How 18 months of economic uncertainty has impacted treasurers

Christoph Hofstetter, Senior Expert Capital Markets/Treasury at Vienna Insurance explores what lessons treasurers can learn from the economic uncertainty caused by Brexit and Covid-19

Sara Benwellposted on Monday, August 23, 2021

Sara Benwell: Off the back of Brexit, have you seen much in the way of currency volatility and what impact has this had on the account, cash, and economic sides of the business?

Christoph Hofstetter: We are an insurance company but are not currently involved with the Sterling nor do we have business in the UK so it is harder for me to comment.

In general, there has been an increase the sensitivity in this topic and the feeling that you must look closely in order to be ready for any new developments because of the increased uncertainty.

A closer look is certainly needed now for cash and accounts as currency volatility in general has increased.

Sara: How has the Covid-19 crisis impacted currency volatility and what impact has this had on the account, cash and economic sides of the business?

Christoph: The lesson learned out of the pandemic is that you need a closer look to secure the daily business even though, at least in our sector, we haven’t had that many issues.

In general, the intensity and the intervals of doing liquidity reports of the subsidiaries, in doing their reports, has been increased. This has been a very good measure to secure stability and in terms of always knowing what the next steps are.

"The lesson learned for us was to increase the intervals of liquidity reports"

In our case, we didn’t have any issues but if there had been, it would have been very good to have these elements in place in order to solve problems as they came up.

Luckily, we haven’t had many clients who stopped paying the premiums in the insurance business - so for us, the measure was just in place on our side to be ready if there were any issues.

The lesson learned for us was to increase the intervals of liquidity reports to know on a weekly or bi weekly basis what is going on.

Sara: In the Covid-19 recovery period how best should treasurers approach funding for strategic initiatives given the levels of uncertainty and predicted change?

Christoph: The recovery period gives us the chance to do it on both - the funding and strategic - sides. It is a good message to the markets as it helps companies to better understand what they would like to do and where they would see the add-ons and benefits for society and their clients.

From a funding perspective, this has been more or less a very good opportunity to take new funding steps in a greener or more sustainable way.

This would also have been the case without any pandemic but I guess it would not have been happening with this high pace if operating activity would have been a normal high level.

"This has been more or less a very good opportunity to take new funding steps in a greener or more sustainable way."

If you were to issue a bond rather than doing something more specialised like equity related funding, the advantage for investors is that it is only for a limited period of time so you have a special maturity for this funding and the issuer can argue it’s just needed in order to get back on track.

All economic (re)development programmes are based on that and companies get supported. If the storyline is good and matches with the strategic initiatives then this would be a great support for funding.

Sara: Have you seen any changes to banking arrangements that have come with the digital consequences of Covid-19?

Christoph: For us, we have all been working from home for over a year now and yes, there have been some changes as everything was settled on a digital basis.

That being said, it wasn’t really necessary for any of us to meet face-to-face so we managed very well with the digital meetings.

The consequences for us were that everything went digital but, in some ways, it increased time-efficiency for us as it skipped out other possibilities to meet or speak about various issues. I wouldn’t say that it had a very large impact for us because a large part of our interactions were already being carried out via email and phone.

 

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