‘INDUSTRIES SHOULD REACH OUT TO FINANCIAL ADVISORS’
MBABANE – Experts have identified industries that are worst-affected and suggested responses they can take to confront the challenge of COVID-19.
COVID-19 has undoubtedly produced an instant global economic shock.
It is unclear whether the economic effects will be short-term or long-term – like the 2008 global financial crisis. Among the hardest hit are airlines and other tourist-dependent industries. COVID-19 has caused some airlines to cut the numbers of flights by up to 70 per cent and other countries have enacted travel restrictions. Hotel occupancy and room rates have likewise fallen off a cliff. Also hardest hit, according the experts, are retailers.
Weak
“While retailers with a strong online footprint and ability to serve customers safely will weather the coronavirus storm, already weak retailers and those that cannot pivot to online will particularly suffer,” noted an expert.
As government urges social distancing, the numbers of customers going to restaurants, cinemas, and gyms has rapidly declined.
“Moreover, workers in these businesses cannot work from home, so any government restrictions limiting people from attending work or requiring restaurants or other crowded places to close will severely harm these businesses,” stressed the expert.
While many of the events surrounding the spread of COVID-19 and its impact on the global economy are outside the control of individual actors, there are steps that parties can take to protect their interests and minimise the pandemic’s economic fallout.
In particular with this global crisis, governments and regulatory agencies are likely to play a role in industry recovery, particularly in industries that are the most harmed such as the hospitality and travel industries. Experts advise that companies in need can maintain a proactive dialogue with their regulators and focus on opportunities available for financial and other assistance as developments play out.
“Companies can take steps to maximise their short-term cash position, drawing on credit lines as applicable and reaching out to financial advisors and other professionals for advice as necessary. Lenders and investors should monitor company draws on credit facilities and can review and exercise information rights in their credit and investment agreements to inform themselves proactively in order to be best prepared for developments.
This can best position parties to protect themselves and to enhance the likelihood of well-planned and value-maximising courses of action,” shared an economist from one of the institutions of higher learning.
Others say parties can emphasise open and constructive communication regarding counter-parties’ financial and other circumstances so that both short-term and long-term considerations can be intelligently evaluated in planning the path to bridging the current crisis.
For example, for lenders and investors, this means understanding companies’ short term issues regarding liquidity and operations but also appreciating the opportunities and future beyond immediate difficulties, with attention to longer term viability once the crisis subsides.
Relief
Is COVID-19 accelerating inevitable decline or is it a short-term problem that calls for covenant relief/bridge financing and investing in a long term relationship? Meanwhile, on the issue of possible extension of the lockdown and the effect on the economy, local economists politely asked not be dragged for comment, as the issue was sensitive and touched on lives. This publication wanted to get their expert opinion on how the economy can be slowly opened by allowing some of the industries to operate.
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