The impact of the war in Ukraine on Cash management

INTERVIEW of Benjamin Madjar
Head of Cash Sales & Structuring EMEA, at Deutsche Bank

Benjamin Madjar provides an insightful analysis of the economic consequences of the war in Ukraine, and the repercussions on businesses. Although the current geopolitical context is destabilizing economic activity in the region, solutions are available to French companies affected.

How are companies affected by the geopolitical context?

‘It's impossible not to view the current situation with compassion and concern, particularly in view of the atrocious daily lives that people have to endure. Despite this sombre backdrop, I shall confine myself to trying to decipher the impacts of the conflict on Cash management. Barely recovered from the sanitary crisis, the Cash flow of French companies has been severely tested since the beginning of the war in Ukraine.

 

On the one hand, some companies are exporting to Ukraine, Belarus or Russia, and sometimes even have facilities in the region. On the other, some companies are facing problems linked to energy costs. Energy costs are a particularly heavy burden for so-called ‘energy-intensive’ industries.’

The main issue of this situation (beyond the complete stop of the activities in the above mentioned countries) is the supply chain as well as the difficulties of supplying the companies.

 

Many factories in Russia have stopped operating, forcing some sectors to change suppliers. Similarly, some retailers have simply ceased trading in Russia, but still need to transfer funds locally (i.e. onshore). Not least to help the local resources that are still there’.

What questions should you ask yourself if you are concerned?

‘In the case of an international company selling or buying in Russia, we need to ask ourselves a few questions:

 

• Do I comply with the sanctions enacted by the United States, the United Kingdom, the European Union, or l’OFAC (American financial control agency) ? These sanctions concern particularly Russian banks and companies.
• Can I cash Russian customers locally (knowing that Visa and Mastercard have ceased their activity there)? Can I receive transfers from Russian customers' accounts?
• Can I transfer my local (onshore) cash in Ruble (RUB) to an account in this currency but located in another country (offshore)?
• Are the amounts in RUB offshore at risk? Should I convert them to EUR or USD, or another currency?

 

Businesses linked to the region are not the only ones affected. Like consumers, businesses are also affected by rising electricity and gas prices’.

What solutions for French companies?

‘The government has announced a economic and social resilience plan to help companies facing the economic consequences of the conflict in Ukraine. This 7 billion euro will help the sectors most affected. The aid plan will be tailored to the individual needs of each company.

 

One of the key measures of this plan is the return of the state-guaranteed loan (PGE) for companies in difficulty, which will be able to borrow up to 35% of their sales revenue. This measure is expected to provide relief from rising electricity and gas bills. qui ne cessent d’augmenter. Elle est néanmoins disponible qu’à partir du 1er juillet jusqu’au 31 décembre 2022,
Eligible companies can, however, take advantage of the current PGE, still in effect until June 30th, 2022. BPI France also offers loans for heavily impacted industries, mainly in the construction and public works sectors. Unlike the PGE, the repayments of these loans will be spread over 10 years.

 

Another measure that concerns all French people, individuals or professionals, is a fuel discount of 15 cents per liter on the price at the pump, from April 1st 2022 for a period of 4 months.

Finally, exporting companies that:

• see their energy bill increase by 40% or more,
• whose electricity and gas expenses represent more than 3% of their turnover, will be able to benefit from a state aid. The latter will cover half of the additional cost of energy expenses..

Although these short-term measures will give French companies a break, this situation highlights the energy dependence of France, and more globally of Europe.

 

For more information on the resilience plan, we invite you to visit the government website and the resilience plan." 

Ensemble, aidons l’Ukraine

It is impossible to publish this article without mentioning the human consequences of this war. For all those who wish to help the Ukrainians 🟨🟦 find the list of existing initiatives here: https://www.weukraine.fr/#database

Written by Eléonore Berne, on 23/03/2022.