Frankfurt School COVID-19 Crisis Response

In the wake of the COVID-19 outbreak, businesses and financial institutions worldwide are facing unprecedented challenges to their daily operations amidst a global public health crisis and simultaneous collapse of economic activity. Several corporates and financial institutions approached us in early March 2020 to seek our advice in navigating the crisis and mitigating the impact of the lockdowns on their business models.

Based on our experience providing technical assistance in the context of economic crises, natural disasters and armed conflicts, as well as situation analysis conducted with partner institutions worldwide, our expert team developed a conceptual framework for the Frankfurt School COVID-19 Crisis Response for SMEs and Financial Institutions. Our crisis response framework draws on our recent experiences among others from Azerbaijan, Democratic Republic of Congo, Haiti, Lebanon, Pakistan, Sudan, Syria and Yemen.

Frankfurt School’s COVID-19 Crisis Response supports businesses and financial institutions in emerging markets take care of client needs, keep staff healthy and productive and more generally to keep the lights on during the most severe business disruption in generations. Our approach is anchored in a rapid but rigorous assessment of the nature of the crisis, as well as the severity and expected duration of the disruption to business.

With this understanding of the current situation, we encourage immediate actions that can still mitigate some of the impact and ensure operational continuity during lockdowns. These actions revolve around process digitisation, remote working, client communications, asset protection, ensuring liquidity and shoring up the capital base. It is never too late for these immediate actions, because the COVID-19 crisis is far from over. There will be more surges in infections and more business restrictions at least at municipal or regional levels.

The essence of the FS COVID-19 response is to move beyond simply maintaining an acceptable service level during the disruption. In every crisis, we witness a flight to quality which creates an opportunity for our clients to come out of the COVID-19 recession as a better and more effective organisation. We help our partners plan for the post-crisis phase and come out roaring the day after with the right products, the right delivery channels and a viable, robust balance sheet.

Overview of the Frankfurt School COVID-19 Crisis Response

Our support is structured as illustrated in three pillars below:

Crisis Assessment (Emergency Assistance)

The first pillar is an immediate action to assess the expected impact of the crisis on the institution. Based on the assessment, the financial institution and/or SME will be able to define which technical assistance it might need for the COVID-19 assistance in the medium-term.

The assessment will primarily focus on “establishing the crisis management team and plan”, “taking care of staff,” “taking care of clients” and “liquidity management,” but can also take into account other – institution-specific or requested - topics. Implementing these four steps will serve as the basis to move toward the second pillar: reliable crisis management strategy and business continuity plan.

Business Continuity (Crisis Management)

To ensure ongoing crisis management and business continuity, our expert team foresees the provision of tailored Technical Assistance packages (TA).

These TAs will be delivered fully remotely by our international experts, or via a hybrid approach though a mix of international and local experts. We will define the mode of TA delivery based on the current travel restrictions and in close consultation with the institutions.

These TAs can be an optional follow-up with financial institutions and/or SMEs that participated in the Pillar I (Crisis Assessment - Emergency Assistance) or directly provided without going through Pillar I of the Frankfurt School’s COVID-19 Crisis Response Assistance.

The areas of Technical Assistances under this pillar include:

Asset Liability Management

Funding and capital management & funding strategy
Treasury & ALM
Liquidity risk management & liquidity gap analysis
FX risk
Interest rate risk
Contingency funding and liquidity planning
Support for developing an institutional fact sheet / concept paper to access further funding / institutional support from donors/funding partners

Portfolio Management

NPL analysis
Transition matrix analysis
Vintage curve analysis
Early Warning System (EWS)
Loan underwriting, recovery, collection and restructuring
Loan portfolio analysis and customer segmentation along the lines of loan performance
Development of “incentive” programmes to stimulate payment performance (restart, maintain)

Risk Management

Enterprise risk management / Framework ERM
Stress-testing and scenario analysis
Debts restructuring and investors communication

HR, Training & Capacity Building

Reorganise staff structures and profiles as needed
Reskill employees to adopt new digital tools and processes
Health & safety measures for staff and clients

Business Continuity Planning

Business impact analysis
Board and senior management responsibility
Major operational disruptions
Recovery objectives
Cross-border communications
Testing
Business continuity management reviews by financial authorities

Recovery and Resolution Planning

Sales, Communication & Marketing

Development of pro-active commercial communication in times of lockdown and restricted mobility (digital/alternative marketing & communication)
Revision of the institutional purpose
Development of a digital strategy with a zero touchpoints approach
Client maintenance - adapting marketing, sales and alternative distribution channels during the crisis
Clear and regular internal communication

Business Recovery (The Day After)

Our Crisis Assistance service aims to guide our clients toward “the day after” and plan their post-crisis business strategy with a viable client franchise.

This pillar of our assistance offers in a dynamic, tailored TA support with a blended approach of remote and on-site component to strengthen the institution’s strategy and adjusted business model. The point is that survivor institutions need to come out swinging in order to recapture market share, build a new portfolio and lead the effort of rebuilding the small business ecosystem in their home markets.

An example of services we offer under this pillar include:

Loan portfolio assessment and development of recovery strategies;
Business model restart programme (develop products, services and outreach to play a meaningful role in the economic reconstruction following the crisis);
SME strategy development, lending process analysis and enhancement, lending policies in post-crisis context, etc.;
Fundraising and investment readiness support;
Talent management due to shifting mind-sets and behaviours due to crisis;
Developing of value-added service package for FI’s SME clientele in adapting/adjusting their business model/strategy to the new normal by providing access to training, coaching and information; and,
Other components tailored to the clients’ needs.

How to access the FS COVID-19 Crisis Assistance

Contact us at b.chaban@fs.de - our expert team will follow-up with you and schedule a call to check your institution’s needs and the terms of required support.

Selected Projects

Europe (Bosnia & Herzegovina) I The European Fund for Southeast Europe EFSE I 2020

COVID-19 response and stress testing for an MFI

Europe (Georgia) I FMO I 2020

COVID-19 response package for Non-bank Financial Institution

Europe (EU southern neighbourhood countries) I EIB I 2020

EIB TAFIR – COVID-19 response to selected MFIs

Worldwide I The World Bank Group / CGAP I 2020

COVID-19 response for PAYGO off-grid companies

Other FS Response Initiatives to the COVID-19 Crisis

Recognized Expertise - Frankfurt School Professors on Corona and its Effects:

Coronavirus and its impact on the financial industry
Stress Test for banks in times of Coronavirus
Certified Corona-Immunity as a Resource and Strategy, Coping with Pandemic Costs
The Coronavirus Crisis: The China Experience
COVID-19 – Could this be the trigger for a new financial crisis?

Find the full articles, interviews and other information here.