Financial resilience

As the global response to COVID-19 evolves, organisations start to experience significant operational, financial and liquidity challenges. One of the biggest concerns is how to manage cash pressures to be able to ride out the crisis. 

While companies will likely require significantly increased levels of liquidity and working capital to keep their business going, the COVID-19 crisis will probably bring other significant challenges too:

  • Declining sales leading to cash flow and covenant issues under financial agreements

  • Committed facilities and bank overdraft mechanisms becoming unavailable, withdrawn or denied due to covenant breaches or abuses of denial clauses

  • Acceleration clauses under factoring programmes being triggered due increased default rates or delayed payment of invoices 

  • Disruption in the organisation’s ability to forecast cash flow

  • More limited access to or temporary unavailability of capital markets funding

  • Providing adequate disclosure to investors

How can you navigate cash pressures at this turbulent time?

  • Install a (financial) crisis team to centralise all actions and take care of internal and external communication

  • Review finance documentation and identify if there’s flexibility on covenants, cures, force majeure, etc.; additional borrowing capacity and unencumbered assets; review potential intercreditor issues that could arise when taking out additional funding

  • Assess to what extent you can use the (tax and other) measures issued by governments to optimise your cash position in the short to mid term; check  for the availability of additional funding guaranteed by government measures

  • Update cash forecasts and perform sensitivity analysis, modelling worst-case scenarios and downsides

  • Use open and transparent communication to build trust and credibility with stakeholders 

  • Assess the position of stakeholders (banks, shareholders and government) and seek partnerships, and renegotiate terms based on the scenario planning performed

  • Identify cost-saving measures

  • Update financing plans and consider if your capital’s allocated appropriately or whether you should re-prioritise current capital allocation plans in light of your organisation’s response to COVID-19

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