that’s why it needs to play a major role in the economic recovery.

Assistance programs

Cinemas, theatres, museums, festivals, and television and movie producers—none of these businesses are able to operate as usual due to physical distancing directives. That’s why so many are relying heavily on assistance programs.

Nearly $500 million has been granted to support this major industry in Quebec. Bolstered by funding, organizations can think about how to survive and thrive in this new reality. Some of this funding comes from government programs managed by groups like the Canada Media Fund and the Société de développement des entreprises culturelles. With all the uncertainty surrounding the public health crisis, businesses need to keep up with new assistance programs and how these financial support measures can help them transform their offer.

Learning to adapt

In Quebec, consumers have serious reservations about heading back to live performances or in-person exhibits. In fact, most say they wouldn’t attend a festival or visit a museum in the near future, even if these options were to reopen. As a result, organizations are having to find creative ways to stay alive, connect with audiences and generate cash inflows.

One example is Théâtre La Licorne, a theatre company that sought new ways of keeping their customer base satisfied and entertained during these challenging times. With live performances out of the question, they decided to offer their customers tickets to webcasts of their performances.

Meanwhile, the Just for Laughs Festival decided to go digital by broadcasting performances on an online platform. This move enabled the annual festival to build on its reputation and reach a broader global audience. In all, they grew their customer base by 23%.

When the plug was pulled on festivals, tent and public sanitation providers like Chapiteaux Classic and Groupe Star Suites shifted their offer to hospitals. More specifically, they provided planning assistance and equipment for setting up COVID-19 screening centres.

Seizing opportunities

With so much of the population hunkering down at home, the already-popular online gaming industry saw their subscriptions soar. Since online games allow players to interact with friends and family as well as strangers, they give people a sense of accomplishment and connection through real-time communication.

After realizing just how effective games can be for building relationships and a sense of community, some gaming companies decided to fast-track production of key products to get them out faster and capitalize on growing consumer demand.

In the United States, one-third of all gaming customers are first-time subscribers. With schools and offices closed, more and more people are playing video games. For video game developers and publishers, this is the perfect time to attract new players.

Continuing to innovate and manage the crisis

The entertainment and culture is in the midst of a massive transformation, a process fraught with difficulties. To set the stage for success, each project needs to be approached with rigorous and innovative management. This is more important than ever.

In this industry, many companies plan projects at least a year in advance, a feat that’s next to impossible in the current crisis. You need careful cash management and a solid financial plan for each of your projects; your organization’s future depends on it.

Our team is well-known for its broad range of experience working with cultural organizations and television and film companies. We’re knowledgeable about the various assistance programs available, as well as the latest developments and financing and taxation affecting the culture and entertainment industry.

 

26 Nov 2020  |  Written by :

Alain Lacasse is a partner at Raymond Chabot Grant Thornton. He is your expert in assurance for the...

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Would you like to reduce your income taxes? Although tax planning should be a year-long activity, there is still some time left to implement a few tax strategies that will help reduce your tax bill.

Furthermore, certain measures coming into effect as of 2020 should be taken into consideration.

The following are a few simple, effective strategies that can be implemented before the end of 2020 or early 2021. Don’t hesitate to contact your Raymond Chabot Grant Thornton advisor who can help you determine the measures that apply to your situation.

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Nancy Jalbert
Partner | CPA, CA | Management consulting

The pandemic triggered major changes in the way manufacturers manage their operations. What are the key issues?

Manufacturing is an important driver of Quebec’s economy. In 2019, this sector’s gross domestic product (GDP) reached $50 billion, accounting for 14% of the province’s total GDP and 89% of export values.

It was also one of the largest sources of jobs with 433,000 employees—that’s 11.7% of all workers in the province and 28% of all Canadian manufacturing positions. And since these workers’ weekly earnings are 10% higher than the Quebec average, manufacturing jobs are considered quality positions that keep the wheels of the province’s economy turning.

COVID-19 and its impacts on manufacturing

When the pandemic struck last spring, it resulted in serious repercussions on manufacturers around the world.

In Quebec, businesses were forced to halt their operations or slow them considerably during the first wave. This led to a 33% reduction in global exports and the loss of some 44,000 jobs between February and July 2020.

Not all industries within the manufacturing sector were affected equally, however. Each was plagued with its own set of issues.

While some companies were forced to shut down completely, others faced reduced production capacities, supply shortages, import/export bottlenecks due to border closures, and other constraints. The situation was particularly bad for manufacturers who rely on international trade or hard-hit industries like air travel, tourism and entertainment.

In contrast, companies that make essential products saw demand skyrocket and had to accelerate production despite being short on workers and supplies, and the need to navigate strict new health and safety protocols.

Understanding issues before taking action

These new challenges affected production lines in more ways than one.

Supply disruptions and domino effect

When China closed its borders to stop the spread of the virus, it triggered a domino effect across global supply chains. Manufacturing businesses were the first to feel the pinch. For example, many had to contend with a lack of raw materials and seek out new suppliers.

Interestingly, this also had a positive effect, as it raised questions about how we can create more reliable supply chains for the future.

The situation also highlighted the need for manufacturers to strengthen their relationships with suppliers and diversify their partnerships, leading to interesting debates on self-sufficiency and the Buy Local movement.

Operational resilience

Managing a company involves juggling multiple variables, such as sales volumes, personnel availability, operational inputs, machine capacity, infrastructure quality, technology potential, etc. Each of these variables has an impact on your ability to achieve your targets.

In order to remain operational during the crisis, companies feeling the squeeze had to analyze their processes to determine which ones were at risk and identify potential solutions to minimize the damage.

Ensuring operational resilience depends on a company’s ability to adapt and strike a balance between dynamic production planning, technology optimization and costing. Implementing these actions can help you control costs and improve operations.

IT data security

Since the beginning of the pandemic, there has been a spike in phishing, ransomware and other cyberattacks on businesses of all sizes, to the point where cybersecurity has become a major concern for all organizations.

And since remote work arrangements are now widespread in certain industries and for certain types of jobs, these types of scams are only expected to become more frequent. In order to protect themselves and their data from cybercriminals, manufacturers need to invest in IT security. With the right solutions, they can keep threats at bay and minimize the impact of breaches.

Improving efficiency through digital transformation

The pandemic has accentuated the need for digital transformation. New technologies are essential to keep businesses viable with competitive production capacities that meet the needs of today and tomorrow.

We’ve already seen that the companies that started their digital transformation before the pandemic have been able to adapt better, thanks to process automation, the implementation of remote controls, improved data analysis and the use of artificial intelligence solutions. They’ve been able to remain efficient, achieve better output and take advantage of the situation to set themselves apart from the competition.

Workforce health and safety

Your workforce is your greatest asset. To remain engaged and productive, employees need to feel safe in the workplace. This means having a suitable physical environment and an employer that cares about their physical and mental health.

The pandemic has been hard on workers in the manufacturing industry. Some have seen their workplaces closed while others faced layoffs, reorganized work environments, new health and safety protocols, teleworking and uncertainty about the future. Not to mention the disease that may result from the virus itself.

Companies are rightfully concerned about employee retention and wellbeing. This raises several questions for managers. In this context, it’s important to plan effective and regular communications with employees. You want to keep them informed of any changes and provide them with reassurance.

Cash management

Cash management has always been a major concern for manufacturing companies, even before the pandemic. But in the past several months, most companies have experienced a significant drop in revenue, which is affecting their working capital.

Businesses need capital to meet their financial obligations, such as payroll, accounts payable, loan repayments and business investments. Carefully assessing the situation is critical for making informed decisions, protecting liquidity and limiting financial impacts over the short, medium and long terms.

Preparing for the new normal

Recent events have turned things upside down and our society is changing. Manufacturers have demonstrated resilience in adapting to the new normal and we’re already seeing evidence that the challenge will leave permanent marks on our ecosystem.

Certain trends observed during the pandemic have increased. Others have emerged and look like they’re here to stay, such as taking a more preventive approach to risk management, shortening supply chains, and striking a balance between buying local and complying with the terms of free trade agreements.

16 Nov 2020  |  Written by :

Nancy Jalbert is a partner at Raymond Chabot Grant Thornton. She is your expert in strategic and...

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During this discussion with John Parisella, our President, Emilio B. Imbriglio, addressed the stakes of the U.S. election for Canada.

In the wake of the U.S. elections, on November 4th, as part of the Firm’s One-on-One discussions, Emilio B. Imbriglio, President and CEO of Raymond Chabot Grant Thornton, spoke with John Parisella, Senior Advisor, Strategy and Business Outreach at NATIONAL Public Relations and a leading expert on American politics.

Although the outcome of the elections was still uncertain, particularly for the presidency and the Senate, the observations of the former chief of staff for Robert Bourassa and Daniel Johnson and Quebec’s delegate general in New York City highlighted U.S. policy trends that are likely to emerge. Here is a brief overview of the discussion between the two leaders.

Realistic and optimistic approach

From the outset, John Parisella made a point of stating that his analysis is intended to be both realistic and optimistic. The United States is not the same country of the 1960s, where there were many more divisions, particularly in the areas of civil rights and nuclear confrontation.

John Parisella said: “You might have thought it was the beginning of the end for the country, but the U.S. kept going,” adding that in the ensuing years, the U.S. showed strong leadership on a global scale.

Despite the fact that the results were still pending and would be close, especially in the upper house (Senate) where the Republicans could retain a majority, albeit smaller, Parisella stressed that it will be a transitional presidency, regardless of who is elected.

In his opinion, because of the respective ages of the presidential candidates and the 2022 mid-term elections when the House of Representatives and one third of the Senate will be renewed, a completely different dynamic could be taking place in both parties. “The U.S. will already be in a new election cycle as of 2022,” he said.

Given the issue of mistrust about possible electoral fraud, John Parisella indicated that while there are no historical references, possible interference is not ruled out—for example, via the Internet from foreign governments such as Iran, China or Russia. Nevertheless, John Parisella is confident that the electoral system is well organized. “There are 50 separate elections and each state has its own voting system. […] There may be irregularities, but that’s not proven.”

Mr. Imbriglio asked Mr. Parisella how he envisioned the system of checks and balances. According to John Parisella, the issue of checks and balances applies to institutions, but it also belongs to civil society, which is very active on this front.

“Remember when the President withdrew from the Paris Accord, several states had ongoing climate change initiatives that did not require such an agreement to be carried out. Even some Republican governors are much more open to environmental dialogue than Mr. Trump is,” the expert stated, adding that the media should not be neglected in all of this either, because they make a significant contribution.

Economic and trade impacts for Quebec and Canada

With respect specifically to Canada-U.S. relations, the Firm’s President asked John Parisella about his views after four years of the Trump presidency. Considering that Quebec and Canada are competing with several other states for market share in the United States, Mr. Imbriglio highlighted the United States-Mexico-Canada Agreement (USMCA) and raised the U.S. President’s tax reform, which cancelled out Canada’s corporate tax advantage.

In a word, according to John Parisella, they’re complicated. He added that changes will take place in the economy, especially with the new USMCA. “Yes, we had to make concessions, but it should be noted that the former North American Free Trade Agreement (NAFTA) was concluded before the advent of the Internet. […] We retained what we achieved, saved a lot of what we had and signed the new agreement, with a cross-Canada consensus.”

According to John Parisella, post-COVID economies will face a recovery with different policies than before the pandemic and this will have to be dealt with. “That’s why I use the terms trade diplomacy and economic diplomacy a lot.” Parisella also noted that 70% of Quebec’s exports go to the U.S., something that won’t change.

“You have to be in a constant state of diplomacy, and that’s not just between the White House and the federal government, but between provinces, cities, chambers of commerce, unions, business sectors,” he said. He went on to point out that Quebec is the only province that has as many representatives globally, in 18 countries with 33 representations, including nine in the United States, and that would not change, regardless of who’s in the Oval Office.

In short, even though the results of American elections were not known at the time of the two leaders’ virtual meeting, Parisella expressed optimism about the future of Canada-U.S. relations. “The United States is a highly imperfect democracy […] but a country with which we share prosperity, democratic values and security objectives.”

This dynamic and informative exchange between Emilio B. Imbriglio and John Parisella clearly demonstrated that the strong relationship between the two countries will continue. Thank you, Mr. Parisella, for your insightful, candid and optimistic observations!