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Recovering from COVID-19 – Three focus areas for mid-corporates to improve liquidity

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24 Jul 2020

Home > News > Recovering from COVID-19 – Three focus areas for mid-corporates to improve liquidity

Conserving cash amid COVID-19

COVID-19 caught many businesses by surprise, with many facing government-imposed operational restrictions, severe supply chain disruptions and declining consumer demand. The most serious impact, experienced by most if not all businesses, was on their finances, especially working capital.

In our survey1 of 205 mid-corporates, 60 per cent of C-level executives said they face challenges in receiving financing support from traditional channels, and want stronger liquidity support from critical suppliers, while 39 per cent of them are facing delayed payments from customers. Given these scenarios, companies will need an effective finance strategy focused on preserving liquidity through immediate cash conservation measures to weather the effects of this ongoing crisis.

As economies re-open, companies are finding themselves in the ‘Preservation and Stability’ phase, i.e. Stage 2 of the ‘The Mid-Corporate Journey to Resilient Growth’. They are actively exploring ways to maximise revenues and re-evaluating their cost structures with an immediate need to optimise working capital.

Swift actions needed to tackle immediate financial and regulatory challenges

Besides the upheaval to their finances, mid-corporates also cited keeping up with regulatory developments as something they find challenging even as they grapple with revising business plans and forecasts in the face of fast-changing circumstances. Complying with stricter reporting and the myriad complex requirements in order to qualify for financial grants have added to their concerns.

While these challenges are not uncommon, the scale of impact is significant in a crisis of this nature. To overcome them, mid-corporates need to build a comprehensive and well-defined plan followed by swift execution.

key challenges faced by mid-corporates

Three key actions to take for an effective response to the immediate challenges

key actions considered by mid-corporates

First action to take – Manage and Protect Cash

 Second action to take – Engage with Customers and Suppliers

case example infographic

Third action to take – Leverage External Financing Sources

Read about Standard Chartered’s collaboration with SAP Ariba to help companies seamlessly manage their supply chain finance needs with the digital platform here.

case example infographic

Mid-corporates should also consider more active engagement with industry lobby groups to campaign for sector-specific policies around financial and other support to businesses during the COVID-19 crisis.

Managing working capital along the resilient growth journey

As companies progress along ‘The Road to Resilient Growth’ and enter Stage 3 (‘Preparing for Growth’), they should consider actions that will improve their cash position in the longer-term, such as realigning corporate real estate and manufacturing locations to map against revised operational capacity and leveraging digital technologies for cost-efficiencies (e.g. blockchain for trade finance).

The next point-of-view in our series will focus on alternative sources of capital and investments that mid-corporates can potentially tap into to further strengthen their capital base and enable this new phase in their journey towards resilient growth.

Surviving the cash crisis in a pandemic

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PwC, ‘COVID-19: Finance and liquidity – Managing cash pressures due to coronavirus disruptions’

PwC, ‘Measures to mitigate the impact of coronavirus – Optimisation of working capital’

Standard Chartered, ‘We’ve joined forces with SAP Ariba to bring financial supply chain solutions to the world’s largest digital business network’, August 2019

Standard Chartered, ‘We’ve completed our first joint transaction on blockchain platform with Linklogis’, August 2109

Treasury & Risk, ‘Strengthen Your Cash Position in the Covid-19 Crisis’, May 2020

Oberlo, ‘5 Steps Business Owners Can Take Now to Improve Cash Flow During COVID’, May 2020

EuroFinance, ‘Managing treasury through the Covid-19 crisis’, April 2020

The Asset, ‘Covid-19, trade war uncertainties spark supply chain innovation’, March 2020

1 Survey commissioned by Standard Chartered in June 2020 and completed by 205 mid-corporates (annual revenue USD100m-500m) based in Mainland China, Hong Kong, Singapore, Malaysia and India

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