Project, prepare, respond
As we move through the coming days and months, the financial landscape for most, if not all, businesses will continue to be significantly affected by COVID-19. Anticipated and realized pressures are mounting across the globe, as operations are impacted from all sides. Management’s questions have quickly shifted from “will this affect us?” to “how prepared are we, and what can we do to respond?”
The first step is to examine your business and try to predict the financial impact. Then, you can plan your prevention and response strategies, and perform the steps necessary to weather the COVID-19 crisis.
Assessing liquidity needs in the face of a major crisis is critical. Sensitivity and/or “what if” analysis in your financial modelling is a necessity to projecting the financial requirements over the impacted period – revising cash flows for this new reality, understanding the extent and timing of financial needs and possible shortfalls, and assessing the results of critical scenario testing. Models must be dynamic to accommodate the evolution of inputs and assumptions relating to revenues, expenses, trends in markets, reserves, and debt. Immediate points of focus for consideration may include:
- Vendors & business partners: Current financial obligations as well as anticipated expenses (new or strained supply chain arrangements and financial effects on other areas downstream)
- Employees & operations: Current and anticipated payroll obligations, and other support payments, as well as operating expenses, including work-from-home tools and other requirements
- Customers: Projected customer behavior, needs, and new demand, and reviewing where collection of outstanding debts stands
- Other stakeholders: Projecting impacts on existing agreements with lenders, investors, and other stakeholders
Understanding the internal and external financial reality is the first – and most important – step in forming adequate preparation strategies during the COVID-19 crisis. Robust communication strategies across all stakeholder groups is critical in achieving an accurate understanding of the impending financial landscape. Keeping pace with the challenges and opportunities of key stakeholder groups, maintaining their confidence, and bridging the impact on your operations will strengthen your projections and improve the effectiveness of financial analysis and planning.
Knowing your options and assessing how they fit into your business is the next step. In order to better understand existing cash flow availabilities or constraints, evaluating current agreements with lenders and other stakeholders is one of many immediate steps to take in planning for a financial reserve or emergency fund. Alternative strategies, such as monitoring ongoing changes to markets and economic policy, can also help your business quickly seize opportunities or anticipate and respond to threats.
Once you have assessed liquidity needs, defined projected financial requirements, and your business has formulated a preparation strategy, then it is time to implement your plan. Taking the steps to prevent and respond to anticipated and realized financial challenges should be a fluid process, and flexibility in times of rapid change is necessary.
“Action will delineate and define you.” – Thomas Jefferson
How we can help
BDO is at the forefront of discussions to help our clients navigate the rapidly evolving financial market, including understanding economic stimulus programs and other unconventional options that may be available to support and sustain your operations. As your trusted advisor, it is our responsibility to guide you through the essential actions, unique to your business, to continually project, measure, plan and respond to financial challenges. The time to act is now.
We are ready and able to provide the following services:
- Financial modelling and scenario testing
- Assessing the suitability of existing lender arrangement as it relates to near term capital requirements
- Assistance with sourcing incremental capital (debt or equity)
- Financial budgeting or pro forma financial statements
- Enhancement and guidance on existing models, budgets, and trend analytics
- Market demand assessments
- Financial communication strategies with stakeholders
- Contract reviews and negotiations
- Developing funding/financing applications
- Financial strategy development
- Implementation planning
Vice President, Strategy & Operations, Vancouver
Vice President, Strategy & Operations, Toronto