Have you seen the Game of Thrones about a disease contaminating everyone and turning them into living dead?<\/p>\n\n\n\n

<\/div>

<\/div><\/p>\n\n\n\n

” Is it real or fake? How fast will it spread? Can it be cured? “<\/em><\/p>\n\n\n\n

Sounds familiar?<\/p>\n\n\n\n

<\/div>
<\/div><\/p>\n\n\n\n
In Geneva, most restaurants are empty. Important conferences are canceled. Employees of large companies work from home, and business travel is banned. Even though the spread of the virus now seems to be under control in China, a growing number of new cases in other countries, such as Italy, France, and now in Switzerland, is worrisome.<\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
WHO suggests us to focus on the hygiene, avoiding travels and interactions with infected people. So far, there is no official resolution on what effective antiviral treatments could stop expansion of the pandemic. <\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
What about business? <\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Companies are facing uncertainty and increased risks deriving from the viral outbreak. Do they perchance sell into the concerned markets? Do they produce or operate service units in the affected countries? Do they source from these regions? For certain, there will be a negative effect on the business, if but quite impossible to predict how much.<\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
CEOs need to deal with the \u201cUnknown\u201d. <\/strong><\/h2>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Even with the best companies, who created efficient contingency plans, and cross-functional risk teams – uncertainty prevails. Business decisions, investments are postponed, contract renewals are delayed. Revenue of the transportation, tourism, retail, manufacturing and services sectors suffers. Current projections envisage up to 1.2% slow-down of the global economy due to direct and indirect implications caused by COVID-19. <\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Credit \/ Finance officers have an important role in this game. <\/strong><\/h2>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Traditionally, their job is to proactively assess risks of the cash cycle; to establish risk mitigation procedures; and to prevent cost increase deriving from probable business disruptions. More importantly, they own the responsibility for setting credit terms and conditions. This mission is relevant today, because lack of credit could easily introduce negative growth. <\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
How to add value to the business while the epidemic\u2019s amplitude is unknown? Here are a few practical points to consider:<\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Stay close and evaluate your major customers. <\/strong><\/h2>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Segment your customers and stay close to those with whom you generate the vast majority of your revenue. Investing time and energy into customer relationships enable Credit \/ Finance officers to anticipate their behaviours. As coronavirus spreads, it is imperative to understand the customer\u2019s dependence on the impacted regions and companies. If an important part of their sales comes from them, if they source mainly from the affected regions, or, if their critical services\u2019 functions are quarantined there \u2013 the customer\u2019s business will be affected. The question is how much they rely on these regions and how rapidly they can adjust. Customers alternating their channels and shifting toward more stable markets should be supported with adequate credit terms. However, unplanned swings carry risk, so it is better they have reserves to cover possible interim losses. In China, COVID-19 induced a rapid shift toward online shopping for all kinds of goods, whereby overall customer demand has been low. Companies which were already offering shopping on-line, have benefited from this move. Those who were not, are clearly falling behind. Customers sourcing key products from the affected regions and those who concentrating their key services functions in these regions need to be monitored. With new technologies of companies like Bisnode, Moody monitoring is easy and reasonably priced. <\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Optimize vendor portfolio and evaluate supply alternatives <\/strong><\/h2>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
The primary aim is to mitigate dependencies. This mission is more relevant than ever, hence coronavirus concerns important low-cost sourcing regions. Disruptions of key product supply has negative consequences; major delivery issues, loss of customers confidence and cash flow problems. Optimising vendor portfolio is fundamental to respond to the COVID-19 challenge. Why? An optimised structure with buffers allows rapid shifts to where sourcing is smooth. The key is to understand alternative solutions. Assessing not only the capacity, the adaptability; but also the financial stability of the players is vital. Credit \/ Finance function has a role in evaluating supply chain risks and qualifying available alternatives.<\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Develop business scenarios to ensure liquidity <\/strong><\/h2>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
In a crisis, identifying critical trigger points affecting revenue and costs is necessary. Once they are identified, business scenarios forecasting revenue and cost changes should be developed. Looking into these scenarios enables the company to define what moves are necessary to stabilize the situation even if the worst-case scenario materializes; by optimizing working capital, reducing costs or by selling assets. Developing business scenarios is a must to secure cash-flow and weather the storm. Insurance premiums have increased in the past few weeks, signaling that providers compensate their forecasted losses by adjusted pricing. If internal reserves are insufficient, it is still worth to involve a third party to cover possible losses. When benchmarking them it is advised to check to what extent their policies cover losses from disruptive events and validate the notice period they give for changing their coverage. In the Game of the Thrones, millions were contaminated before the Rulers united their forces in a quest for a resolution. <\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
When facing the \u201cUnknown\u201d they demonstrated resilience, took a calculated risk, and looked with cautious optimism, into the future. Finally, Arya Stark killed the Night King and the epidemic vanished. I have no doubt that we are going to find a way to neutralize COVID-19, too. <\/p>\n\n\n\n
<\/div>
<\/div><\/p>\n\n\n\n
Until this happens the Credit \/ Finance function has the mission to assess risk, prevent losses and ingeniously support the business operations. The coronavirus epidemic teaches us that comprehensive, in depth knowledge of major customers, healthy spread of supply chain risk, and liquidity measures are basic requirements to sustain business in trying situations. <\/p>\n\n\n\n
<\/div>
<\/div> <\/p>\n\n\n\n
Resilience, taking calculated risks, and cautious optimism will undoubtedly help us to raise up to the challenge. <\/h2>\n\n\n\n
<\/p>\n\n\n\n
<\/p>\n\n\n\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
Have you seen the Game of Thrones about a disease contaminating everyone and turning them into living dead? …<\/a><\/p>\n","protected":false},"author":40,"featured_media":6704,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[112],"tags":[],"table_tags":[],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\t\n\t\n\n\n\t\n