A TREASURER’S GUIDE TO THE PANDEMIC:
TWO STEPS FOR NAVIGATING A RECESSION
To ensure business continuity during the current
economic downturn, corporates of all kinds are
looking to optimise their cash management and
working capital processes. This should involve a
holistic approach and include two crucial steps:
one, tighten cash management processes to unlock
trapped liquidity; two, re-evaluate working capital
strategy and extend liquidity to suppliers.
Given today’s climate, however, it is not enough
for corporates to merely shore up their treasury.
Cash management and working capital processes
must be digitised from end-to-end to ensure daily
operations can be maintained seamlessly from any
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If carried out successfully, this plan will help
corporates establish a future-proof and streamlined
treasury set up – capable of better absorbing
economic shocks and shortages in liquidity.
Step one: Tighten cash management processes
To access liquidity, corporates are increasingly
drawing on pre-existing revolving credit facilities
(RCFs) to tide them over in the short term. Before
this happens, however, measures can be taken to
help unlock internal liquidity, and thereby minimise
the amount (and therefore the cost) of borrowing.
UniCredit, for instance, has recently worked with
Italian company Tecnica – a leading retailer of
outdoor footwear and ski equipment – to give the
Group Treasurer better oversight and faster access
to liquidity.
Before this solution, the company’s liquidity was
split over several subsidiary accounts across
Tecnica’s sprawling sales and production network.
While this gave local teams control over their
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to evaluate the company’s overall cash position
with ease and allocate liquidity where necessary.
The solution to this was to redesign the client’s
cash and liquidity management processes by
implementing a complete payment factory
and cash concentration solution. This meant
rationalising Tecnica’s treasury structure to just two
bank accounts per country, with daily international
sweeps from local accounts (including those held
with other banks) into the company master account
held in Italy. Importantly, these accounts can now
be managed through an e-banking portal – allowing
the central treasury to easily check positions at any
time and anywhere.
Under this new system, Tecnica has been able to
unlock internal liquidity and funnel it to the most
impacted stores. If a branch is short on cash due
to low collections, for example, Tecnica’s treasurer
can easily reallocate funds from the central cash
pool to tide it over. This has been key to softening
the economic shock caused by the COVID-19
pandemic and reducing the need to lean on short-
term lending facilities.Step two: Re-evaluate working capital strategy
and support suppliers
Once a corporate’s cash management processes
are optimised, the challenge of default and delays
in payments caused by the pandemic must be
addressed.
To combat this, corporates are increasingly in
search of guaranteed, or quicker, payment, drawing
on established working capital techniques such
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businesses can top up their liquidity as needed,
while simultaneously guarding against the
heightened risk of late payments and defaults. This
can be critical, especially given the lack of visibility
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Depending on a company’s unique situation, this
can be carried out a number of ways, including
factoring, which is straightforward and familiar to
most; forfaiting, which is ideal for a small number
of debtors with large amounts; and securitisation,
which requires elaborate set-up, but is excellent for
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Large buyers will also need to ensure access to
liquidity is extended to suppliers, who are equally
at risk of default and delays in payments, as well as
declining revenues.W
ith liquidity in scarce supply, and supply
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UniCredit’s Adeline de Metz, Global Head of
Working Capital Solutions and Raphael Barisaac,
Global Head of Cash Management, suggest two
steps treasurers can take to help navigate the
current economic climate.