COVID-19 BUSINESS ACTION FRAMEWORK
The Covid-19 virus is bringing all of us into a time of unprecedented challenge. The protection of life is paramount, and every effort should continue to be made to curtail and eventually eliminate this virus.
The impact of Covid-19 on businesses in Ireland and worldwide is unprecedented and the speed of its impact is alarming. Business owners are dealing with a volatile and evolving situation daily and understandably most are not prepared. However, as the seriousness of the situation becomes a stark reality, Business owners and managers now need to quickly stabilise cashflow, assess the key risks, evaluate the potential impact of this crisis on their business and prepare an action plan to address the immediate impact and develop a roadmap for the ensuing recovery.
The difficulty with this is that it is unknown how long the crisis will last and how deep the economic impact will be. This uncertainty should not deter Business owners and managers from financial planning. The business should put together a framework or tool kit that it can:
– As revenue is impacted businesses’ cash flows are already being strained. Businesses should perform a detailed review of cash flows, covering the next 3-month period at a minimum, and identify any and all mitigating steps that can be implemented to minimise cash flow impacts and maintain cash in the short and medium term;
– this relates to a deep dive into the business and accessing the risks Covid-19 has on all aspects of the business, for example:
– once you have assessed the risks and gathered the various elements where Covid-19 can impact your business, you then need to evaluate the potential impact. This is made difficult due to the uncertainty of the depth or length of the crisis. However, we would recommend that the business prepares a financial forecasting model that allows varying assumptions and delivers financial outcomes based on those assumptions. We would then recommend that the business prepares at least three different scenarios – an optimistic, middle and pessimistic – and review the financial outcomes for each. The financial model should indicate the financial outcomes of each scenario including monthly Profit & Loss and Cash Flow. This will allow the business to evaluate different scenarios and the impact of different actions on the financial position of the business.
– the business should then prepare an action plan, for both short and medium term actions, based on the risk assessment and impact evaluation. This action plan should be detailed and measurable with clear owners of actions and accountability. This action plan should include evaluating the different support packages being made available by Government through agencies such as the Local Enterprise Offices, Enterprise Ireland, SBCI, the Revenue, etc.
– the business should keep the action plan under continuous review to ensure that the actions are being carried out and that such actions are delivering the expected outcome. In the current circumstances, we would also recommend that the business revisit the risk and impact evaluation exercise on a timely basis and re-run the financial models. This may lead to a change in the actions required. By “timely” we would recommend that this be twice monthly initially and then move to monthly and eventually quarterly once the crisis abates.
This type of framework is a common exercise for multinational businesses who have the internal resources to carry out such in depth analysis. We would recommend that small to medium companies use external consultants such as Coombes Corporate Finance (“CCF”) to drive, coordinate and deliver this framework for your business. CCF has over 30 years of experience in both practice and industry and we can manage the business through this process. Furthermore, Enterprise Ireland and the Local Enterprise Offices provide funding assistance for companies to carry out this financial planning exercise.
As noted above, the action plan should include evaluating the different support packages being made available by Government through agencies such as the Local Enterprise Offices, Enterprise Ireland, SBCI, the Revenue, etc. CCF can evaluate the appropriateness of the supports being offered and assist you in securing such supports.
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Frank Coombes is a qualified Chartered Accountant with vast experience in Corporate Finance in Ireland and the UK, obtained in both industry and practice. In 2000, Frank moved his family to Cork to join Deloitte. In 2006, Frank set up his own corporate finance practice, Coombes Corporate Finance to offer his clients 20 years of expertise and experience.
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