Question

Questions
1. COVID -19 has not only affected the health sector but the economy has a whole. The Zambian
government has implemented health and economic measures to curb the spread of the
pandemic as well as address the economic challenges;
i. With practical examples, explain in detail the financial challenges faced by corporations and
individuals at the onset of the pandemic.
ii. With the aid of a diagram, explain the effects of the financial challenges faced by
corporations and individuals on liquidity in the economy.

Answer 1

Coronavirus pandemic has had a huge impact on the economy. Many companies are facing an unprecedented economic crisis due to the coronavirus outbreak. In regard to this, ETCFO interacted with various Finance leaders to find the challenges that they are facing during COVID-19.

Many companies have not generated their revenue as much due to coronavirus-induced lockdown. So, the main focus of a CFO during this pandemic is to manage the fund position i.e. maintaining the company’s liquidity and cash flow.

Here are some challenges that CFOs are facing amidst pandemic:

Relaxo CFO Sushil Batra said, reviving demand is the major challenge for them and due to restrictions in manufacturing operations demand for open footwear is not fulfilled.

"Picking up of demand is the key challenge. We don’t think that the supply chain will be a challenge for us. Moreover, we have enough liquidity in the system, so we are in a position to support our vendors & distributors," said Batra.

According to Hitesh Uppal, CFO at Magicbricks.com, the biggest challenge for the organisation is that they have to learn to live with the pandemic.

"The greater risk in today’s environment is business continuity. The main challenge on the table is how to prepare your organization to survive the COVID pandemic," Uppal said.

"Another risk which poses a challenge for finance leaders in the current situation is depleting lines of credit from various institutions and this challenge is in renewing existing limits," he added.

Group CFO of InterGlobe Enterprises Pankaj Madan also shared his views with ETCFO about what challenges he is facing under this situation.

"The key challenge in this situation is to sustain the businesses with a focus on cash preservation and cost control measures,"

Lalit Malik, Chief Financial Officer, Dabur, also shared his problems related to labour and said, "Workers who have already gone to their hometowns will take time to come back. This challenge is mostly on the side of unskilled labor."

On the other side, Arun Kumar Gupta, CFO at Newgen Software, said that he doesn't have any issues related to liquidity, as the company has enough liquidity.

"As we have been getting revenues from our existing clients, and expect the momentum to continue, we don’t see a major challenge on the cash flow side. For our business, the third and fourth quarters are more crucial, and we will

hope the Covid-19 pain will reduce by then,"

IMPACT FACED BY INDIVIDUALS

India is only now beginning to fully recognise and respond to the coronavirus crisis. It has the advantage of learning from the mistakes of other countries, where the health crisis exploded earlier. Here are some thoughts on what India is doing and the challenges it faces, bearing in mind that viewing the crisis and commenting from afar may have limitations.

First, almost every country has been slow to act to control the spread of the virus. Even China did not respond as quickly as it should have. Though it had the disadvantage of being the first country to get affected, it also had on-the-ground knowledge that should have triggered a faster response. One problem for every government is taking responsibility, and suffering political fallout from overreacting.

But, by now, it seems that the dangers of being slow are much greater than those of overreacting, even allowing for the costs of economic disruption. India went for the national lockdown, not a day too soon. However, it remains to be seen if has implemented this lockdown in a way that will prevent panic and shortages. The messaging and the planning—again, observed from far away—seem to be less than optimal. If supplies of food and other basic commodities are disrupted, it will lead to chaos and other kinds of health problems.

Second, there has been a wide variation of the speed with which different countries have ramped up testing. Testing is important to guide individuals and public authorities in targeting social isolation and allocation of health supplies. As the head of the World Health

Organisation said, responding to the virus without adequate testing is like fighting a fire blindfolded. Most accounts suggest that India has been way behind the curve in scaling up testing. If testing is not increased rapidly, the lockdown could be longer, more widespread and worse than it needs to be.

Third, ramping up the production of health supplies that are needed to treat coronavirus patients is critical, as the number of identified cases starts to jump—New York City is an example. One of the richest cities in one of the richest nations in the world is already finding it difficult to treat just over 20,000 patients.

It is not entirely clear if the Indian government is doing enough on the front of manufacturing the health supplies the country may need over the next few weeks. And, this is in a situation where India is not as well-endowed with doctors and other medical professionals as are richer economies.

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