Cash & Liquidity Management

Notes From the Pandemic: How Treasurers Have Responded to Covid-19 Whether it be optimising account structures to maximise liquidity, digitising trade processes to ensure business continuity, or extending liquidity support to suppliers, treasurers have been drawing on a range of tools to maintain operations and minimise disruptions, explains Giovanni Solaroli, UniCredit’s CoHead of Global Transaction Banking.

Notes From the Pandemic: How Treasurers Have Responded to Covid-19

By Giovanni Solaroli, Co-Head of Global Transaction Banking, UniCredit


The economic downturn caused by Covid-19 has forced corporate treasurers to re-evaluate their cash management, trade finance and working capital strategies. Whether it be optimising account structures to maximise liquidity, digitising trade processes to ensure business continuity, or extending liquidity support to suppliers, treasurers have been drawing on a range of tools to maintain operations and minimise disruptions, explains Giovanni Solaroli, UniCredit’s CoHead of Global Transaction Banking.

The past few months have been quite extraordinary for corporate treasurers, as they move to adapt to the economic shock caused by Covid-19. Liquidity, of course, has been the primary concern – needed to keep both companies and their suppliers in business. Meanwhile, the shift to remote working has thrown up technical challenges, requiring treasurers to identify ways in which trade and document signing processes, among others, can be carried out digitally. To address these, corporates have been turning to a combination of traditional tools and new platforms and solutions.


Pushing liquidity up and down the chain

Top of the list of priorities is adequate working capital. Whilst most large businesses have been able to draw on existing bank facilities to tide them over, this kind of financing is less readily available to those further down supply chains.

We’ve seen businesses move quickly to support their suppliers here, engaging their banks to make early payments based on approved invoices through supply chain finance or ‘reverse factoring’.

The weeks following the outbreak of the pandemic saw a spate of these programmes established or expanded. Italian retail store, Esselunga, for example, tapped UniCredit to extend its pre-existing reverse factoring facility to EUR 530m, accelerating payments to its suppliers and thereby stabilising its supply chain. Other clients, such as food retailer PAM Group and retail consortium Conad, were also quick off the block with similar programmes.

Buyers with the liquidity to spare have also set up similar dynamic discounting programmes to reach further down the
chain – using their own surplus cash to offer smaller suppliers early payments in return for a scaled discount (i.e. the earlier the payment, the greater the discount).

A number of corporates, such as luxury goods retailer, Furla, and Italian chocolate and ice cream manufacturer, Venchi, are already benefiting from this kind of tool, working with UniCredit and its fintech partner FinDynamic to ensure the benefits of supply chain finance can be extended to the historically underserved ‘long tail’ of small suppliers, who were previously too numerous and expensive to onboard.


Optimising before borrowing

While borrowing to plug a possible liquidity gap will be essential for many, careful cash management can help corporates minimise the amount they borrow (and therefore the costs involved) by ensuring existing cash reserves are available and deployed effectively. Earlier this year, sports equipment provider Tecnica sought to achieve this by centralising its liquidity through a European cash pool. Tecnica’s cash position had been split into independent subsidiary accounts across its sales and production network, which made it difficult to quickly assess cash positions and allocate liquidity where needed. However, by implementing a payment factory solution involving just two bank accounts per country and daily international sweeps from local accounts (including those held with other banks) into the company master account held in Italy, it was able to establish a centralised system with far greater control and flexibility.

These accounts are now managed through UniCredit’s e-banking portal – making it easy for the central treasury to check positions anytime and anywhere, including from home, drawing from this cash pool to meet ongoing liquidity needs. This kind of approach has allowed Tecnica and those running similar platforms to generate internal solutions before leaning on short-term borrowing – making their cash go further and future-proofing their treasury operations at a stroke.


Accelerating digitalisation

The transition to remote working also posed its own set of unique challenges – not least in terms of trade finance, where a typical cross-border transaction can involve as many as 35 physical documents changing hands.

In response, the banking industry has redoubled its already significant efforts to shift treasury interactions to
a virtual plane. In addition to solutions for digital document signing and transmission, corporates have a host of
options to digitalise almost every stage of the trade process. These run from contract discussions with trading partners, which can be taken online via solutions such as we.trade, through to custom-built platforms for trade finance (UniCredit’s Trade Finance Gate, for instance, lets clients configure and issue their own letters of credit and guarantees) and digital settlement through the new Bank Payment Undertaking.

The Covid-19 pandemic has undoubtedly upended traditional ways of working, but it’s pleasing to see how well businesses have been able to adjust. As we navigate the way to recovery, the solutions put in place will serve companies well – as will the agile and progressive mindset that fuelled them.

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