As Covid-19 continues to disrupt and destabilize the world economy, a new survey by PWC has lifted the lid on the current thinking of CFOs, more than half of whom are concerned that the pandemic could have a serious effect on their business.
Covid-19, and the CFO’s concerns
The poll, which was conducted during the week of March 9th, surveyed 50 chief financial officers operating out of the US and Mexico.
As mentioned, 54% of respondents, when asked to rate their present level of concern over the overall effect of COVID-19, said they were greatly concerned about the potential for a significant impact on their firm.
However, 34% claimed that their concerns were region-specific, while 12% said the coronavirus presented an isolated challenge that, at the time, was not having a major influence on their business.
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When asked to rank-order their concerns regarding the ultimate fallout from the pandemic, the vast majority (85%) admitted that the potential for a worldwide downturn was their foremost worry.
A reduction in consumption, based on a decrease in consumer confidence, was the joint-second biggest concern, alongside financial ramifications, which ranged from operational results to the impact on liquidity and capital resources.
Unsurprisingly, given the uncertainty the world economy is now facing, almost 60% said they expected to see a decrease in profits and/or revenue. Conversely, 40% claimed that they were still unable to make such prognostications. PWC will release an updated version of the survey on March 30th.
Meanwhile, in one of a series of advisory texts published since the coronavirus materialized on a global scale, Deloitte noted that revenue losses incurred due to a sudden change in business practices will be permanent, thus putting unexpected pressure on capital lines and liquidity.
With an eye to businesses securing funding and, indeed, helping potential funders understand their actual and potential financial needs, Deloitte strongly recommended that treasurers not just amend assumptions, forecasts, and cash flow but also perform downside scenarios in light of the mounting unknowables.
Reforecasting – or revised forecasts – must now be considered an operational necessity for treasurers.
Amid this protracted volatility, many companies will temporarily shelve medium to long-term planning in favor of continuously monitoring real-time, group-wide cash positions and requirements.
And identifying, perhaps, areas where cash movements between business units are possible. Thus, a revised forecasting time horizon, along with regular data refreshes, should be among treasury’s top priorities.
Moreover, according to Deloitte, funders will expect to see that companies have proactively bettered cash flow via the optimization of working capital and the identification of means of securing swift and material cash flow benefits.
Indeed, businesses must also be able to demonstrate that they have taken bold but prudent steps to maintain cash in the short and medium-term.