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  • cash pooling
  • coronavirus
  • Covid-19
  • liquidity
  • working capital

Managing treasury through the Covid-19 crisis


With companies in lockdown, EuroFinance investigates how treasurers are distance managing the essential levers of liquidity to mitigate Covid-19 related risks.

by Paul Nicholson

Published: 7 April 2020

Corporate Treasurers are currently working through the greatest crisis in their careers in unprecedented circumstances. “We have never seen anything like this”, says Vincent Almering, Group Treasurer of Netherlands-based dairy products multinational Interfood.

The need to maintain good liquidity and working capital is becoming paramount for many treasurers. “Liquidity is at the heart of the crisis” says Almering, who has been stress testing credit scenarios weekly and running daily cash forecasts and “so far all models are good, but we cannot predict how this unfolds”.

Helena Ramos, Director of Treasury & Credit Risk Management at Grupo Impresa, a Portuguese national media company, puts it more starkly from her home in Lisbon: “Currently, we are going through a period of great stress as we are obliged to build several treasury scenarios predicting revenue declines”.

For another European media group treasurer, who declined to be quoted by name, the remote activation of real time cash forecasting tools is proving essential in providing the granular detail and precision timing needed to measure the short term liquidity position of the business. “Forecasting systems and processes are more frequent and real time than the standard monthly cycles and typically also follow the direct cash flow approach”.

In China, Xuelin Chen, Group Treasurer of, a leading web based travel booking portal, states that “the Covid-19 outbreak distressed corporates” earning outlook, in the meantime it raises cash flows to vital importance. Good risk management safeguards and reduces volatilities in the cash flow, and good forecasting mechanisms provides visibility”.

In an recent earnings call, CEO Jane Sun conceded “for the first quarter of 2020 the company currently expects net revenue to decrease by 35% to 50% year-on-year, with an “operating net loss in the range of RMD 1.75 billion to RMD 1.85 five billion”.

Operating levers

The levers which treasurers have at their disposal to mobilise internal cash pools for working capital are critical to mitigate against potential external liquidity issues. As the European treasurer explains, “cash pooling structures, combined with a framework of visibility and access for treasury tools internal liquidity enables treasury to be as efficient as possible in terms of cash allocation but also potentially quickly moving country and counterparty risks”.

For treasurers seeking external funding to shore up working capital positions, the first step is typically the utilization of general working capital or revolving facilities.

Almering says that for the time being, “central bank stimulus has calmed the panic, and banks are broadly comfortable with the credit situation” but also points out that “inventory repos and receivables discounting are backup working capital strategies that can be deployed, although there has not been any requirement to mobilise this yet”.

In a week when investment grade corporate issuers raised $244 billion in new bond issues, the European media company treasurer states “raising new capital is possible”, but funding is “highly dependent on the specific situation and debt capacity”. Alternatives for contingency capital, includes “structured solutions like factoring or securitization, which can work well if the underlying credit quality of the portfolio is strong”. In most cases, the treasurer has “the network and ability to be the pivot between the inside and outside finance world”.

At the start of the coronavirus outbreak in China, the first activity to be disrupted was the regional supply chain, where output fell by 17 percent in Q1. The impact of supply chain disruption is ongoing, with many production lines in the automotive and manufacturing industries reducing activity either due to falling demand or social distancing measures impacting the workforce.

Chen argues that any pressure on supplier terms would be a mistake, “extending payment terms to small suppliers can certainly improve working capital, it could also be a PR disaster at this sensitive time”. Instead, the focus for is maintaining good dialogue with banks on available credit lines leveraged on strong pre-crisis fundamentals.

As the European media company treasurer points out, business partners can carry out impact assessments and “assess best how critical each part of the supply chain is in combination by the shock absorption capacity of each of those parts themselves”. The strategy is to examine the supply chain in all its parts, to identify and resolve gaps and weakness where possible.

Vincent Almering, Group Treasurer, Interfood

Almering agrees, “We are part of the food supply chain, so as long as shipping channels and borders for goods remain open then credit will be available – milk still needs to turn into skim milk powder and butter!” Yet “this will be a difficult year for many companies” says Almering, “expect dividend payments and investment activity to be postponed”.

In the view of the European media company treasurer, the coronavirus crisis has highlighted the importance of a solid, well-staffed and equipped treasury team. As he points out, treasury is too often still seen as a niche and specialist area, where treasury operates under the radar in normal times. Yet the crisis has emphasised the critical role that treasury plays in managing liquidity through crisis and the essential need to invest in treasury in the good times, to prepare for these exceptional times of business disruption.

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