• Jean-Baptiste

How should a business talk about COVID-19

Updated: Mar 31

COV-SARS-2, the coronavirus which originated from Wuhan, China, has sent a shockwave to the financial market and burnt down roughly 40% of the market value of the Dow Jones index. Similarly, in Europe, FTSE 100 in the UK, CAC 40 in France, and DAX in Germany have registered historic losses. As the next quarterly financial report approaches, chief financial officers and other business leaders accountable for investors’ capital shall address concerns associated with the disease.



Investors are seeking information about the virus: how long will the pandemic last, how much impact does it have on the business, how do business leaders plan to deal with the crisis, and do we have enough liquidity to withstand the shock from the slowing-down of the activities ? Other stakeholders as well wonder about what solutions the company is proposing to suppliers and employees. The market being extremely volatile, business leaders have to ensure that the management of the situation is under control.


The first question to be answered is how the virus is going to impact the operation of the business. Whether positively or negatively, companies that are not affected by the pandemic are rare. Some may face substantial supply chain issues due to the lockdown of cities where the suppliers are located. In contrast, others, such as medical supply producers may face a massive demand increase. To ensure investors that the entities they invest in are capable of dealing with the situation, business leaders should present a detailed view on company demand and supply and provide investors an insight view of how the company is currently running versus the pre-pandemic time. It is also essential that leaders propose a preview of how the company is planning to recover after the pandemic, with several serious scenarios being considered along with respective responses from the company.



From the public relations side, to maintain the image of the company, leaders should show efforts made by the administration to avoid the spread of the virus and to cooperate with public health officials, nonprofit organizations and medical professionals. The impression that the company is profiting from the situation will have a long term negative impact on the image of the company.



Being frank, transparent and serious [...] is key to earning stakeholders' trust.



Last but not least, what's on every investor's mind is the question of whether the company has enough liquidity to survive the crisis. Investors would want detailed information about the financial situation of the company, and business leaders must explain how the company can withstand a long term downturn as well as how the unexpected financial situation could affect business operation plans: how the company is doing right now, what we can expect in a month, a quarter, a year... In the worst scenario, what internal or external resource can the company get? Selling real estates? Getting loans from banks? The business should make investors understand the determination of the company to survive the crisis.



It is in the time of crisis that we see the importance of the leadership of CFOs and company leaders. Being frank, transparent and serious about where the company is and where it is heading to is key to earning stakeholders' trust.



Pinglei He - Corporate




Sources


www.marketwatch.com/investing/index/djia


www.weforum.org/agenda/2020/03/covid-19-coronavirus-business-health/


home.kpmg/cn/en/home/insights/2020/02/coronavirus-thoughts-on-financial-instruments-accounting.html


www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business


26 views

INQUIRIES

Thank You

  • LinkedIn
  • Facebook
  • Instagram

CentraleSupelec Finance 2020 - All rights reserved

Association under the French Law of 1901.