Corona Virus Pandemic and Effect on Businesses
Currently, the continued spread of the virus within the already established regions and community transmissions within new localities is more than likely to reduce the global Gross Domestic Product growth by between 0.3 -0.7 percent in 2020. China continues a slowed path to recovery toward the restart of the second quarter owing to challenges of slowed permissions and inhibition to worker migration capacities. As a result, these factors have led to a sharp demand decrease, thus lowering economic growth.
Finance teams are more likely to discuss and critically analyze potential opportunities for credit facilities and their cash retentions with forward-looking propositions to halt any share repurchases. This is in the wake of declined cash flows. Rating firms such as S&P Global Inc. confirm having in-depth discussions to assess the level of financial risks with the spread of the Coronavirus. Notably, most financial teams are advocating firms reduce and manage costs to cushion themselves against shortfalls.
Stock markets in Asian regions rose in the last two days after pronouncements that the central banks in the region will extend help in a bid to cushion the economies from the impact. S&P 500 closed higher while the Hang Seng index was up by 0.7 percent and China’s CSI 300 rose by 1.2 percent. Rating agencies are continuously assessing the impact of the pandemic on the credit and economic conditions.
Securities and Exchange Commission has taken measures to authorize publicly trading companies, especially those with establishments in China, to make disclosure provisions about COVID-19 risks in their subsequent financial reports. Although it is acknowledged that the material effects of the Coronavirus may be difficult to measure and estimate, there is a need to make reasonable reporting about its impact on the company operations.
The impact of the Coronavirus is expected to cut across all the industries since manpower resources are threatened. Chinese airlines are canceled across the world. The entertainment industry suffers from canceled mass concerts while football matches and leagues, especially in the Asian countries being postponed. The shipping business has been affected by canceled landing, while agriculture and manufacturing logistics have been in a lockdown owing to travel restrictions.