WHAT ARE TREASURERS’ AND CFOS’ PRIORITIES DURING THE CRISIS?
While COVID-19 is primarily creating a public health and social crisis, its economic ramifications are already spreading globally. Trading volumes have fallen, customer demand has plummeted in some industries and surged in others, while supply chains across many industrial ecosystems have been disrupted.
FOCUS ON LIQUIDITY
Treasurers are at the forefront of corporations’ response to the crisis as they seek to assess and limit the initial financial impact of the crisis. In particular, normal revenues have skewed considerably, while many costs have remained unchanged. Maintaining liquidity across the business has therefore been by far the most significant concern during the immediate throes of the crisis. 63% of respondents emphasised that liquidity was amongst the top three priorities, which is higher still in North America (76%) and Europe (69%). For 48% in North America and 45% in Europe, liquidity is their number one priority.
One particular challenge, noted by 38% of respondents, is mobilising cash, with some banks reporting that clients are seeking to extend cash pooling programmes and find ways to unlock pockets of trapped cash that were previously considered less significant.
ALONG THE CRISIS TRAJECTORY
Countries are at different stages of the COVID-19 crisis, with some lifting some restrictions now that the spread of the virus appears to have been contained, with others introducing or tightening restrictions as the virus takes hold. Consequently, although the figures are small in this study, it appears we are already seeing a shift in treasurers’ priorities in Asia, particularly China, which is likely to be reflected in other regions over time. For example, 30% of treasurers and CFOs in Asia are focused on optimising investment strategies as their number one priority, while this figure is only 12% in Europe and 18% in North America.
PROTECTING THE WIDER ECOSYSTEM
While liquidity management is amongst many treasurers’ immediate priorities, they are also looking ahead to ensure that the business can return quickly to normal as the immediate phase of the crisis passes. The burden on smaller supply chain participants is often far heavier than on the ‘anchor’ company, creating uncertainty and risk throughout the ecosystem. Consequently, 35% of respondents noted that they are seeking to mitigate supply chain issues as a top 3 priority. This is significantly higher in Asia (51%) compared to 21% for North America and 33% for Europe, which is likely to reflect both the significant proportion of global supply chains that are based in Asia, and the beginning of re-opening manufacturing in China.
While treasurers and CFOs are looking to support their suppliers, they are unlikely to do so to the detriment of their own working capital position. As a result, we would expect to see greater demand for commercial cards to make supplier payments and the increased use of supply chain finance programmes.