Luiza Buserska (pictured), Editorial Board Member of TRF News, Corporate Communications Executive at CODIX and Laurent Tabouelle, COO of CODIX’s Group describe below the new strategies organisations need to adopt in order to recover after pandemic.
The economic disruptions caused by the pandemic have put many companies in hot water, which has had a huge effect and far-reaching consequences for the global economy and global markets. Almost a year after the first cases of coronavirus, we are still in the midst of the pandemic. Several countries have reimposed extremely rigorous measures, closing entire economies, and it now seems that we should not rule out the "worst-case scenario". So far, quite predictably, we have witnessed a decline in GDP (world GDP is expected to shrink by 4.3% in 2020), rising unemployment and a fiscal deficit. Therefore, economists predict that the negative impact of COVID-19 will be greater than the one of the financial crisis of 2008/2009.
At present, a significant proportion of businesses around the world are reporting a negative impact on cash flow and revenue, a marked increase in overdue invoices and a considerable extension of the average payment period when compared with pre-pandemic levels. The interruptions of the production and supply chains have proved to be a serious obstacle for many companies, particularly those with inadequate liquidity. Large companies worldwide are selling assets to increase their cash as the availability of cash is very important for this type of crisis. At the same time, supply chains are shifting, and “big” players are potentially changing as Covid-19 (as well as the changing financial conditions) has impacted supply chains and forced buyers to look for alternative suppliers. In this context, considering the various possible scenarios, if large companies collapse, this could cause a domino effect before the vaccine becomes widely available. In that regard, the impact of the economic crisis caused by the pandemic, which has already affected the work, health and lives of many people, may turn out to be devastating.
All these challenges have led to an unprecedented supranational response from all European countries in an effort to stabilize economies and help those most affected by the crisis through powerful financial injections and various programs to support businesses and citizens. For example, in many countries companies in economic difficulties have been released from the obligation to file for insolvency, thus receiving extra time and space to ride the storm.
Still, despite the breathing room and strong support provided by the government, given the current second wave of the disease and the need for further social distancing, analysts' most optimistic forecast is that economies will begin to recover gradually only in the third quarter of 2021.
Against this backdrop, it is hard to predict what the prospects for the world economy are and in particular for the commercial finance industry in the months and years to come. But one thing is for sure: businesses need to find a way to meet the challenges of this ever-changing environment in search of growth and development. Companies should respond adequately to these harsh economic conditions by changing their payment practices, introducing more flexible terms or providing the option of deferred payment and, generally, by seeking more versatile financial instruments.
At this very moment factoring companies’ role could prove very important as factors, through their methods of control and permanent monitoring of the receivables from their clients’ buyers, are able to provide more working capital than traditional lenders while minimizing credit risks. And it is not only small companies, which are most vulnerable in the current situation, but also mid-size organizations and big players on the market that can leverage this flexible financial instrument.
The crisis has weakened many businesses and completely ruined others and it is an opportunity for financial companies to provide their invaluable support to the weak ones or focus on new types of business that inevitably surface after each crisis. Such a strategic decision is very likely to shape the products and footprints of those players for the years to come.
Besides, telecommuting is in full swing. Many financial businesses are looking for ways to have the work done outside of the traditional office environment, which allows them to combine optimal security with the expansion of their networks. Working from home is a trend that has been going on for a long time now, with an average to low adoption rate, especially in the most traditional lending and financial groups. The pandemic has really brought this trend to the forefront. More and more people can work remotely, from home or anywhere, as long as they have Internet access and the necessary communication tools. This has brought new opportunities to do business (not only in the financial industry), especially when it comes to customer service, by providing varied offerings and larger contact timeframes, and by making it easier to go cross-border, overcome language barriers, etc.
All this has brought technology to the forefront. The new reality is forcing companies and people to rethink their working protocols. Nowadays we are witnessing a growing demand for integral business solutions which can help carry out tasks easier than before, performing transactions and operations from anywhere in real time via web portals, automation capabilities, communication tools with a broad global reach, AI, etc. Financial companies are already (or should be) seeking smart business software solutions compatible with the remote access which will give them the flexibility that they yearn for, e. g. allowing users to have access in read-only mode to their data, consult their contracts, accounts, invoices, payments and send/receive documents and letters or even record information, trigger back-end processing and print jobs, as well as provide the security they need (through digital signatures, multi-layers authentication, etc.). We can expect that multi-product technologies will become more and more popular in search of opportunities to offer more complete working capital solutions outside the domain of receivables/payables finance while effective systems and controls are maintained at all levels.
In light of the foregoing, we can anticipate that the recovery of the world economy, and respectively of the commercial finance industry, will be a long journey with many bumps along the road. But one thing is for sure – the world is changing faster than ever and is going more and more digital.
Financial companies now urgently need to process all those changes in their landscape to shape their new strategies in order to respond to the crisis and thrive in today’s unpredictable environment. The winning strategy implies both the adoption of a more flexible approach to working and doing business and the implementation of technologies able to adjust to the new rules. Those who focus on how to access quality offerings and achieve greater efficiency will survive the crisis and get the most out of the situation.
The adoption of the right strategy will enable companies to reduce costs, manage risks and even boost their performance. After all, enhanced adaptability, increased efficiency and reduced costs are what makes a difference in the uncertain economic climate that is set to continue for un unknown period of time.