Coronavirus: an update from FCIMonday 16 March 2020
FCI Secretary General gives an update on the situation with the coronavirus:
As you all have been reading in the media, there is new information about the Coronavirus on a daily basis. The countries seem to be responding in a similar manner as our friends in China. These reactions, which we support as an organization and which will hopefully show significant effects on the speed of the virus spread will also have an impact on FCIs activities, from a business perspective and also for FCI as an international association.
Below are some updates about the internal measures taken. As most of you know, the World Health Organization (WHO) last week announced the Coronavirus has been elevated to a global pandemic. We had sent out a circular last month regarding the challenging situation in China, but now we have seen other countries like Italy, Spain, France, Germany, South Korea, Japan, US and Iran with a significant rise in new cases, and we are afraid many more are to come. But certainly Italy has been the most affected outside of China to date. The country had to adopt emergency measures to combat the spread of the virus but others are following suit. We wish all of our members a speedy recovery from this crisis.
Here in the Netherlands, just yesterday the Prime Minister announced emergency measures to contain the virus, including the closure of all schools, stores and restaurants, restricting unnecessary travel and requiring people to work from home. Hence, effective immediately FCI will implement the requirement to allow staff to work from home until the 31st March. FCI is a virtual organization, with all of our colleagues outside of the Netherlands working from their home offices, so we are quite prepared for such an event. The impact should be quite minimal however we want to make sure everyone is aware of the severity of the situation.
Regarding the upcoming FCI annual meeting to be held in Washington DC 21-25 June, the FCI Executive Committee had met last week in London, in part to discuss the situation and determine whether to hold or postpone the event. Since then, as you know the US Government has announced a national emergency, in part suspending travel from Europe to the U.S. We also recognize that many of our members based in Asia will have a particularly difficult time attending this event. The Executive Committee will assess the situation over the next two weeks and will make an announcement by 31st March whether to hold the annual meeting or to postpone it. Although the meeting is of paramount importance to the chain, we recognize that above all else the health and safety of our members must always be our first priority.
We have already witnessed significant corrections in the stock markets globally. The head of the OECD stated that the downturn could be the “gravest threat” to the global economy since the financial crisis in 2008/2009. The head of the WTO said he expected the epidemic to have a substantial impact on the global economy and the effects will “start to show up in the trade data in the weeks to come.” We are beginning to see governments and regulators around the world implementing various measures to stimulate their economies in general and implement policies to support SMEs in particular during this time of crisis.
With all of these disruptions globally, it is bound to result in an unprecedented slowdown in business for our members, and we can expect an increase in client-debtor business closures, client/debtor bankruptcies and defaults, a rise in dilution, and a spike in late payments in the coming months ahead. FCI is an association and business network with a strong track record in executing open account cross border receivables finance transactions for over 50 years based on a foundation of faith & trust that members bestow on each other through their adherence to the General Rules of International Factoring (GRIF). As these are exceptional times, we appeal to the good faith of our members, and ask that all parties use good judgement to assess each and every situation, communicate clearly and consistently with each other, and by consulting the suppliers when necessary, provide each other, both import and export factor with the necessary time to allow both sides to process the business as best as can be expected.
FCI provides an impartial service and cannot diminish the GRIF’s effect, which must operate within the certainty of the law. We understand these are difficult times, but we all must be cognizant that there may be circumstances beyond our control that will affect the best intentions. As such, it is possible to see debtor defenses of “force majeure” during such a time of disruption. Force majeure covers those uncontrollable events that are not the fault of any party and that make it difficult or impossible to carry out normal business. The GRIF has specific provisions relating to debtor non-payment under force majeure, as stated in Legal Circular 24.1 (please ask us for a copy but it can also be found in the Legal Manual in the private net). FCI will provide information on an ongoing basis and will be here to assist any way we can to ensure our members are heard and provide the necessary support during this time of crisis.
But as the Chinese say, when there is crisis there is also opportunity. The crisis will surely impact SMEs, as we have witnessed in past cyclical downturns. We have seen repeatedly that banks will develop a more conservative posture and SMEs will be adversely impacted. As such, factors will have an opportunity to leverage on what they do best, providing enhanced cash flow to SME’s. We believe this is also an opportunity to increase the level of education and to take advantage of the time that the staff of our members will have during this slow down, either working from their offices or homes in order to register for the various FCI e-learning courses available and webinars that FCI will organize over the coming months ahead. As our Chairman states, this is a time for all of us to “go back to basics”! And it starts with a robust education to prepare ourselves during such times of crisis.
On behalf of FCI, I want to share our support to our members everywhere who are fighting this virus. We hope and pray that the situation will become stable very soon.