Global Recovery Monitor 11th Edition (June 10 – 24): A Survey Digest Highlighting the Impact of COVID19 on corporate treasury

About the Survey:

The Global Recovery Monitor is an ongoing biweekly 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 that the Treasury departments and their organizations are facing caused by the pandemic.

In its 11th edition (Survey Period: June 10 – 24), the survey witnessed an increase in the number of respondents by 35% bringing the total tally of respondents to 1350 (vs 1000 from the previous survey period i.e May 24 – June 10).

Impact of COVID19 on Treasury: What Has Changed from May 27 – June 10

Of the 1350 respondents who participated in the survey, ~30% of the respondents cited having a positive outlook about organizational liquidity, ~18% cited having a negative outlook, while ~52% remained neutral.

Thus, shifting the overall outlook on organizational liquidity towards a net positive in the survey period, with implications of diminishing challenges surrounding organizational liquidity in the forthcoming weeks.

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

1. Accounts receivables, since ~57% of the total respondents cited having a positive outlook against this metric; hinting at reduced working capital pressures in the near future

2. Access to Short-Term Debt, since a significant number of respondents, have cited having a positive outlook against this metric, implying easier access to short term debts.

Access to Debt & Liquidity: The Perspective from June 10 – June 24

The outlook on survey metrics, such as access to short-term loans, money market funds and commercial paper issuances, remained positive, and have also shown a positive forward shift (except money market funds), in comparison to the period of (May 27 – June 10); implying better business conditions despite the Coronavirus Recession

However, the outlook on the US government’s fiscal activities showed a slight decline in the outlook in comparison to the survey period (May 27 – June 10), indicating a negative outlook on the remediation steps being taken by the US government.

The outlook on accounts receivable also has remained negative. But the respite for this metric is that 57% (vs 45% from the last survey period) of the total respondents cited having a positive outlook against it, implying a sluggish recovery of the metric in the coming times.

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

1. Outlook on accounts receivable changed from -2.5X (May 27 – June 10) to -2.0X, indicating a positive shift and a recovery of this metric.

2. Bank lines of credit which earlier had a positive outlook of +1.5X in the last survey period, shifted to +1.8X in the current survey period, showing a small, yet positive shift in this metric, with indications of better accessibility to 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 in the current survey period, with the metric shifting to +3.2X vs +3.5X from the last survey period. However this metric also experienced a slight decline (from 3.5X in the last survey period to +3.2X in the current survey period) indicating a possible negative in the outlook in the coming weeks

4. The outlook on commercial paper issuance in the current survey period saw a positive shift to +2.0X from +1.8X (from the period of May 27 – June 10), indicating an ease of access to short term debts by issuing commercial papers.

5. Covenant requirements & MACs in the current survey period had a stagnant negative outlook among the respondents since it stood at -1.3X which was also the outlook in the last survey period (Survey period of May 27 – June 10).

6. The outlook for the US fiscal policy shifted slightly towards the negative side by standing at -2.1X (in the current survey period) in comparison to -1.4X from last week, indicating a slightly negative sentiment about the remediation initiatives being proposed by the US Senate

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

In the last survey period (May 27 – June 10), respondents cited that COVID19 was expected to reach its inflection point in less than 1 month, while financial normalcy was expected to be restored within 10 months.

However, this week’s results pointed out that financial normalcy can be expected to be seen within 11 months from now; hinting at a slower than expected recovery from current economic pressures and financial conditions

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 one month, which is a positive shift from the earlier expectation of 2-3 months from the survey period of May 27 – June 10
• The end of the COVID19 pandemic was expected to be seen within 7-9 months as cited by a majority of the respondents from the previous survey findings. The outlook against this metric in the current survey period shifted negatively to 11 months implying a slower than expected recovery from the pandemic
• Financial normalcy was expected to be seen in 10 months in the last survey period. This survey period, however, the outlook shifted to 11 months indicating a slower than usual recovery of current economic pressures and financial conditions.

Conclusion: Accounts Receivables and Material Adverse Conditions remain the Top Concerns for Treasurers during (June 10 – June 24)

• Accounts receivables remained a top concern for treasury departments this week since the metric showed marginal improvement in the outlook from -2.5X to -2.0X. However, considering the trends from the earlier survey the outlook against this metric is on the road to recovery and will eventually become positive in the forthcoming weeks.
• Access to Short-Term Debts has also remained a top concern for treasurers in the current survey period since this metric had a negative outlook against it.

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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