The ninth in FIDIC’s popular series of Covid-19 webinars took place on Tuesday 12 May 2020 with an event exploring how companies can best defend their balance sheets in the face of economic uncertainty as a result of the coronavirus, writes FIDIC communications advisor Andy Walker.
“Covid-19: Defending your balance sheet, securing your business’s financial position and ensuring liquidity” was attended by 365 attendees and explored a range of issues associated with companies’ balance sheets and liquidity during the crisis and offered ideas on how to secure a business’s financial position to ensure liquidity going forward.
Moderated by FIDIC CEO Nelson Ogunshakin, speakers at the event included FIDIC board member Luis Villarroya Alonso from Spain, Bayo Adeola, chairman of Comprehensive Project Management Services in Nigeria, Ryuichi Arimoto, president of Nippon Koei Co in Japan, EY partner Chris Lewis from the UK and Jim Stephenson, CEO of CHA Consulting in the USA. As usual, FIDIC president Bill Howard was also present at the webinar.
Speaking first at the event, FIDIC board member Luis Villarroya Alonso said: “In order to protect our staff during the current pandemic it is also crucial to protect our companies.” Infrastructure plans will be the engine of recovery in many companies, Alonso said, but companies will be affected in the short and medium term due to cash flows and revenue reductions as projects slow down or are halted. Another risk to be considered was an increase in potential claims that could lead to increased insurance premiums and this needed to be avoided, he said.
Ryuichi Arimoto, president of Nippon Koei Co, said that the situation facing the consulting engineering sector in Japan had changed drastically since the outbreak of the virus, with only 15% of staff working in offices and the rest working from home. Going forward, he said that there would be a need for better technologies and infrastructure for people to work more widely from home as the changes brought by the pandemic had a permanent effect on the industry. He also said that the industry would have to accept a high degree of uncertainty in the medium term and that this would have an effect on companies’ finances.
Next up, Bayo Adeola, chairman of Comprehensive Project Management Services in Nigeria, said that cash flow for all companies in the current situation was absolutely key. Retaining skilled professional staff was also a big challenge as was maintaining workload, especially post-Covid. All these issues were impacting on companies’ finances, especially those operating in the private sector which was likely to be adversely affected by the plummeting price of oil. There was uncertainty around the ‘new normal’, Adeola said, but he thought that engineering consultancies would have to become more creative as adapted their designs to provide solutions to fit a more socially distanced world.
EY partner Chris Lewis said that firms needed to prepare for different scenarios as they come out of the Covid crisis. “Economically, the sector has seen a sharp decline in economic activity in the sector and coming out of lockdowns was going to be harder than going into them,” he said. Companies were looking to draw down liquidity using a variety of measures, including government support and firms needed to manage their cashflow, working out the potential likely scenarios going forward, he said. Turning to recovery and resurgence, Lewis said that there would be a continuing focus on liquidity but also companies needed to consider collaboration with partners. The future would be different as the sector no longer builds for peak demand but builds more sustainably, he said.
Jim Stephenson, CEO of CHA Consulting said that his company was meeting weekly to oversee liquidity as a matter of good governance and feeding back to employees to reassure them in difficult times. Understanding how much revenue was likely to be pushed into 2021 was important for planning purposes, he said, and it was clear that government support for the industry and businesses working within it would be required going forward. A key challenge going forward was maintaining client relationships and staying close to them to show that they were with them for the long term. This was crucial, said Stephenson.
The discussion covered a variety of issues. A recurring theme was what future infrastructure demand would look like. Chris Lewis thought that there would be a move away from large projects as governments focused on quick delivery of schemes that would support the economy as countries emerge from the current crisis. Companies would need to think carefully about these future infrastructure needs and this would likely impact on the services they provide, he said.
Attendees asked a number of questions about cashflow and maintaining staff resource and it was clear that there are mounting concerns about the effect of the current and coming financial crisis on firms’ ability to trade against a background of infrastructure projects being cancelled or delayed. Jim Stephenson thought it was important to focus on the type of work affected and whether this was likely to be started sooner rather than later.
Speakers were also asked whether governments in all of the countries represented on the webinar were seeing infrastructure spending as a good way to stimulate their countries’ economy. Chris Lewis believed that they were, but he also said that governments’ ability to spend would be affected by the fact that they will also come out of the crisis with their liquidity compromised. Notwithstanding this, Luis Villarroya Alonso said that he was convinced that infrastructure spending would be an engine of recovery for all economies as they come out of the Covid crisis. Jim Stephenson agreed, saying that a federal stimulus programme on infrastructure would be an essential part of any recovery plan in the US.
Summing up the webinar, FIDIC CEO Nelson Ogunshakin said that it was important to remember that this was a sector that is crucial to helping countries recover from the current crisis but that the new normal, post-Covid, would mean a changed industry doing different things differently and firms would need to prepare for that.
The next FIDIC webinar in the series is Covid-19: Developing crisis response plans - an industry perspective which takes place on Thursday 14 May at 12 noon CET. We expect another big turnout for this event so please register your place as soon as possible.
Click here to book your place on the event on developing crisis response plans.
Click below to view a recording of the Defending your balance sheet webinar.
