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COVID19 – Managing Capital & Liquidity in a Crisis

COVID19 – Managing Capital & Liquidity in a Crisis

The wellbeing and financial implications of coronavirus has blindsided businesses globally.

The speed and veracity of the impact of the coronavirus can be seen in the comparison of the market decline in the Dow as a proxy where it took a year to drop 33% as a result of the GFC and a month as a result of coronavirus. COVID 19’s economic impact is a lot deeper and more severe than the collapse in 1987 and the 1991 recession.

This crisis is different

  • – Speed of change
  • – Mothballing whole sectors
  • – Transition to remote/virtual work environment
  • – Driven by factors not controllable at this point in time
  • – Government response – containment and stimulus

In the current COVID19 crisis CEO’s and Business Owners have shared their two key areas of focus :

1. Protecting their people

2. Liquidity to weather the storm

Our advice to CEO’s is :

  • – Scenario plan what may come & start to build specific action plans around those scenarios.
  • – Not clear how long this disruption from a business perspective is going to last 60/90/120 days or 6 months ?
  • – Depending on those scenario’s you will have a very different plan that you will need to execute against.
  • – Develop scenario plans (at least four) that will allow you to take specific action depending on how you see the scenario’s playing out.
  • – For example a “V”, an “L” or a “U” recovery
  • – Need action plans and specific levers ready to go as it plays out.


Studies from previous major disruptions shows that businesses that weathered previous pandemics and financial crisis were able to quickly answer and act on four key questions :

How will a sudden economic slow down impact your cashflow ?

When will you run out of critical materials, finished goods or spare parts ?

How can you quickly reduce costs without damaging future business capacity ?

Are you dependent on a supplier or customer that may not be able to survive a sudden economic slow-down ?


What can you do in the first few weeks ?

1. Manage the impact on cashflow

2. Reduce costs

3. Work with suppliers

4. Manage critical inventory or in the case of professional services firms headcount planning

5. Identify core revenue activity

6. Work with high risk customers

7. Work closely with key stakeholders including shareholders, banks & lenders

8. Understand the key tax cashflow implications


Our advice is to act quickly and methodically, be data led – the role of the CFO is critical as CEO’s and business owners rely on their expertise to build scenarios and discuss cashflow and crisis management in daily & weekly executive meetings.

If you would like more detail around each of these critical factors or your business needs our Virtual CFO support please contact us.