Financial services firm PricewaterhouseCoopers (PwC) on Wednesday, April 29, published a report targeted at businesses in Kenya, breaking down their options in response to the Covid-19 pandemic that has had an unprecedented negative impact on the economy.
The firm acknowledged that the pandemic had affected the ability of businesses to operate as well as their access to liquidity to facilitate operations in Kenya.
Indeed, many businesses of all sizes in the country, from micro-enterprises to established mid-size firms, have been forced to undertake cost-cutting measures due to the economic downturn, with countless reports of wage cuts and lay-offs hitting the headlines.
The PwC report breaks down three steps that could be taken by businesses in Kenya to ensure business continuity through the pandemic.
Critical review
The first step businesses were advised to undertake is to conduct a critical review of the impact of Covid-19 on their operations, taking into consideration the specific sector they were in as well as the state of the nation's economy and the global economy.
The critical review is supposed to factor in both the supply and demand sides of the value chain, taking a holistic view that includes sourcing of inputs, delivery of goods and services as well as collection of payments.
Key questions businesses were advised to ask themselves as part of the review include 'What is the impact of Covid-19 on availability of supplies and labour?', 'Will you be able to access the market, and your customers the products?', 'Are your products and services essential?' and, importantly, 'Can your customers pay?'.
Liquidity
The second step is to conduct a rapid review of their liquidity positions and assess the resources available in the short to medium term to allow them to finance operations and meet their ongoing obligations
"Businesses should, where necessary, proactively engage with their financiers to seek support in the form of short term facilities to enhance liquidity, or forbearance to the extent that their projections indicate a potential inability to meet debt repayment obligations.
"Indeed, the need for such engagement has been acknowledged by the Central Bank of Kenya, which has directed that “SMEs and corporate borrowers can contact their banks for assessment and restructuring of their loans based on their respective circumstances arising from the pandemic”.
"Furthermore, the President, in his address of March 25, 2020, also indicated that the Central Bank of Kenya would “provide flexibility to banks with regard to requirements for loan classification and provisioning for loans that were performing as at March 2, 2020, and whose repayment period was extended or were restructured due to the pandemic”.
"To inform engagement with their financiers and other management decisions, it is imperative that businesses understand their liquidity positions and take measures to safeguard those positions from deterioration," the report advised.
Stakeholders
The third and final step is to assess the impact of business decisions informed by the two previous points above on internal and external stakeholders and develop an effective stakeholder engagement plan.
This phase involves the identification of key internal and external stakeholders such as employees, customers, regulators, and their probable reactions to changes occasioned by the prevailing business environment.
This should be followed up with the development of an effective communication strategy to facilitate early, pro-active engagement.
"Additionally, businesses may want to consider potential legal and commercial implications of the inability to perform in line with the terms of these contracts. While undertaking this assessment, businesses need to consider both immediate and long-term objectives since decisions taken during this period are likely to have implications long after Covid-19.
"As such, and to the extent possible, businesses should evaluate the possibility of striking a compromise with their key stakeholders who, no doubt, understand the prevailing circumstances," PwC advised.
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