Global Crisis Monitor Week 3 (April 1-8): A Survey Digest Showcasing the Impact of COVID-19 on Corporate Treasury

About the Survey:

The ‘Global Crisis Monitor’ is an ongoing survey, conducted by HighRadius in partnership with Strategic Treasurer. The intention behind the survey is to understand the sentiments of the treasury community at large, and also the current challenges Treasury departments and their organizations are facing.

In its third week (April 1-8), the survey witnessed a 33% increase in the number of respondents bringing the total to 400 respondents versus the earlier count of 300 from last week.

Impact of COVID19 on Treasury: What Has Changed In Week-3 (April 1 -8):

While organizational liquidity and accounts receivables continue to remain the top two concerns for more than 90% of the respondents, treasury departments have also raised concerns regarding:

1. Operations during WFH, that are currently disallowing treasury professionals access to IT applications and data for smooth treasury operations

2. Accounts Payables is being extended by at least 32.6% of the Treasury respondents, indicating liquidity pressure

3. Loan covenants and MACs now have 55% of the respondents more concerned

Access to Debt & Liquidity: The Perspective In Week-3 (April 1-8):

Considering the current impact of COVID19, most of the instruments that promise liquidity for an enterprise have shown further retardation (versus the previous week of March 25-31) in terms of availability.

This in turn has fostered a much more negative outlook across all respondents on liquidity instruments such as Accounts Receivable, Bank lines of credit, commercial paper issuances, covenant requirements and the US fiscal policies.

Here is a representation of the outlook that treasury departments currently have on various liquidity instruments available to them.

1. Accounts Receivable has shown a moderate improvement by +1X over the last week, pushing it from -6X to -5X, indicating a possible move towards a positive outlook

2. Bank Lines of Credit which earlier had a positive outlook of +1.4X last week, shifted to -1.2X this week, signifying that organizations are currently faced with limited availability of short term debts that can fund working capital, investments, operations and more

3. During the early onset of the pandemic, Central Banks induced liquidity into the system by setting up Money Market Funds, which was considered a welcomed move and had a positive outlook. This week, however, the outlook shifted to +2X from +3X, indicating a deteriorating shift, but with the outlook in general still remaining positive.

4. The outlook on Commercial paper issuance has shifted drastically to -1.6X from +1.8X, hinting towards a possibility of lesser commercial paper issuances in the coming weeks

5. Covenant requirements & MACs have had the most negative outlook among the respondents, wherein it shifted drastically to -3.5X vs last week’s +1.5X, indicating a progressive negative outlook against the metric in coming weeks

6. The outlook for the US fiscal policy shifted a little more towards the negative side to -1.7X from last week’s -1.5X despite the influx promise of $2 trillion by US Senate

The Lasting Effect of COVID-19: When Treasury Can Expect a Change:

In last week’s survey, respondents cited that COVID19 is expected to reach its inflection point within 2 months, while financial normalcy was expected to be restored within 4-6 months.

However, this week’s results pointed out that financial normalcy will take slightly longer to be restored, pushing the expected timeline to 7-9 months; further hinting that companies will not readily have access to lines of credit from banks, and may not be able to invest in newer initiatives until the beginning of the next financial year.

A Projected Timeline of Health & Financial Inflection

• The expected point where the impact of the virus begins to diminish can be seen in the next 1-2 months
• Financial Normalcy & end of the COVID-19 pandemic can be expected in 7-9 months as opposed to 4-6 months which was cited earlier

Conclusion: Liquidity and Operations are Top Concerns for Treasurers in Week 3 (April 1-8)

• Access to adequate liquidity has been the top concern for treasury departments this week as well and is also projected to be a concern in the coming weeks too.
• Treasury operations face a challenge since 62.6% of the respondents have cited limited access to data and IT applications while working remotely.

We’ll continue to monitor and report on how the changing dynamics of COVID-19 has been impacting Treasury and Finance professionals so far, and on the way, we will also empower readers with valuable insights that can help mitigate risks.

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