CTMpulse: How to survive the COVID-19 crisis
by Jack Large
In today’s COVID-19 crisis, where economists are predicting a 15% fall in trade and a global recession, new attitudes and new ways of working are required. Below we describe 1) what corporate treasury departments are doing and 2) a couple of good ideas lists.
Corporate treasury departments
Corporate treasury departments:
- Are focusing on:
- Managing liquidity and funding:
- More disaster scenario planning
- Stress testing to determine the need for new or extended facilities
- “Although have sufficient liquidity globally– nevertheless, we have just issued a multi-billion Delayed Draw Term Loan.”
- Cash flow forecasting:
- Much more emphasis on the accuracy, particularly in the short term
- Moving to more frequent – a weekly forecast for most businesses, rather than monthly
- “Using cash flow forecasting to closely monitor our working capital needs”
- Credit risk on receivables and the linked supply chain finance
- Increased visibility and focus on receivables position by industry and type of customer
- More emphasis on Letters of Credit
- Managing FX volatility: corporate treasury departments are asking:
- How long can our hedging programme work?
- What are the right hedge levers
- Managing liquidity and funding:
- Have found that having the corporate treasury team working from home:
- Is mostly not a problem as many were already doing that already, just the % changed
- Signing documents is a problem
- Doing team projects remotely and interacting is a problem
- Needs cross-training of team members to ensure continuity in case of mass sickness
- Challenges are more emotional. Need to keep close to each team member.
Great ideas for handling the COVID-19 crisis
There are many lists of ideas on how to tackle the COVID-19 crisis. Two we like are:
Finch Capital
Finch Capital – the fintech investor, has produced this Checklist on how to navigate through the crisis phase of COVID-19 and reposition for the new normal:
- Managing losses with speed and adequacy: staff costs (be open and emphatic), use force measure clauses, renegotiate contracts
- Be realistic about fundraising landscape: short-term little appetite for new deals as the focus is with protecting portfolio (this will change in about six months)
- Use equity to reward and incentivise staff: your remaining staff needs to be 100% aboard with the mission of the company and needs to overperformed to survive
- Communicate openly with staff: will help to gain the support of staff whilst making tough decisions
- Put as much effort as you can into product development: now is the time to make sure your product stands out amongst a crowd
- Marketing spend: focus only on high ROI channels
- Government support: make use of local rescue packages where you can and explore opportunities early (Find overview here)
Deutsche Bank’s:
- COVID-19 dossier
- The COVID-19 corporate checklist (available to Deutsche Bank customers only).
CTMfile take: Stay safe and be kind.
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