The world is living it’s one of the greatest nightmare in the form of COVID-19 sparking the Global Financial Crisis. The virus has caused recent flu-like, a disease now called COVID-19 affects the respiratory system, which can be fatal to many. 

What initially seemed like a local disease has turned into a pandemic impacting lives of many and disrupting major industry sectors. COVID-19 raises a range of finance industry issues that firms and businesses will be managing through over a couple of next weeks and months.

The sudden outbreak has impacted aviation and tourism-related businesses, making them extremely vulnerable. Major Food-chains, retailers, restaurants, events, and other companies are seeing a massive dip in their revenue and customer base, In short the economy has come to a standstill.

Triggering a Global Financial Crisis 

Businesses across the globe are in dreadful state wherein social distancing has become a trend to curb spreading COVID-19, and in some cases- precautions like stay at home have been advised, even in places without bans, are seeing business slow to a halt. The pandemic claimed Thousands of lives across the globe and brought down the economy wherein precautionary measures like the travel ban. The preventive measures like mass lockdown are wrecking the profit model of major industries contributing to the economy. 

According to a recent article published in Wall Street Journal (WSJ) consumers are facing what could become the most significant credit crunch since the Great Depression, lenders and credit-reporting firms are trying to figure out what could be the best way out. Some lenders have already announced relief programs for their customers. Companies like JPMorgan Chase, Goldman & Citigroup are delaying due dates and increasing spending limits for borrowers.

With the lockdown in many countries and work from home culture due to pandemic it will be too early to predict the course of the financial crisis though a recession is inevitable. 

Sanitizing the Economy Crunch 

“This is something quite severe. If this drags on beyond a few weeks then I don’t see how you’re going to get out of bankruptcies ” as said by Carmen Reinhart.

Businesses will need to make quick decisions and prepare to take advantage of the recovery, Companies are likely to be impacted in following areas:

• Sales: Businesses who do not have online presence will have a more significant impact on their sales & revenue.
• Staff availability: COVID-19 outbreak has restricted people’s movements thus curtailing their ability to work. To over the situation companies would need to allow working from home.
• Supply chain: Businesses who have a dependency on their suppliers from different parts of the world will need to assess their reliability.
• Finance: Low cash reserves could be fatal for some businesses. 

If your business is already impacted, list out the reasons and gravity of the impact on your business. If your business is still marked safe in the current outbreak you might need to make necessary amendments and projections. 

Some of the advice from CPA Australia to curb the impact:

1. Assess your financial statements: For an ethical decision making, businesses would need to assess their financial statements and re-verify their financial state. 

2. List possible impacts on your business: Discuss with your prime stakeholders, staff, vendors and critical customers on the potential effects of COVID-19 on your business to develop a pragmatic risk mitigation strategy.

3. Perform a financial health check on your business: Being aware of your business’s financial health would aid in wise decision making and should do a better positioning for your business in the crisis. 

4. Re-do your budgets with new assumptions: Discuss with your finance team to re-do the budgets taking into consideration unthinkable scenarios such as a decline in sales, unavailability of suppliers, or decrease in cash flow.  

5. Increase online sales: It has become viable for the business to explore online platforms and decide over, which is the best-suited platform for their business since most of the customer base shall be available online. 

6. Talk to critical suppliers: Stay in touch with your suppliers during the time of crisis to maintain reliability. 

7. Identify employees: Lookout for employees that are irreplaceable and which business function needs to keep operating. And if required, update your employees with critical skills for your business for a longer sustainability.

8. Seek professional advice early: If your business is facing any financial difficulty, it would be wise to seek a piece of expert advice and act quickly before your business becomes solvent. 

Conclusion

According to a report published in PWC, financial leaders are concerned about the impact of COVID-19, which may lead to global economic fallout. However, 90% of finance leaders state that they would restore to the normalcy of their business in less than three months if COVID-19 were to curb on immediate grounds. 

 “However, if conditions continue to deteriorate, we would expect to see a pullback in long-term investment spending as companies move to longer-term cost containment strategies.” said Amity Millhiser, PWC US Vice Chair and Chief Clients Officer.

Amidst Covid-19 pandemic, the focus should be on virus containment. The best way to restore and restart global growth is by curbing the Covid-19 outbreak, both in individual countries and worldwide.