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Coronavirus vs. Corporate Health

Coronavirus vs. Corporate Health Right now, companies around the world are going out of business. They’re laying off employees and closing their doors. While in some cases this might have been inevitable many could have survived if only they had been proactive. To be sure It is difficult to wrap our heads around the profound effects that the microscopic Covid-19 coronavirus is having on our world. For some managers of small to middle-market business’s it may be even more difficult to understand the necessary steps they must take immediately to ensure the survival of their organizations.

Some businesses who’s supply chain or end users will be affected by the coronavirus may be sadly watching the slow death of their enterprises on the Evening News. For some companies, this will ripple through to their lenders and trade creditors. It is an ugly and unprecedented scenario.

We have likely all heard the expression “a deer in the headlights”. This alludes to the fact that a deer caught in the headlights of an oncoming vehicle will often freeze, uncertain of which action to take. The same can happen with people when faced with an overwhelming situation such as the possible downfall of an organization they struggled for years to build. Certainly, as the coronavirus begins to overshadow a great deal of the world around us, “overwhelming” is not too strong of a term.

In a worst-case situation, as corporate borrowers begin to fail, significant pressure will be brought to bear on their lenders. Therefore, it is critical that commercial lenders work with their borrowers to get out in front of any ripple effects of the virus on their borrowers. Third party professionals can provide effective assistance in this effort.

CEO’s need to start taking decisive actions immediately:

    • Scheduling reductions in workforces.
    • Make plans and technology arrangements to allow employees to work from home.
    • Cut non-essential expenses.
    • Businesses who anticipate a slowing of demand for their product(s) should consider reducing inventories and slowing down their supply chain.
    • Other companies who anticipate continued or increased demand for their product need to ensure the integrity of their supply chain, find alternate suppliers and ensure adequate inventory.
    • Just as we, as individuals, have been advised by the CDC to have two to three weeks of essential supplies in our homes, companies must begin to increase cash on hand to help get through the tribulations of the next few months.
    • Convert non-earning and non-essential assets into cash.
    • Most importantly, future cash inflows need to be accurately projected out to 13-weeks, and cash outflows managed, to stay within that envelope.

The best thing that management can do right now is to ensure they have a comprehensive plan and that they are aggressively managing in accordance with that plan. Hopefully, things will never get too grim for their enterprise. But if bad things happen, they will be out in front of it and well prepared.

Now might be a good time for management to seek the services of an outside professional management consultant. Certified Turnaround Professionals can be quite helpful in quickly preparing borrowers to weather the storm and should be considered as one of the best tools available to lenders and business owners.

Kevin M. Burke, CTP

Burke Advisory Services

September 23, 2020

Kevin Burke is a member of the Turnaround Management Association and a Certified Turnaround Professional. A graduate of the Villanova School of Business, he has over 35 years of experience in banking and executive management. His management consulting practice is located in Troy, Michigan.