How a trusted funding partner can turn crisis into opportunity

CEO Jon Sutton and CFO David Kirwan explain how their deep experience, plus ScotPac’s financial solutions, have helped thousands of Australian companies to manage through all types of scenarios.

Presented by ScotPac

Where do businesses commonly fail when a crisis hits and how does it test governance?

Jon Sutton: “A crisis doesn’t create weakness, it exposes directors to how well they’ve planned and scenario-tested what can come at them. Directors need to be asking their executives, ‘What stress testing have you done?’ At ScotPac, we do scenario planning and stress testing on our own business and likewise think deeply about what our clients are facing. If directors haven’t done rigorous scenario planning, they’re letting themselves and their companies down.”

David Kirwan: “We see both large and small businesses fail when they have a shock event – they just don’t have access to the liquidity to pull through. Too often, otherwise strong businesses have a fragile cash flow, inadequate liquidity buffers and no bridge to their recovery.”

How should boards approach financial resilience as part of their risk oversight?

Kirwan: “Boards can’t take for granted that the adequate buffers are there. Directors need to be probing their CFO and finance team, ensuring there is adequate liquidity in the event that something does happen. If that’s not done, it’s probably too late when something does happen.”

Sutton: “It’s so important boards have these conversations before a crisis hits, and that they’re looking at their financial arrangements. If they’ve been tied to one financier for a long time with a set of covenants, ask if that is the right thing for the company.”

What are other areas boards need to stay across?

Sutton: “You must pay attention to diversification of suppliers, supply chains and customers. Is the majority of your revenue coming from one party? If you have a small customer base and you lose 20 per cent of that, you’re likely to lose your business. What plans do you have around mitigating that?”

Kirwan: “The concentration risk around single suppliers is a real issue and we’re also seeing a lot of companies not ready for regulatory change. Payday Super – where employee superannuation guarantee contributions must be paid the same day as payroll – comes in on 1 July. As does tranche 2 of AUSTRAC’s AML/CTF reforms, compliance obligations that will capture thousands of additional companies. It all impacts working capital, so boards and management need to be across the short-term and ongoing impact on cash flow from these changes.”