Addressing the financial impact of Covid-19

There are many actions companies can take – all of which focus on improving the immediate cash position and identifying and addressing existential risk.
 

Cash flow

• Real-time cash flow forecasting
  - 13 week cash flow - daily view for next 2-4 weeks
  - Visibility over key receivables / payments
  - Assumptions flex with latest information
  - Model downside scenarios for the next 3-6 months
  - Mitigating actions and when may need to be executed
  - Remain agile as situation is highly dynamic
  
• If survival is at stake – nothing should be sacred
  - Stop all discretionary spend
  - Postpone all (expansionary) capex
  - Make cost base more flexible
          - Reduce contractors to reflect activity levels
          - Consider unpaid leave for permanent staff
          - Hiring freeze
          - Lengthen payment terms on large leases (e.g. property)
          - Reduce activity in production / shutdown planning
  - Seek support from larger/robust suppliers & customers
  - Leverage government initiatives (e.g. tax deferrals)
  
• Take TIGHT control of cash
  - Only one person authorising payments (e.g. CFO)
  - Daily meetings on what payments to make
  - Prioritise business critical expenses
  - Match payments to receipts
  - Consider reducing frequency of payment runs
  - Offer early payment discounts – focus on cash, not profit
   

Funding solutions

• Draw down all funding lines (many companies already have)
• Utilise whatever Government support is available
• Seek support from existing funders (lenders & shareholders)
• New funders who can act quickly
  - Asset based lenders
  - Alternative lenders: many ready to lend in Covid19 world
• Accelerated M&A: delivered outside of “normal” timescales
   

Stakeholder management

• Communicate regularly with all your key stakeholders
  - Lenders, Shareholders, Employees, Suppliers (incl.landlords), Customers, Authorities (tax, government etc.)
  
• Prepare for key questions raised:
  - How do we tackle the situation and what is our contingency plan?
  - Is our strategy still relevant?
  - How are we managing our cash flows? Do we have sufficient liquidity in the short/medium term?
  - How to prepare/position your company during downturn?
  - What decisions should we make today versus later on?
  - Is our leadership team fully aligned around what we need to do to survive?
   

Supply chain & cost reduction

• Assess ability of operations to continue production and supply. Make contingency plans for alternative supply
• Assess key trading terms and communicate regularly with critical suppliers to map their ability to maintain continuity of supply
• Cost reduction: Increase margin and operating profit to counteract impacts to revenue, via:
  - Cost Transformation and Margin Improvement
  - Supply Chain and Network Operations
  - Robotic and Intelligent Automation
  - Tax Toolkit for Uncertain Times
  - Workforce Transformation
  - Operational Excellence 10
   

Contingency & response planning

• Improve resilience with business continuity review including operational and commercial perspectives
• Map out your dependencies and evaluate where, how and when disruptions might impact your value chain
• Consider scenario planning and set realistic expectations
• Shift/prioritise your business to focus on more stable offerings (products &/or markets)
• Identify divisions that could be segregated to protect value

Combating COVID-19 with resilience

Visit our Global Covid 19-page to find more content on combating COVID-19 with resilience. This page brings together Global Deloitte insights to help businesses manage and mitigate the risk.

On our Swedish page you will find more content from our local specialists.