Global Crisis Monitor Week-5 (April 15-21): A Survey Digest Showcasing the Impact of COVID19 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 fifth week (April 15-21), the survey witnessed a 20% increase in the number of respondents bringing the total to 600 versus the earlier count of 500 from last week.

Impact of COVID19 on Treasury: What Has Changed In Week-3 (April 8-15):

Of the 600 respondents who participated in the survey, 28% cited having a positive outlook about organizational liquidity, 17% cited having a negative outlook and 56% remained neutral. Thus, shifting the overall outlook on organizational liquidity towards a net positive, and also implying that organizational liquidity may not remain a concern in the forthcoming weeks.

While this was a positive insight, respondents from the survey showed lessening concerns surrounding:

1. Accounts receivables: showed 12.5% of the respondents having a positive outlook against this metric, which is a positive shift in comparison to last week where 0% of the respondents had a positive outlook.

2. Access to short-term debts: 44.5% of the total respondents seemed less concerned about the organizational access to short-term debts, indicating an easier availability of short-term debts & lines of credit in the coming weeks.

Access to Debt & Liquidity: The Perspective in Week-5 (April 15-21):

This week’s outlook on most of the survey metrics, such as access to short-term loans, money market funds and commercial paper issuances, have remained positive, and have also shown a positively forward shift, in comparison to last week (April 8-15), implying better business conditions in the coming weeks and sooner than expected economic normalcy.

The outlook on accounts receivable and the US government’s fiscal activities (though the outlook on these metrics is still negative) also saw a significant improvement in the outlook, in comparison to last week, implying quicker than expected recovery for these instruments.

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

1. Outlook on accounts receivable shifted positively towards -7X, in comparison to last week’s (April 8-15) outlook that stood at -10X, hinting at reduced challenges in working capital management

2. Bank lines of credit which earlier had a negative outlook of -0.6X last week, shifted to +1.8X this week, indicating the availability of short-term loans provided by banks, that can be leveraged by organizations

3. Money market funds, which were set up by the central banks to induce liquidity into the system had a positive outlook this week too and has shifted from +3.0X (outlook last week) to +4.0X, indicating a progressive shift of this metric in the coming weeks

4. The outlook on commercial paper issuance this week saw a positively stark shift from -1.0X (which was the outlook last week) to +2.0X, indicating that organizations might issue commercial papers more comfortably to secure short-term debts

5. Covenant requirements & MACs had a slightly positive outlook last week among the respondents since it stood at -1.2X vs -3.5X (in comparison to week 3 – April 1-8). This week, however, the outlook shifted to -1.6X negative, hinting towards a negative outlook against the metric in the coming weeks

6. The outlook for the US fiscal policy shifted slightly towards the positive side to -1.4X from last week’s -2.0X, indicating a positive sentiment about the remediation initiatives being proposed by the US Senate

The Lasting Effect of COVID19: When Treasury Can Expect a Change:

In last week’s survey, respondents cited that COVID19 was expected to reach its inflection point within 1 month, while financial normalcy was expected to be restored within 9 months.

However, this week’s results pointed out that financial normalcy can be expected to be seen within 7-9 months from now; hinting at the steady improvement of economic conditions rather than deterioration. Furthermore, this positive shift is also an indication that companies may soon have easier access to lines of credit from banks, and will be able to invest in newer initiatives towards the end of the first quarter of the next financial year (2021-2022).

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 20-25 days, which is a positive sign considering the fact that it was 1-month last week
• The end of the COVID19 pandemic can be expected to be seen within 5 months as cited by a majority of the respondents this week. The outlook against this metric has also shifted positively by a few weeks in comparison to last week, indicating an end to the pandemic sooner
• Financial normalcy is expected to be seen in 7-9 months from now, indicating a positive shift from last week’s expectation of 9 months

Conclusion: Accounts Receivable & Covenant Requirements are Top Concerns for Treasurers in Week-5 (April 15-21)

• Accounts receivablesremained a top concern for treasury departments this week, since it only had a small cohort (12.5%) of the respondents with a positive outlook against the metric
• Loan covenants & MAC found its way to be a concerning issue this week since the outlook against this metric shifted to -1.6X from -1.2X last week

We’ll continue to monitor and report on how the changing dynamics of COVID19 has been impacting Treasury and Finance professionals, and on the way, we will empower readers with valuable insights that can help mitigate risks.

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