Corporate tips for navigating Covid-19

27 March 2020

The COVID-19 pandemic has precipitated a global demand and supply shock that poses significant risk for business. To assist in navigating this difficult environment, Deutsche Bank’s Capital Markets Strategy team provides a detailed checklist for corporates to review across operational, funding and risk management functions

Global healthcare systems and hospitals do not have sufficient “surge capacity” to provide adequate treatment for the spread of Covid-19. Simply “slowing” the pace of contagion therefore becomes critically important to an effective public policy response.

By definition, this requires “maximum containment” and “social distancing” that leads to the “economics of stoppage” that economists and market participants still do not fully understand. While the visibility on the forward is limited, and peak impact likely temporary, we would advise companies globally to not underestimate the potential economic and market impact ahead.

We would like to thank the dozens of corporate clients and Deutsche Bank employees that provided direct input for this preliminary set of guidance. Our review is a mirror image of your insight and thoughtfulness.

Please consider this a “live document” that we will update and resend on an ongoing basis. To this end, we welcome your continued input via email for future editions.

At Deutsche Bank, our most senior leadership, market specialists and research teams globally are all available to assist you in navigating this very difficult period.

Business strategy, governance and stress testing

Governing boards and executive committees should include the following in their supervisory and business management routines:

  • Board oversight with respect to material risks posed by Covid-19
  • Key executive and employee related support, protection and flexibility
  • Potential formation of senior executive “Covid-19 Task Force”
  • Improved board and C-Suite preparedness for activist campaigns
  • Covid-19 impact on key contracts, insurance policies, MAC (material adverse change) and force majeure provisions
  • Consider virtual format for annual shareholder, Board and other critical meetings
  • Consider acceleration of digital strategies longer term across entire enterprise
  • Conduct dynamic scenario analysis (base case and tail risk) for:
    • Virus related path dependencies (time, geographic, intensity, recurrence)
    • Economic scenarios (quick recovery, long recovery, deep recession)
    • Market disruption scenarios
  • Consider Covid-19 impact on:
    • Business: revenue, expenses, earnings
    • Capital allocation: capex, R&D, dividends, buybacks
    • Funding, liquidity and bank counterparty risk
    • Hedging positions, vulnerabilities, opportunities
    • Suppliers, distributors and customers
    • Digital and physical processes
    • Investor relations, public communication, investors
    • Activist campaigns
    • Employee health, relations and management
    • Longer term business strategy and operational issues
"We would advise companies globally to not underestimate the potential economic and market impact ahead "

Disclosure requirements

These will vary from country to country but the broad regulatory obligations are comparable. In the US, treasurers should review the following, paying particular attention to Securities and Exchange Commission (SEC) requirements:

  • Evaluation of earnings guidance (adjust, withdraw, update)
  • Communication strategy and disclosure detail in earnings announcements
  • Inclusion of relevant disclosures in proxy statement Board oversight section
  • Determine if material borrowing on credit lines triggers SEC 8k disclosure obligation
  • Thorough review of material risk disclosure obligations, risk factors and MD&A
  • Navigating Regulation FD selective disclosure prohibitions
  • SEC filing relief (if needed)
  • Exposure to disclosure-related securities litigation arising from Covid-19 impact

Liquidity and bank credit facilities

  • Determine how long existing sources of liquidity hold up to prolonged stress environment
  • Determine daily liquidity requirements in various scenarios
  • Determine amount of liquidity required in credit market freeze scenario
  • Identify monthly run rate of fixed expenses and how many months cover is available from various liquidity sources in the event revenues decline sharply
  • Determine amount of liquidity to manage through short term revenue delays
  • Increase size of revolving credit facilities (if necessary and possible)
  • Determine timing and cost of accessing overseas cash, if needed
  • Evaluate charges for excess deposits on cash held overseas and not yet repatriated
  • Determine alternative sources of liquidity (private placements, revolvers, unwinding in-the-money derivative positions)
  • Identify how sales in highly impacted regions may impact dividends back to the head office
  • Evaluate flexibility in internal guidelines and rules if needed to amass appropriate liquidity (i.e., tax rules, intercompany lending, investment guidelines)
  • Determine scenarios for drawing on bank lines
  • Assess pros and cons of drawing down facilities early (security, negative messaging)
  • Identify limits, if any, banks may have on full utilization of available credit lines
  • Assess impact of MAC (material adverse change) clauses on credit lines
  • Assess focus of activist investors to your liquidity vulnerabilities

Bank relationships and counterparty risk

  • Assess counterparty risk for capital providers for Covid-19 stress scenarios (insurers, banks)
  • Assess counterparty bank credit risk in bank facility, especially in highly impacted countries (China, Italy, South Korea)
  • Proactively speak with bank relationships to understand capacity for bank funding as a backstop if capital markets “seize up”
  • Discuss back-up procedures (and related indemnities) with banking partners to facilitate alternative payment instructions (i.e., via email) in case of system / access issues
  • Evaluate expectations for potentially changing credit provisions going forward
  • Identify one or more banks for processing the payments in case the primary cash management bank is unable to do so
  • Consider effectiveness of potential government support measures on the financial liquidity system
  • Understand strength of government backstop for banking system

Capital allocation and structure

  • Undertake comprehensive re-examination of entire pre-Covid-19 capital allocation plans for new environment of higher economic uncertainty and volatility
  • Evaluate cash balances for stress scenarios
  • Evaluate opportunistic use of “excess cash”
  • Liquidity and risk of investment portfolio (impairment, market dislocations, defaults)
  • Revisit pre-Covid-19 capex plans
  • Re-examine dividend policy
  • Revisit share buybacks for new risk-opportunity paradigm
  • Revisit debt buybacks for new risk-opportunity paradigm
  • Re-examine the appropriate mix of fixed / floating debt given market conditions and yield curve
  • Evaluate the impact of negative rates on currency exposure, cash management, investment portfolio, pension obligations and liquidity management
  • Communication with rating agencies
  • Assess focus of activist investors to your capital structure imbalances or vulnerabilities


Note these points are based on US market infrastructure and other regions should check the equivalent position with their funding markets:

  • Assess ability to fund short term maturities, including commercial paper (CP)
  • Ability to access CP market, especially if not A-1/P-1
  • Contingency plans for funding large pending transactions over next 3-4 months
  • Assess ability to fund unexpected contingent liquidity demands (M&A, litigation, supply chain disruption, margin call on swaps)
  • Preparedness to move quickly on opportunistic funding market reopening (documentation, due diligence)
  • Pre-funding longer term maturities when opportunity arises
  • Balancing short term maturity obligations (12−18 months) with opportunity to refinance longer dated maturities (if excess cash permits such financial assessment)
  • Monitor access and cost of alternative funding markets across geographic areas
  • For leveraged loan borrowers, consider possibility of 1% Libor floor returning to new term loan issuances; for existing deals with 0% or no floor, consider locking in currently low Libo rates
  • Assess focus of activist investors to your funding vulnerabilities
  • Understanding the eligibility criteria and operational details of relevant government funding, liquidity and capital programmes in your geographic jurisdiction

Pension obligations

Again, pensions regulation differs from region to region, but corporates should as a basic principle keep on how this current period of economic shock could impact pension fund performance and the ability of the fund to meet its obligations. In short:

  • Examine impact of low rates and depressed equities on pension obligations
  • Assess opportunity of low rates to fund pension obligations
  • Understand Rating Agency response to macro impact on pension obligations
  • Understand potential pension fund relief for comparable stress scenarios historically

Supply chain

  • Assess Covid-19 impact to credit and business profile of largest suppliers and distributors
  • Develop efficient matrix for tracking supplier and distributor risk
  • Alignment of your contingency plans with key suppliers and distributors
  • Create “heat map” or grid indicating the impact by region and part to identify potential bottlenecks
  • Assess preparedness for supply chain disruption (facility closures, transport bottlenecks, etc)
  • Evaluate financial support options for key suppliers facing liquidity and business risk
  • Evaluate risk of inventory shortages, impairment and write-offs
  • Evaluate supply chain strengths and weaknesses of competitors and/or potential mergers and acquisitions (M&A) targets
  • Evaluate long-term investment in new supply chains to limit future risks
  • Assess focus of activist investors on supply chain vulnerabilities

Customer/Accounts receivable (AR)

  • Assess Covid-19 impact to credit and business profile of largest customers
  • Alignment of your contingency plans with key customers
  • Assess strength of accounts receivable
  • Evaluate potential strains in customer financing
  • Assess credit policies for customers and develop a framework for rapid decision-making while evaluating impacts on cash flow
  • Consider restricting credit to customers in high risk industries/locations
  • Consider extending additional credit to customers with higher needs
  • Evaluate if terms on receivables may need to be relaxed if customers face liquidity challenges
  • With incoming cash flow unpredictable, design contingency plans for customers who may not be able to pay on time
  • Review counterparty risk/ policies to potentially adjust risk mitigation measures, especially around larger clients (insurance, AR sales, CDS, etc.).
  • Model how long customers may delay purchases or technology investments and determine if financing is needed to bridge the revenue gap

Hedging strategies

  • Identify the extent to which forecasted exposures have changed, and impact on hedging needs
  • Consider adjusting notional hedging amounts or adding flexibility to existing programme
  • Re-evaluate interest rate hedging approach for new and prolonged lower rate paradigm
  • Assess cost and benefit of interest rate locks for historically low rates
  • Evaluate unwinding of FX hedge positions, if necessary, to reflect downward revisions to overseas revenue
  • Determine if FX hedge policy allows for use of options to take advantage of dislocations in FX market
  • Evaluate current hedged item definition, and hedge effectiveness measurement method, to ensure sufficient flexibility to maintain hedge accounting
  • Reassess ability to execute larger transactions given low market liquidity as volatility remains high

M&A restructuring

  • Impact of COVID-19 on announced M&A, not yet closed
  • Impact of COVID-19 on industry consolidation, potential targets and activist M&A campaigns
  • Impact of COVID-19 on M&A timetables
  • Assess impact of lower equities on target valuations
  • Assess impact of lower equities on vulnerability to unsolicited bids
  • Impact of business disruption on bond financing covenant compliance (for targets and acquirors)
  • Impact of supply chain disruptions on restructuring activity
  • Update due diligence protocols for COVID-19 on target company business profile, key executives, employee issues, key contracts, and key counterparties (suppliers, distributors, customers)
  • Assess impact of COVID-19 on existing and future MAC (material adverse change) clauses
  • Determine areas of competitive advantage and disadvantage for potential M&A
  • Evaluate actions strategic peers and potential disruptive future peers are taking
  • Identify areas where activists are likely to be most influential
  • Assess impact of asset impairment, if any, for potential targets, and/or restructuring of own business
  • Awareness of Covid-19 impact on Bankruptcy Court proceedings (procedures, delayed hearings, timetables)

Investor relations

  • Communication strategies for crisis response and impact with:
    • Key stakeholders (employees, suppliers, distributors, customers, shareholders)
    • Activists
    • Potential M&A counterparts (targets, unwanted acquirors)
    • Rating agencies
    • Regulators, government (if applicable)
  • Reconsider form, content and frequency of rating agency discussions
  • Consider communication strategy for disruptive “outbreak” in manufacturing or business facilities
  • Communicate strength of funding and liquidity
  • Determine the impact of Covid-19 pandemic on ESG profile, and how ESG scores might be impacted by this crisis (in particular, social and governance)
  • Impact on earnings guidance and announcements

Employee relations and management

These points relate to the US employment system and each region will need to navigate within their own employment law and health and safety jurisdictions.

Employee workspace and functionality

  • Implement effective remote working options, if possible
  • Implement and communicate rules for on-site “social distancing” in work spaces and meeting rooms
  • Separation of employees between work sites or manufacturing plants, if appropriate
  • Dividing critical work teams into separate locations, if appropriate
  • Ensure robustness of technology platform for remote work functionality
  • Ensure robustness of cyber protection for transition to remote and virtual work places
  • Evaluate potential business continuity issues in a scenario where remote working is necessary for extended periods of time
  • Create plans to keep workers engaged and focused, particularly in the event of prolonged virus outbreak
  • Consider potential for long term consumer, customer and worker behavioural changes (i.e., acceleration of virtual work environments, propensity for virtual over in person meetings, cost savings from reduced business travel)

Access to treasury functionality and processes

  • Determine if employees can still make and approve payments and manage risk while working remotely / virtually (security tokens, systems access, market and trading access)
  • Ensure all relevant employees have access to online treasury systems
  • Consider how potential dislocation of employees will impact cash payment and management activities (accounts payable and receivable, documentation, signatory and settlements processes)
  • Evaluate long term potential business changes such as potential to accelerate efforts to automate certain treasury functions (hedging, auto cash sweeps, etc.) to reduce dependencies on human intervention for day to day treasury management.


Managing Director, Capital Markets Strategist Deutsche Bank Securities Inc, Corporate Finance



Director, Capital Markets Strategist Deutsche Bank Securities Inc, Corporate Finance



Associate, Capital Markets Strategist Deutsche Bank Securities Inc, Corporate Finance

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