deloitte thailand: combating covid-19 with resilience | a
TRANSCRIPT
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series #10Enhancing financial flexibility for strategic agilityOctober 27, 2020
© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 2Deloitte Thailand: Combating Covid-19 with resilience | a webinar series 2
Speakers
Kamolwan ChunhagsikarnPartner, Restructuring ServicesDeloitte Thailand
Dr. Narain ChutijirawongDirector, Clients & IndustriesDeloitte Thailand
© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 3Deloitte Thailand: Combating Covid-19 with resilience | a webinar series 3
Economic Highlights
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 4
-4.4%
-1.7%
3.0 2.3
2.0 1.8
7.56.5 4.9 4.8
6.0
0.9 1.0
2018 2019F
2018 2019F
2018
2018 2019F
2018 2019F
2018 2019F
2.2
-4.3
2019 2020F
1.3
-8.3
2020F2019
6.1
1.9
2019 2020F
0.7
-5.3
2019 2020F
4.2
-10.3
2019 2020F
4.9
-3.4
2020F2019
2
As a result of the COVID-19 pandemic, the IMF projects the global GDP to shrink by 4.4% in 2020, the worst-hit to global GDP since the Great Depression
Source: IMF WEO Oct 2020Note: 1 Asia refers to Emerging and Developing Asia2 ASEAN refers to ASEAN-5; Indonesia, Malaysia, Philippines, Thailand, Vietnam
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 5
Source: SCB EIC (Outlook Q3/2020)
4.502.80
1.400.20
-3.20-5.40
-2.30
-12.60
2.50
8.10
-10.40
-15.30
Public investment
Public consumption
Private consumption
Private investment
Exports of goods
Imports of goods
2.40
-7.80
GDP growth
Thai economy was forecasted a contraction of 7.8% in 2020 mainly due to the global economic downturn, a sharp decline in the no. of foreign tourist arrivals and private investment as well as a lockdown.
2019 2020F39.80
6.70
Foreign tourist arrivals(Million persons)
-83.2%
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 6
Source: IMF WEO Jun 2020 and SCB EIC (Outlook Q3/2020)
In the baseline, global activity is expected to trough in the second quarter of 2020, recovering thereafter. The Thai economy also recorded the lowest growth in 22-year span at -12.2% YoY, reflecting large and abrupt impacts from nationwide lockdown measures. However, after lockdown easing, several economic activities have improved such as private consumption, manufacturing production, capacity utilization, business and consumer confidence indices as well as export values.
Quarterly World GDP (Index 1Q2019=100) Quarterly Thailand’s GDP in 2020 (%YoY)
-1.8
-12.2
-9.2
-6.7
1Q 2Q 3Q 4Q85
90
95
100
105
110
1Q2019 3Q2019 4Q20203Q20202Q2019 2Q20204Q2019 1Q2020
Emerging market and developing economies excluding China
World
Advanced Economies
China
Forecast
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 7
>20%
10-20%
<10%
2H 2020 1H 2021 2H 2021 2022 2023 onwards
In Thailand, some sectors can quickly recover by this year, while some esp. tourism related businesses and durable goods have to wait until 2022 and beyond
Source: SCB EIC (Outlook Q2/2020)
Speed of recovery
De
gre
e o
f im
pac
tsR
even
ue
in 2
02
0 d
ecre
ase
by.
.
Telecom
Airline
• Healthcare*
• Life Sciences*
• Insurance*
• Consumer product*
• Wholesale & Retail* (Grocery)
• Residential estate
• Petrochemical
• Refinery
• Metal
• Banking & Capital markets*
• Wholesale & Retail* (Non-Grocery)
• Electronic
• Building material
Industrialproducts &
construction*
• Hotel
• Restaurant
• Automotive*
• Oil, Gas & Chemicals*
Note: * Priority Sectors
88
Business
Future of work
Continued shift to virtualization and how, when, where, and by whom work
gets done dramatically reshape the nature of work
Social license
Investors, consumers and activists increasingly drive focus on climate change, purpose, triple bottom line
Society
Health & safety
Collective imperative of public health and accessibility as a shared rather
than a primarily individual responsibility increase demand for the
upgrade of healthcare systems
Supply chain resilience
Greater resilience of supply chains is required potentially at the expense of efficiency, triggering or accelerating
supply chain reconfigurations
Contracting credit
Low interest rates increase economic fragility to recessions, challenge the banking system and reduce credit to
enterprises
Industry shifts
Some industry sectors (e.g. travel & hospitality, gig economy) are significantly weakened; others converge to meet new
demand (e.g. healthcare & consumer)
Economy
Economic recoveryHow deep and how long will the recessionary impact last?
How effective will be the current stimulus & government driven debt responses?
How quickly will the economy take to resume to pre-Covid-19 rates of growth?
Geo-politicsWhat new geopolitical tensions & alliances will emerge?
How long will countries take to re-open and re-integrate?
How will the relationship between US & China evolve and impact the rest of the world?
What is likely to accelerate under the next normal…
What is mostly uncertain about the future…
Nationalism
Nationalism and desire for economic sovereignty lead to trade frictions and
temporary decline in international institutions, albeit without fundamentally
questioning globalization
Big government
High level of fiscal stimulus to support economic recovery, rising taxation &
interventions in building infrastructures of the future lead to expanding government
Politics
Rise of Asia
Rising economic & political powerof Asia owing to its coming out of the crisis first and less indebted than West
Industry 4.0
Fast adoption of digital, cloud, cyber, AI, automation, human experience (AR/VR) & other technologies dramatically transform
industries
New business models
New consumer demands lead to a proliferation of new business models, incl. direct-to-customer, contactless, subscription & ‘anything as a service’ supported by ubiquitous ecosystems
Trust
Increasing unemployment and inequality strengthen people’s desire to have
governments, institutions and businesses they can trust
What are the Big Shifts we will see in society?The environment in which we operate is bound to shift substantially
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 9
Increased Corporate Stress
Simultaneous increase in economic, business and financial challenges increase corporate stress – potential simultaneous adverse affects on company’s profitability, cash flows, leverage, liquidity and financial flexibility.
Increased challenges
• Severe economic contraction
• Market disruption and drop in demand/ consumption
• Operational disruption
• Supply chain disruption
• Counter-party failure
• Legal and contractual issues
• Working capital and liquidity pressures
• Commodity markets shock
• Financial market volatility and financing risk
• Increased financial risks - interest rate and FX volatilities ValueValue
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 10
How most companies respond…
Maintain going concern status and facilitate turnaround to maximize stakeholder values.
Engage Stakeholders
Preserve Business
Stabilization
Prepare for Next Normal
Trust
• Engage stakeholders for continued and additional supports• Implement comprehensive immediate and long term action plan to protect
and build trust
Liquidity Management
• Detail forecasting and scenario analysis• Tight liquidity monitoring and management• Optimize working capital
• Prioritize critical business payments• Lock to turn fixed costs into variables costs• Limit personal cost and keep flexible where
possible• Step discretionary spend and capital
expenditure• Review and focus essential maintain capex
Cost reduction
Financial restructuring
• Explore alternative fund resources – asset based financing, alternative lenders and special situation funds
• Renegotiate with creditors• Leverage government initiatives and support• Pursue waivers and deferral of payments if
needed• Develop contingency planning and damage
limitation
Strategic (Turnaround) Plan
• Navigate short-term operational and financial challenges• Amend business objectives and operating model to win in the
future, making difficult decisions in an uncertain market• Operate in “next normal” environment with new competitive
dynamic• Products/services portfolio review• Fund strategic response
Operations Optimization
• Dispose non-core operations and assets• Opportunistic acquisitions for seizing market
opportunities and assets• Asset footprints and facilities review and
implementation• Tactical purchasing to manage cash flows• Delivery of cost and commercial synergies
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 11
Trust
As we recover, reopen, and rebuild, it’s time to rethink about the importance of Trust. At no time has it been more tested or more valued in our leaders and each other. Trust is the basis for connection. Physical. Emotional. Digital. Financial. Ethical.
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 12
Trust
Trust is the foundation of all relationships. Built on competence and intent, trust amplifies the organization’s brand promise. A trusted organization is resilient and adaptive to its ever-evolving external forces.
A TRUSTED
ORGANIZATION
INTENT
COMPETENCE
INTENT
COMPETENCE
• Lead by example
• Deliver with excellence
• Perform with distinction
• Secure the foundation
• Amplify core values
Which core tenets are
critical to achieving trust?
Who are our most important stakeholders
and what is most important to them?
• Board & shareholders
• Customers
• Employees
• Partners & vendors
• Regulators
• Community
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 13
Enhanced cash flow forecasting
In response to the COVID-19 crisis, many CFOs have shifted focus from long-term P&L and growth planning to more immediate business continuity risks and cash positions.
Forecasting Methodologies
Source: Deloitte Development LLC, 2020
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 14
Enhanced cash flow forecasting
Forecasting Framework
Source: Deloitte Development LLC, 2020
Connectivity and predictive capabilities across all three statements
Outcome:
• Hybrid cash flow methodology (indirect + direct) that enables greater visibility into P&L and balance sheet
• Enhanced balance sheet forecast that drives greater accuracy in the corresponding cash flow
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 15
Restructuring
Restructuring Strategies:
Restructuring objectives are achieved through a combination of operational and financial strategies. Combined implementation of strategies normally pursued to achieve a holistic and sustainable solution.
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 16
Restructuring
Restructuring strategies will be tailored to company position and requirements.
Business Rehabilitation
Automatic Stay/ Planner and Plan Administrator Appointed/
Voting Procedure/ Priority of Debt or Fund Incurred/
More restructuring schemes
Restructuring options:
Deloitte Thailand: Combating Covid-19 with resilience | a webinar series© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 17
Strategic turnaround plan
In today’s environment, while organizations are in critical business situation and look to recover from the Covid-19 crisis, some focus on stabilization and set up the levers for growth by gaining a better understanding of internal and external unknown challenges.
Asset Efficiency
Growth
Liquiditymanagement
ResourceAllocation
Cost Optimization
StrategicTurnaround
Plan
Strategic Change Framework• Redefine Purpose• Evaluate Impact• Develop Capacity • Drive through
Excellence
Simple three-step process to frame the unknowable intruders:1) Don’t be shackled to the value
chain2) Adopt a “why not?” mindset in
order to turn weak spots into opportunities
3) Use the analysis of weak spots for strategic planning
© 2020 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 18Deloitte Thailand: Combating Covid-19 with resilience | a webinar series 18
ContactFinancial Services Advisory
Kamolwan ChunhagsikarnPartner, Restructuring ServicesDeloitte Thailand
Email: [email protected]