The Coronavirus (COVID-19) outbreak continues to develop, with impacts felt globally, affecting daily life and the financial markets.
Firms of all sizes and sectors have been taking urgent steps to prepare and respond, with business continuity and incident management teams heavily engaged. Their work includes a large amount of information sharing, refreshing business continuity plans and refamiliarizing staff. Plans are being tested or invoked, including "work from home" arrangements. Every organisation will have its own sectoral and individual context. Organisations must also respond in a proportionate manner.
The Coronavirus (COVID-19) is impacting businesses globally by disrupting supply chains, travel, production and consumption, threatening operations and financial markets. Companies find themselves navigating a new reality, addressing issues from crisis response and cyber threats to valuations and financial stress. Our valuation, restructuring, security and risk management experts can help you assess and manage the risks to your business and provide transparency to key stakeholders.
It is worth noting that you should always assess the risks in how they specifically relate to your business, think about factors such as how many visitors you get, whether they are known to you (Are they contractors and regular clients or do you get passing trade?), how people flow through buildings and how often.
Here are the key external factors you should consider:
- Is health infrastructure adequate?
- How strong is the economy in your country and region?
- Is your country heavily dependent on imports or exports?
- Also, pay attention to currency exchange rates, the supply chain and other factors.
- You might also apply and combine SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) and PESTEL analysis
(Political, Economic, Social, Technological, Environmental, Legal). Once you understand the external environment, it's time to assess your organization.
Here are the key aspects you should evaluate within your organization:
- What is your industry? How is it impacted by the COVID-19 crisis?
- Does your organization have solid corporate risk practices?
- Is there a business continuity plan in place? Is it effective?
- Also, take into consideration profit/loss, flexibility, agility, organizational health and more.
Organizational assessment is already going on at all levels. Does your organization seem to be lost and confused? If people in your organization are seriously concerned, but still working diligently to evaluate and to create responses, you are on the right path. If people are panicking and confusion is growing, this is a bad sign.
Specific Areas of Focus for COVID-19:
Economic Shock: The pressure of cancelled contracts or high levels of unfinished goods and exposure to high risk countries may present a financial
stability risk which requires careful monitoring.
Access to Critical Services: Vendors may face impacts due to restricted movement or higher than normal absence levels. Key person risk may be a factor, should employees with specialist expertise become unavailable. Previously shared SLAs may no longer be achievable based on the circumstances of locations where the service is supplied. Fourth parties (suppliers to your suppliers) may be a factor and should be identified and considered.
Access to Critical Goods: Limited availability of parts for critical infrastructure could be a factor. For Financial Services firms, examples of relevant critical goods could include replacement parts for IT infrastructure. Firms will typically be confirming their internal and vendor stock levels and will continue to monitor the situation through the rest of the year.
Risks & Controls: Moving operations to alternative locations carries risks. One example is working from home, which could carry information security risks which need careful management. Compensating controls may need to be re-examined. Any location-specific dependencies such as clean rooms must be understood and continuity plans for these functions examined.
Risk management encompasses the identification, analysis, and response to risk factors that form part of the life of a business, and it is usually done with its best interest in mind. Effective risk management means total control of future outcomes proactively rather than reactively. Therefore, effective risk management offers the potential to reduce both the possibility of a risk occurring and its impact.
Risk Functions:
The primary risk functions in such a risk management program typically include:
Adan's experience:
Adan's team of professionals have substantial experience in risk management. We evaluate a full range of considerations including market conditions, liquidity needs, and legal and regulatory issues to identify the most efficient transaction solution.
We frequently draw upon the expertise of our restructuring and insolvency colleagues and their experience of advising on investing in companies in distressed situations,
purchasing assets and businesses out of companies in distressed situations and restructuring companies near and in insolvency. We provide expert support throughout the entire lifecycle,
delivered by local and global teams. This enables us to help banks create liquidity and unlock capital for reinvestment in other value adding lending activity benefitting the firm more broadly.
Our broad client base includes debtors, secured and unsecured creditors (including financial institutions, mezzanine investors, insurance companies, bondholders and landlords), creditor committees, special opportunity/situation investors, directors/officers and insolvency practitioners. Through working with these clients our team of professionals have gained valuable insights into the approaches of key stakeholders across the capital structure, and have developed and delivered innovative and practical solutions such as:
Our experienced team build robust, transparent financial models covering all circumstances and across a wide range of sectors. Our approach is to start with a clear understanding of the situation and design a bespoke model using proven methodologies and techniques. The advantages of our models include creating outputs and usability that are designed specifically for the user, as well as providing the flexibility of assumptions to perform sensitivity analysis.
Our experts partner with clients on corporate planning, providing perspective not only on immediate value and impact, but on long-term implications. We work closely with management and other advisers to leverage and complement their knowledge and ensure maximum impact, and actively support implementation and skill building.
