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Uncertainty around how long our situation the past months have left us with will take to recover from increases the complexity of formulating a concise response.

One thing is apparent: it is critical that businesses are proactive in assessing their risk and vulnerability from both an operational and a financial health standpoint. Beyond that, sustainable systems need to be implemented to accommodate a “new normal” such as working from home and accessing data and information systems seamlessly and safely.

Persisting and thriving in this environment requires a business to act decisively to mitigate risks and plan for rapid and slow recovery scenarios and associated impacts on liquidity.

We are already experiencing the long-term effects on South African business continuity as business operations reduce, supply chains dry up, and demand plunges. These risks may quickly lead to liquidity risks, pressure on covenants, re-financing requirements, and increasing third party risk.

David McWilliam, Cortell

3 pillars of corporate finance solutions:

What businesses should consider through this uncertain time to ensure thriving, not surviving.

1. Managing cash and liquidity:

  • Businesses should implement a rapid cash management / 13-week cash flow model diagnostic to understand your cash position and short-term working capital needs.
  • Assess the potential for changes to your cash conversion cycle based on the current environment’s impact on your suppliers and customers.
  • Consider changes to working capital practices (including inventory management) with a focus on business continuity and resilience.
  • Reduce all non-essential expenses.

2. Revising financial plans for sustainability:

  • Once your short-term financial needs are mapped out, consider assessing your longer-term financing alternatives.
  • Begin financial modelling of multiple scenarios to assess the potential impact on 2020 budgets and projections for 2021 and beyond.
  • Perform financial and liquidity stress tests and ensure appropriate contingencies are in place for worst-case scenarios to ensure maximum resilience.

3. Restructuring existing debt and/or seeking alternative financing options:

  • Consider renegotiating and restructuring loans (and loan covenants) if potential issues are uncovered in the financial scenario modelling.
  • Prepare to raise new capital, including bank debt, subordinated debt, minority equity and alternative financing in the event of potential liquidity issues.
  • Seek governmental tax credits, rebates and incentives available to businesses impacted by COVID-19.
  • Assess divesting non-core corporate businesses or assets to generate cash.

How can your FP&A system help you now?

Cortell are sourcing the knowledge of large communities of experts — clients, governments, scientists, developers, partners, academic institutions, health agencies and our key vendors — to help your business work together and help your finance teams to apply data, knowledge, computing power and insights to solve difficult problems.
By rethinking how your business works, you can act in three key areas to emerge smarter, more resilient, and more agile.

Work safe, work smart: Guard the health, safety, and productivity of your people in a changing workplace by including workplace re-entry planning, facilities management, workplace safety, contact tracing, care management, and customer and employee care.    
Enhance IT resiliency and business continuity Maintain business operations, protect critical data and assets, and effectively respond to threats – knowing your status and having a firm handle on your forecasting and reporting is key.
Accelerate agility and efficiency. Getting your Financial Planning and Analytics under control helps to boost your capability to be agile in your response yo new challenges within your operational and financial areas.