How can Corporate Finance help to Manage Coronavirus Challenges?

Amid the coronavirus, new accounting and human resources pose a challenge for corporate finance leaders. The economic downturn has created complex accounting issues that need fresh and effective judgments for companies to start moving.

Not to forget, the challenges of new accounting standards have become more daunting due to the implementation of Current Expected Credit Losses (CECL), leases and revenues are haunting companies with fewer resources.

The good news is that a professional corporate finance team can respond to all these challenges emerging from the pandemic.

Accounting departments and controllership functions help with both numbers and valuable business advice. They offer immediate insights about varied business alternatives and financial reporting implications and accounting for infrequent and new transactions caused due to the novel coronavirus.

These finance leaders need to look into the following aspects:

Impairment:

Now companies are dealing with impairment issues for intangible, fixed assets and goodwill. The need of the hour is to focus on assessing the left side of the balance sheet for impairment.

Companies should identify where they need help. You should know about the desired accounting standards to be applied, handle models, prioritize business analyses and likewise.

Estimating cash flows for valuations can be complicated given the uncertainties of governmental actions, economic recovery, lifting of restrictions and such.

Debt:

Businesses should evaluate all the changes made to debt arrangements to understand modifications or extinguishments required under accounting guidance.

For example: In the USA, there are several financial instruments and debt-related issues for the smaller companies under the CARES Act.

Companies need to keep vying on accounting contribution models granted by the government.

Investments:

Looking at your company investments, you should consider the different impairment models applied to your requirements.

Investments without any determinable market values can be challenging to evaluate as they need to be assessed periodically for impairment.

Make sure you get your impairment analysis done right!

Financial statement disclosures:

Companies who have maintained clarity and transparency with their audiences have been able to withstand the crisis.

The coronavirus pandemic has forced us to think from a different perspective. Audiences are looking out for companies showing clarity and transparency in their operations.

Make sure you continue disclosing your financial statements as usual. Transparency is one of the most critical factors affecting a company’s attractiveness to investors and corporate governance.

As the COVID-19 continues to impact the business environment, every entrepreneur needs to focus on managing cash and liquidity in the near term and revise financial plans to strengthen their resiliency through recovery.

Let’s move forward with some corporate finance tips and solutions for businesses to move ahead during these uncertain times.

Make sure you revise your financial plans for resilience.

Every business should map out their short-term financial needs only after assessing their longer-term financing alternatives. Start financial modelling of several scenarios to understand the potential impact on 2020 budgets and projections for the current fiscal year and beyond.

Conduct financial and liquidity stress tests and see those appropriate contingencies are in place for future downside scenarios.

Time to restructure your existing debt and look for other financial options

Prepare a new capital, including bank debt subordinated debt, minority equity and alternative financing in case of potential liquidity issues. Don’t forget to renegotiate and restructure loans and loan covenants to modify your financial scenario modelling.

Search for state tax credits and incentives allotted for businesses affected by the coronavirus. Also, consider divesting non-core corporate companies or assets to generate cash.

Right now, we’re all struggling hard to find out how the world will look like after the corona saga. There are some people busy romanticizing work from home, some fearing the recession, while others are clueless about what will happen tomorrow.

However, hard we’re trying to figure things out, there are nine practical steps to prepare and navigate the financial crisis caused due to the novel coronavirus.

We bring you a to-do list to overcome this pandemic.

1. Never lose sight of your cash

It’s advisable to keep your money handy and spend it very carefully. Avoid spending more and don’t deny the possibility of losing your job. Save money and always conserve your bank balance.

2. Prepare yourself to become redundant

The lockdown brought everything to a standstill. You may be underpaid since everything has just started to operate gradually. Prepare yourself mentally for a period of possible unemployment. Don’t keep things to yourself; take help to remain socially and mentally supported.

Learn to accept the situation and don’t get despair.

3. Say NO to Debt

Try not to borrow money from friends and relatives. Avoid using your credit card and switch to your debit card until this crisis. If you have an existing loan, then speak to your banks and take advantage of government policies. Seek help and counselling from an expert before investing.

4. Prepare a list of assets

If you have assets that can liquidate, then don’t hesitate to make a mental list of the same. It can be anything like your gold, property, equity or fund holdings that can help you during this tough time.

You can repurchase them when times are good again.

Are you thinking about taking a loan against assets? We won’t recommend you to do so.

5. Trade-off your long term plans

If you have kept aside money for retirement, then you should look forward to accessing it (during extreme situations only). When you’re facing a loss of income, the wise decision is to trade off some long term for the short term. This is a better alternative than borrowing.

6. Never fall for cheap things

You may have come across cheap properties or shares that you wish to buy. Looking at the current situation, never trust such stories and prevent yourself from such frauds.

7. Stay open for opportunities

Look for new opportunities to work or do something in addition to what you’re doing. The crisis is a perfect time to figure out something different in this changed environment and discover your skills.

Don’t focus on your current skills; try to nurture yourself and rediscover a new talent before the crisis dies down. The aim is to fight the fire and learn survival skills to sustain such a crisis in future.

8. Learn to question your purpose

Ask yourself: What is your contribution during this crisis?

Engage yourself in solving problems, improving efficiency, saving resources and such. The whole point is to make a difference in any way you can.

For example: You can start your small business of preparing home-made masks or preparing food for the poor. Do anything that makes you feel satisfied.

9. Don’t assume

Nothing is going to change once the crisis is over. We have to adjust ourselves to live with it. Don’t expect the world to become a new haven and things getting back to where it was. Learn to move on!

The bottom line is to: Preserve yourself and handle your money with utmost care.

Are you looking for a leading insurance assessor and property valuer in India?

Rakesh Narula & Co. (RNC) is a leading valuation advisor with expertise in the areas of valuation of fixed and current assets for M&A, bank lending, dispute resolution, insolvency, financial reporting, statutory compliances, corporate finance, investment banking etc. Contact us for more!