Accounting Implications Of Coronavirus (COVID-19)
April 13, 2020
In lieu of the above facts, these are the 8 areas that businesses should be assessing:
- It is recommended that companies undertake a scenario analysis to assess how long existing sources of liquidity would be
able to hold up, in an elongated stressed environment impacted by supply chain pressure, customer demands,
cash flow instability and lack of funding, to name a few. - The liquidity position would have to be reviewed as well, to determine if there are hidden pockets,
including the availability of undrawn bank lines. Such reserves can be optimized for usage in other
regions and countries, and the potential for setting up additional banking facilities to support
overall business should also be evaluated. - A contingency plan can also be developed, for the funding of upcoming large pending transactions in the near months.
Companies will have to be prepared to make quick decisions during the intermittent stable period, to opportunistically
raise debt capital at historically low rates. - Reviewing existing capital allocation plans like Capital Expenditure (CAPEX), Share Repurchases, debt pay down, etc.,
would also be beneficial, in this new environment of higher economic uncertainty.
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