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?

« Impossible de ne pas appréhender la situation actuelle avec compassion et inquiétude, notamment face à l’atroce quotidien que doivent subir les populations. Malgré ce contexte noir, je me limiterai à essayer de décrypter les 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.

 

D’un côté, certaines entreprises exportent en Ukraine, en Biélorussie ou en Russie, et parfois même disposent d’implantations dans la région. De l’autre, des entreprises font face aux problèmes liés aux coûts de l’énergie. Ces derniers représentent d’ailleurs, une charge particulièrement lourde pour les industries dites « énergo-intensives ».

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.

 

De nombreuses usines en Russie ont arrêté de fonctionner, obligeant certains secteurs à changer de fournisseurs. De même, certaines enseignes ont tout simplement cessé leur activité en Russie mais doivent encore transférer des fonds localement (c’est-à-dire onshore). Notamment pour aider les ressources locales encore présentes. »

What questions should you ask yourself if you are concerned?

« Dans le cas d’une entreprise internationale qui vend ou achète en Russie, il convient de se poser quelques 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?

 

Les entreprises en lien avec les acteurs de la région ne sont pas les seules touchées. En effet, comme les consommateurs, les entreprises subissent également la hausse du prix de l’électricité et du gaz. »

What solutions for French companies?

« Le gouvernement a annoncé un economic and social resilience plan to help companies facing the economic consequences of the conflict in Ukraine. This 7 billion euro viendra en aide aux secteurs les plus touchés. De manière individualisée, ce plan d’aide fera fonctionnera par besoin des entreprises.

 

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.