RESPOND: SHIELDING YOUR BUSINESS FROM COVID: BLACK SWAN OF 2020

office-pen-calculator-computation-163032

Unforeseeable, detrimental and hindsight bias are the three characteristics of a “Black Swan Event”, a phrase coined by former wall street trader Nassim Nicholas Taleb and very commonly used in the world of finance. Owing to the unpredictable and unprecedented disruption/ loss that the COVID 19 pandemic has caused to Governments and businesses worldwide, it certainly meets the criteria of a Black Swan Event.

But how your businesses will emerge at the end of this war in not only dependant on the legislative and economic factors but is also reliant on the responsiveness and preparedness of any organisation. Thus, it is imperative for companies to take the following steps immediately:

1. ASSESS THE CASH POSITION OF COMPANY

With the government restrictions imposed on the operations of various businesses, the old adage “cash is the king” has re-emerged. It has become all the more important to re-evaluate the cash flows and working capital needs of any business. Companies must update their cash flow forecasts to reassess their current situation. They will have to stress test such cash flow forecasts against multiple scenarios and reconsider the working capital their business requires for the weeks ahead.

2. MODEL FINACIAL IMPACT

The stress testing of cash flow forecasts and financial impact model against scenarios ranging from worst to best case scenarios will help the company understand the impact on profitability. This will further assist them in assessing whether it will be able to meet its debt covenants and determining when the available cash sources or credit facilities should be used.

3. DEFINE WHAT IS FUNDAMENTAL AND SACROSANCT

Companies will need to focus on products, services and customer segments that are core and critical to maintaining the cashflows requisite to keep businesses afloat. Further, companies should consider deferring unnecessary capital expenditures and other unwarranted spending wherever possible. While minimising such expenditures, they must follow a mean and lean culture.

4. ENGAGE WITH RELEVANT STAKEHOLDERS

Clear and transparent communications will have to be established with stakeholders like suppliers, employees, customers, regulatory authorities, creditors and investors. In circumstances where contractual obligations cannot be met due to temporary COVID 19 restrictions, companies should consider deferring payments by invoking “force majeure” clauses or re-negotiate the terms of the underlying contract with relevant stakeholders. This will help their business mitigate any future liabilities or punitive damages arising out of non-performance of contractual obligations.

5. GATHER FUNDING FIREPOWER FOR THE FORESEABLE FUTURE

By performing the above assessments and tasks, companies will be in a better position to ascertain their capital/funding needs. Based on the outcome, companies may consider alternative financing options like invoice discounting, working capital loans, factoring, trade finance, etc. This will help the company preserve its cash position and avoid unnecessary cash pressure.

6. AVAIL GOVERNMENT SUPPORT POLICIES

Companies should not hesitate to seek support of various financial and taxation related policies enacted by the Government in the wake of COVID 19. To list a few, it should consider availing supports like Temporary wage subsidy scheme (TWSS), waiver of commercial rate due to local authorities, Loan Repayment break or even applying for loans available under SBCI scheme or ISIF.

WHAT QUESTIONS DO YOU HAVE?

We are happy to help. Please contact our corporate finance department on 01 677 9000 who would be delighted to assist you. Alternatively, send us an email: info@cooneycarey.ie.

To keep in touch, connect with us on LinkedIn.

Posted on July 9, 2020 by Cooney Carey

A No-Deal Brexit Remains Very Much On The Cards

Overview

Forecasting what turn Brexit is going to take next, remains extremely difficult – when so much remains unknown. However, the possibility of a no deal Brexit remains very likely outcome, even considering the most recent extension in departure date from 29th March to 12th April. Below are some scenarios that could occur in the coming weeks.

Mrs May Resigns

A no-deal Brexit could be delayed if Theresa May was ousted as prime minister. The EU would accept a request for a further delay in such a situation. Albeit the existing problems regarding Brexit would remain. The EU have insisted that they will not renegotiate Mrs May’s withdrawal agreement.

Article 50 Withdrawn

The petition asking the British Government to revoke Article 50 has received over 5.3 million signatures as at 11 pm Sunday 24th March. This petition included with 1 million people marching on parliament requesting a second referendum. It remains unlikely that this pressure will result in a second referendum. 

Mrs May Enforces Exit Without a Deal

If Mrs May manages to hang on in Downing Street, the Prime Minister could force a no deal exit if she so wishes. The UK parliament has not taken no-deal off the table.

Customs Union with EU

A customs union with the EU is the most promising alternative to Mrs May deal. It would only require moderate changes to the political declaration. There is however a significant risk of the second referendum supporters refusing to accept a customs union as a compromise.

No Option – Including Customs Union

This is the most likely of the scenarios. This option could receive backing in the House of Commons. The Prime Minster goes back to EU without a plan. EU27 subsequently refuse to grant any more delays. Thus, triggering a hard Brexit.

ESRI Report on impact of Brexit on Irish economy

The ESRI have studied 3 scenarios on Brexit an estimate that in a hard Brexit scenario the Irish economy could contract by as much as 5% over 10 years, while employment would be 3.4% lower over that same period or 77,500 fewer jobs. This disorderly scenario would also mean real wages would decrease by 1.4% relative to consumption.

What questions do you have?

We are happy to help. Please post your comment below or call Colin O’Brien, Corporate Finance Director at Cooney Carey, on 01 677 9000. Alternatively, send him an email: cobrien@cooneycarey.ie

To keep in touch, connect with our friendly team on LinkedIn.

If you found this article interesting, please share it with other businesses. 

Image by Free-Photos from Pixabay

Posted on March 27, 2019 by Colin O'Brien

Blockchain part 5 of 6 – How Do I Implement my First Blockchain?

If you have read our previous blogs on Blockchain, you are probably now wondering what steps you and your business might undertake to incorporate Blockchain. Below are 6 steps to assist you in implementing Blockchain into your business:

Step 1. Deciding if Blockchain is applicable to your Industry

If you are uncertain how Blockchain can help your business, it can be useful to ask yourself the following questions:

  • Is my current system prone to errors due to manual input
  • Do I need to track transactions more efficiently.
  • Is my current system too complex.
  • Is my current system too costly.
  • Can a new network provide greater transparency.

If any of the above answers are applicable to your business, Blockchain is likely to benefit your business.

Step 2. Examining your Current Business Process

By placing your current business process under scrutiny – you will be able to identify inefficiencies or areas that are prone to delay.

Step 3. Determining How Blockchain Can Help

After identifying inefficiencies in your business process – the next step is to identify how Blockchain can alleviate these inefficiencies. For example, if a lack of trust is causing friction in your business. Blockchain can assist by providing a shared ledger, thereby increasing transparency.

Step 4. Is Blockchain Appropriate

Before implementing Blockchain you will need establish if it can provide real value, could the process be achieved by using an alternative system.

Step 5. Determining How Blockchain can Help You Achieve Your Goals

Ask yourself what you want to achieve by implementing Blockchain. How can your business measure how affective its initial implementation has been.

Step 6. Choosing the Appropriate Provider

Consider who would be your most appropriate Blockchain provider, it might be beneficial to consider the following:

  • Do you have frequent exchanges with the same individual, cold these exchanges be automated to free up time and money.
  • Do you require a permissioned network.
  • Do you need to know your clients, for example to adhere to KYC (Know your client) AML (anti money laundering legislation)

What questions do you have?

We are happy to help. Please post your comment below or call Colin O’Brien, Corporate Finance Director at Cooney Carey, on 01 677 9000. Alternatively, send him an email: cobrien@cooneycarey.ie

To keep in touch, connect with our friendly team on LinkedIn.

If you found this article interesting, please share it with other businesses. 

Posted on June 6, 2018 by Colin O'Brien

← Older Posts