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Insights - episode 2
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Episode 2 - Financial Planning

Nadia:  Good afternoon, I would like to welcome you to our second edition of Insights, which I will be co-hosting with Dr Roberta Lepre. A warm welcome to our guests Mr. Kenneth Farrugia, Chief Business Development Officer at the Bank of Valletta, Mr. Andrew Spiteri-Willetts, who is the Chief Financial Officer at ProHealth, and the managing director, Mr. Godwin Xerri at Focal Maritime services.

Thank you for joining us this afternoon. And we're looking forward to the second edition to discuss financial planning, during times of crisis. And perhaps I think it’s an opportunity to start with you, Kenneth, and discussing financial planning, which is so critical. I think last week, we mentioned during our first addition together with Roberta we've discussed at length, the importance of financial planning, especially during this time, is almost the first item on each and every board meeting and every board agenda to be discussed at the level of the board of directors. 

And obviously, most of companies at the moment, liquidity and liquidity measures for not only for the short term, but also for the medium and long term, is of paramount importance. And even though there are government support schemes that companies are looking into, one important measure, obviously, is for companies to look for additional support, find additional support from other financial institutions, such as banks, like the ones you represent. So in your opinion, which are the most important elements, which you reckon should feature into financial planning, at this particular point in time, especially when companies do not have the luxury or the time or the data to present long term plans. So the focus is more on short term planning, or short term plans yet again, the support of banks and banking institutions. So in order to assist even our guests and other companies, what would… what do you think are the most important elements that should feature within such a plan?

Kenneth:  Well, undoubtedly, this pandemic has brought about a significant impact on economic operators across the various economic sectors. And if you look at I think, three areas that I think boards of directors of these companies, and to a degree event he self-employed and small operators, are focusing on is one, you know, trying to be creative, how to sustain revenue generation. Now, clearly, those businesses that already had their business model, digital platforms through which they sold their products and services could easily switch, switch the focus, you know, sustained revenue through these through these challenges. 

Others that didn't have this yet in their business model are scuttling to do so. But we still have others that have really sort of relied on, you know, the traditional sales of goods and services through physical channels. And clearly with the, with the directions given by the health authorities today, their operations are closed. So really, and truly, the revenue streams have gone down to zero. So I think that's one angle that companies are looking at in this environment. 

Secondly, the biggest issue is cost management, the first thing you want to always do his book in a granular manner, to add costs, starting at zero based budgeting, particularly looking at discretionary costs, human resource costs and impact capex that you had, you know, in plan to invest in new projects, and clearly they have been scaled, scaled, scaled back. And I think clearly, it is a time to really revisit the cost structure of any business operation. Because today, it's all about survival. Right? I mean, I think that's the key word on the agenda of many institutions, we need to ensure that we survive this storm. 

Last but not least, clearly is as you rightly mentioned, the liquidity side. Liquidity is imperative, managing receivables and payables in an orderly manner.

It's a challenge that many businesses are facing because clearly you try to manage your payables and maximize the receivables right? And with targets to ensure that those receivables actually paid by my credit as well, it's not an easy environment undoubtedly.

Insofar as support. I think, you know, those businesses that planned well, and it is fortunate and unfortunate that we have been going through a very strong economic cycle. So I think many boards strategically went in investment mode, you know, literally looking at deploying their reserves into new into new projects. In that mode no one would have ever dreamt three months ago that we'll be going through this experience, right?

So, you know, those companies that had you know, were well preserved, and they had a prudent policy and so far as you know, how they place what part of their profitability, they place into reserves, Part they paid to tax, and by part they paid dividends or invest in new projects, those are that had a prudent policy of, you know, strengthening the reserves for rainy days, and we're going through I think, more than a rainy day, you know, will surely be or are in a better position to weather the storm. Those that haven't done so clearly are resorting to bank financing, and the schemes that are being launched by, you know, from Malta Enterprise with the support of government, [unintelligible].

Undoubtedly, I think the reality is that (1), even from a government perspective has to be careful, and cruel, cruel, as it seems to be selective which companies to support, because there are companies that are already in dire straits prior to the crisis, right? There are companies that are in dire straits because of this pandemic. And there are others that really, truly can dip into the reserves. And, you know, I mean, shoulder all the all the burden, because really, it's all about, to what extent this support can be sustained over the longer term?

I cannot foresee that the government keeps dishing out financial offerings to companies for six months, or a 12 month period, because clearly, it will impact the financials of the country, which at some point in time, or this debt will have to be paid back. So I think it's about being very selective, and, you know, choosing those sectors that are truly adds value to the flow and sustainability of the economy. 

Nadia:  And very much so Kenneth, it's very much on a case by case basis, I work with different companies as well. And very, as much as like you're mentioning, basically, there are companies that have pre-planned and have always taken a very, somewhat conservative measure in terms of reserves and cash reserves, they find themselves in a better situation even to negotiate with banks. And even looking at the famous Annex A or Annex B when it comes to the government support measures. Because obviously, the burden, there is a burden for each and every company within every industry. Undoubtedly, however, there are some in a better position than others. So probably a key takeaway that most companies are going to take away from all this during the crisis, even to prepare and even certain board decisions like we've discussed again, last week, the importance of reaching a balance between investment, but also taking care of the reserves as much as possible for whatever companies go through not just pandemics such as this one, but each and every company goes through its own transition, I believe. 

So, thank you, Kenneth for your support of this one. Now, moving on and enter in Godwin probably, and focusing a little bit on the scenario analysis, which is very much I think, important at this at this stage. Again, mostly I think companies what the first thing that they have done is sit down and prepare a number of different scenarios both for the short term for the medium term for the long term, and focusing mostly on the short term as we speak, because as we mentioned, liquidity is very important. And I think those who managed to do so from the very beginning at a very early stage assisted them to take certain decisions immediately rather than waiting for something to happen, when there was still a little bit of unclarity. So when it comes to the decisions like Kenneth mentioned for example of cost cutting, immediately when you have that particular different scenarios, one could actually analyse which costs which overheads which costs one can look into, but not only that, I believe as well with the working arrangements certain working arrangements that companies have gone into with employees obviously following confirmation with authorities such as the DIER, but definitely most companies have gone through the whole cycle. So how important do you think I know that both Andrew and as well as Godwin obviously they will speak from different scenarios because Godwin is coming from the maritime industry while Andrew is from the health industry, which is a little bit different, but what do you think is the most… do you think there is relevance for companies to prepare these scenarios and why? 

Godwin:  In continuation to what Kenneth said, financial planning really is not something which you do at that point in time, financial planning is it is something which is which is ongoing and always having the having the proper set up, the proper controls in place obviously, gets you ready four times for, exactly times like this, which are unprecedented and like Kenneth said I mean, a rainy day. Obviously, I mean, when it comes to scenario, first of all, we have to deeply understand your revenue streams and what revenue streams will be impacted. So, you could have your products, I mean, in our case, where you have will be impacted and you know, will be impacted, product will be less impacted and possibly areas of business which will have a positive increase. So, that is, that is that is crucial understanding. 

Once you have this in place, and you have your cost structures and your deep understanding of what your controllable costs, and not controllable costs, and what you can do without and what possibly is an extra luxury to the to the cost structure, and then you go into scenarios and you stress, you stress your scenarios depending on possible outcomes.

You stress your revenue figures, you stress your cost figures, and ultimately, based on the level of stress the company can take, obviously, the board and, and the organization has to take decisions, I mean, some of those hard decisions in a lot of cases to trim as required for them to save, ultimately the going concern of the business. 

Nadia:  So do you find that, as an important tool Andrew, for decision making?

Andrew:  It has to be I mean, it's critical to, to analyse scenarios and to understand, understand where I mean, how far you can go, and how much you can take. Because, depending how the company is prepared, and again, this is coming from it doesn't come from today, it comes from its history and the way the company has been built up. And based on the level of stress the company can take, and how well how well capitalized the company is and how well prepared at all levels even operationally then at that point, you can determine how drastic decisions you are able to or cannot take.

Nadia:  The well-known features very much in the sense when to take the decisions and depending on obviously the planning which you have put in place. So I appreciate that. Godwin, I think in your case, it's a little bit slightly different because revenues might not be coming in. So it will be it's a little bit more challenging to assess when you have a scenario and the difficulty of having zero revenues for a longer period of time most probably, because in your case the industry is going to be hit for a longer period. 

Godwin:  What is interesting is that under the last version of ISO accreditation which our company is subscribing to for many years, but two years back the platform was changed based on risk as you had to test your business against the vulnerabilities you have from different services and then assess in what gives the [unintelligible].

Unfortunately, this never prepared us to what if your market disappears overnight and this is what has happened in most sectors. And the other, which brings me to the issue of financial planning which is very, very strategic at this moment, is the complete lack of planning. So when we talk of planning, you have a vision of your historics to guide you. You have your seasonalities, you have your consumer products. We are seeing all this changing completely. 

If your client base was made up of 100 clients coming from different retailer sectors and 75 of these have had their retail business closed. So, the client is not there. And I think, you know, all of us have to do a lot of past thinking why run literally? The strategic issue is becoming even more strategic in water. So, you start questioning the build-up of the business. 

In other words, if as we have within the maritime sector, you are running a passenger terminal, if your passengers are no longer there, you have absolutely and I think a common denominator which is characterized in our industry is that the fixed costs are there, we are all going through the motions of reviewing fixed costs as much as realistic as possible. And look at graphically what is the gap between your fixed costs and the decrease in your revenue, up to which level will you come when you say this is no longer sustainable. 

Nadia:  So it's more cost management in your case Godwin? 

Godwin:  A good point made by Kenneth earlier is the issue of going concern. I must pay tribute to the audit firms who are really you know, engaging with us and discussing and this is one of the discussions that that we are having at the moment be it a standalone company or a company within a group when it comes to certifying boarded accounts and confirming that these are going concerns, a going concern has a limit. And the MFSA has kindly extended the period for defining of accounts, I think specifically because of this issue. And my worry without trying to be too pessimistic is how long this is going to last?

Once again, from our industry, we are now seeing the problem from the demand side of the service. So we started in January, with the supply side. So China closed down ports, closed down, chips had no cargo to carry, there was no supplying and Europe was demanding, but there was no supply coming. Now it is the reverse. Now China is up and producing and exporting. But the demand from Europe is not there. Because of the lock downs because of the cash flows because of all the reasons that 

Nadia:  I think it's a little bit difficult as well and challenging in your case Godwin to rethink the business model whilst you're looking into the cost management structure of your operation as well. Because, as you said, there's the timing is not clear. However, it's not a situation of waiting and see as well. So something has to be done in your case because as you said you cannot continue for such a long period of time in the situation. 

Godwin:  We have brought down our planning, literally to a weekly exercise. So every week, you're undertaking a review depending on the sales that are taking place.

For example, in the not this week, but the week before we had the phenomena of booking cancellations. So the importer has placed his order, he requires the product especially in the food industry, but his supplier is not in a position to deliver. Or there is a warehousing problem that it is, we are seeing it happening in the oil industry where there is a negative pricing of oil because there is nowhere else to store oil. So they're giving you a bonus to take oil from them and find a place to store it. 

The whole business model that we are used to, and this is my biggest challenge and something that I like to debate with my friends who are more hands on economists, depending how long this lasts, I think the whole paradigm of the business model that we learned from times of Keynes to the modern times of doing business has to change.

Nadia:  And for some industries more than others Godwin.

Godwin:  We know for a fact that from now, at least till June, there is there is absolutely no upsurge. We know exactly how many less voyages around the world will be taking place, because of the demand supply consideration. When you bring that includes the local scenario, the consumer, the retailer, the wholesaler, and how they are going to fare out in terms of import and export. It's a completely new scenario. No one can predict the demand. I say it, thus, I've been sick hearing about toilet paper but, no one thought all until today, it's a mystery for me what people go out and buy, but it brings you to the consumer mentality, which is the driver of the of the demand side How is the consumer reacting to this? Apart from the fact that you have certain retail businesses, furniture clothing or whatever, which are shut down. 

So, the business model, which saw us doing the seasonality exercise that you have the build up to the summer period at these are the best months for your input side…

Nadia:  In your case it has to be refined on a weekly basis.

Godwin:  Of course, once then you project this into the larger industries within the maritime, like a free port activity which does not depend on because local market, but on the international market there the impact is magnified 1000 times over.

So, we have seen drops of 40 45% improve. When you translate that into the financial side, it turns into millions we have seen that the ship repair industry where all of a sudden vessels are no longer calling for repair because of the logistics, that you cannot bring over engineers, there is a problem but to put your crew. So 100% market one the same with the tourists industry. Like Valletta cruise terminal and related to that, then you have the ancillaries, the pilots the tugboats, the stevedores. All this has the ripple effect.

Roberta:  I think to tie a little bit to this as well, something that we've been hearing a lot, I think you as well Nadia can relate to this when you when you talk to clients and people that you help, is the first one small businesses who offer in fact services or products to other larger businesses who are experiencing these difficulties that you are mentioning Godwin. Perhaps before all this started happening as well, they used to extend their credit terms beyond the usual 30 days or more because there will be an ongoing relationship and revenue will be flowing anyway. However now that things have obviously changed and these smaller operators are also having problems in recovering what was due to them two or three months ago. 

Godwin:  I can say that this week, we had the first case where a client declared I will not pay. Now, is it genuine? Taking advantage of the situation? The fact is, we are not collecting the money.

Nadia:  It's a sensitive situation. Kenneth have you experienced the same as well, especially Andrew rather than Kenneth? Probably Kenneth with your experience with different companies. I think it's more about relationship building now as well, obviously we all need the money as companies we all need to collect the money that’s due.

Roberta:  And sharing the risk, it's also a matter of sharing the risk sharing the burden and then coming up with common solutions, I suppose finding some kind of balance.

Nadia:  How can we move away from just a financial transaction, because it is a financial transaction, which I understand and I appreciate, however, it's, there are other dimensions.

Andrew:  Financial planning, I think, is part of the planning, this is a time where you, you plan throughout the business, the business life cycle, you plan, you deal with your with your customers, your relationship with your with your, with your suppliers, so basically, what you reap is what you need is what you sow at this point in time, and when we are faced with such a troubled period. I mean, you go back to these relationships, which hopefully you’ve been building through the years, through trusts, through good business and good governance. And, again, you go to suppliers, trying getting, and extending credit terms. And obviously, hopefully, your customers will reciprocate, obviously, the respect and trust which they have in you as a supplier.

I think that this is part of it as well, you know, it's a whole chain of things. And as being as is being said, I mean, it's a whole chain of events. So I mean, no one is an island, I mean, everything that happens, I mean, it impacts from the customer's up to the biggest supplier or producer. 

Nadia:  What are your views Kenneth on this one? It’s a particular situation? 

Kenneth:  Look at undoubtedly in a business as usual environment, relationship management always plays an important role in the way that you treat customers, right? I mean, when you have long standing customers who always had no defaults whatsoever, payments received in an orderly manner, you would normally you know, if you were asked for an extension, you would easily grab that right in a business as usual environment. 

However, this is impacting all customers like so intrinsically, we are really chasing each other someone is chasing for receivables. So far as payables are concerned, right, but if you have a strong business gross coming in, you wouldn't normally mind for a strong customer for a long standing customer to extend the terms, you wouldn’t bat an eyelid

Now, the environment is totally different, where you have your own obligations, maybe, you know, your traditional financing arrangements have taken a twist, you know, in a way that you really need to receive all the receivables that are due in a timely manner. So you know, it's not a business as usual environment, it's an environment that is impacting the revenues of all businesses, some truly more than others, some impacted more than others, because there are some strong operators that have had financial planning at their core. So you know, they're very strongly reserved, and they can withstand, you know, shocks and the maybe short to medium term. There are others undoubtedly, that will hit the wall that will go bankrupt. And I think the challenge from a banking perspective is that, you know, it's ironic in a way when I look at this, because if you look at what happened in the financial crisis, you know, 10-12 years ago, the banks were culprits of the financial crisis. And now, you know, there's being dubbed as potential saviours of, of economies, right, because clearly banks are being resorted to, to support clients. And nonetheless, one must bear in mind that, you know, with these last 12 years, the regulatory framework has changed markedly. 

So banks have regulatory obligations, regulatory capital requirements, and albeit we're seeing a degree of flexibility. You know, obviously regulators are very vigilant on the banks because you can, banks are an even in Malta if you look at their balance sheets, very well capitalized, and they are in a position to finance institutions. But ultimately, if you finance institutions or entities, and they hit the wall, you know, these are red dents on the books of the banks, which went then trigger capital requirements. So it's a vicious circle. So banks have to be to be very wary and very cautious when they're lending their financing companies, you know, taking more of a sort of, you know, short to medium term view that, you know, this is over the next 12 to 18 months, that these companies will gradually will gradually recover, and will not end up being a problem for the banks. So it is a degree a catch 22 situation. And it is unfortunate that, you know, one has to be selective, you know, which companies to support.

Roberta:  Which I think touching upon what you just said, Kenneth, we know that most of the businesses and small businesses 1000’s are micro businesses. To what extent would these kind of businesses have contingency funds? Or is it a common practice that they will have cash reserves to withstand these shocks? As you said?

Kenneth:  I like to think yes, but the reality if one were to look at the financials of these companies, I think their financial planning lacks the standards that one expects of..

Roberta:  Because those are the bulk of our economy at the end of the day. 

Kenneth:  Exactly, absolutely. Those entities and small enterprises that were [unintelligible] used daily revenue to pay off debts to VAT, you know, those will unfortunately, collapsed. I think, however, you know, when you try to find a solution to problems, but I think that has to be the mind-set of any entrepreneur or business, I think that this environment has created what I call “coorpetition”, so cooperation between competitors, right? So, so far, competitors have been very vigilant to protect their market to protect their customers, you know, but clearly, I think there is scope for competitors to come together. And I think consultancy firms and audit firms that know the affairs of their clients very well, you know, these intermediaries, these gatekeepers needs to come together and try to bring a match, you know, their clients that are having similar problems together, because there are there is scope for mergers, and there is scope for acquisitions of businesses, you know, to the benefit of both entities. And I expect to see more of this in the coming months. 

Nadia:  And I agree with you completely. Because it makes a lot of sense, especially when you have resources, and they are finite resources, and that the other on the other hand, when the demand is difficult, too challenging to create, we're waiting for the demands to be created, that makes sense for companies to join forces together rather than compete with one another. As you said, I think there is enough skill set in terms of consultancy firms, business advisors, businesses, which come together to support the small and micro that Roberta mentioned, to take to the next level, especially if these companies would like to go through this transition

Kenneth:  Maybe from a, from a legal architecture point of view and maybe from a fiscal side as well, this is what you know, the national government should be looking at to facilitating the ability for companies to get together now more than ever, right, because it means the survival of business which will be beneficial for economic growth going forward, it will safeguard employment. So, there are a lot of benefits to be had. So, what may be relaxing, even the fiscal treatment of such measures or such positions, you know, may make it more palatable for these business owners to really sit around the table and say, you know, what, I want to safeguard all this value that I have put into my business over these years, I don't have to do it. So, you know, let me consider this, because ultimately, you know, I will get something out of this rather than nothing.

Godwin:  On this, this point that, Roberta made, I think there are other two issues which are crucial at this stage. One is the heavy investment that has been going on into property as a balance sheet item. And we very well know that that is not turning into liquidity when you require that. So I think you know, especially the banks are going to be faced a lot with this issue. The other from a business perspective, there is need, now how at a government level you go about doing it there are various tools, but looking at other countries and the way they are managing, there is definitely the need of actual cash liquidity injection into the economy.

Now, what they do that by telling people stay at home, and they will pay you for selling, the businesses keep running, and I show they're part of it. The financial planning, there is no magic formula, if your income is not covering your fixed costs, it's a question of how long you can sustain things here. But look that from an entrepreneur point of view and look at from a social point of view, of course, there are the different paths at some stage, these two have to come together. Because it is it is one country, one people. He is an employee, but he's also a taxpayer, and he's a family person. So whichever way we go about it, we come how we're going to finance ourselves through this difficult period. 

And I very much believe that at some stage, I think the message from Europe from the European Union came out very clearly this morning, where they're saying that, you know, it's the European Union has to pump in trillions. For the non-problems, let alone for the problems that we are still not aware of. So I think even a month now, we have to start discussing government's social partners, financial institutions, as to how is the country going to finance its way out of this issue.

At a micro level, you have a plethora of situations from the sole trader to the company, which is employing a 1000 people on a local level. But the common denominator, all this is going to be how to sustain, you know, the flow of business, to sustain the people who are earning their livelihood, from the business. And I think there…

Nadia:  I think there's the need from now, but where to start, not only, I think we had this discussion beforehand, even with Kenneth, Andrew and yourself, that companies take the lead as well. And in the spirit of collaboration of companies collaborating, all together, even thinking a little bit outside the box, being a little bit more creative on how they can themselves sustain their business together with the collaborators or with their partners. 

I think the government support is paramount. And it's very important. And I think we've seen that it has sustained and it's already helping companies to stay afloat. But yet again, I don't think that companies should over depend on such as at least my opinion on the schemes and the government schemes, because at the end of the day, it's about how a company can sustain its own, on its own and to be able to, to take it through together with the employees or not. Sustaining as well unemployment and leading that to under employment, perhaps and having a number of people that are not actively productive within the economy. I don't think it's also a solution. So I think there are different debates which you are going to see that are going to happen, especially locally in the coming weeks. 

Godwin:  And I am a firm believer in the residence of the Maltese character. Our economic history is made up of Malta partaking the advantage of an opportunity, be it a neighbouring country, which is facing problems or be it a situation the Mediterranean, we always managed to translate these into business opportunities. And I am sure that, however, and this is unprecedented.

So I have absolutely no hesitation to believe, and believe firmly that the Maltese character will come out as it has done and in successive historical situations to overcome. How do we bridge that gap to avoid the economy going into a deep recession?

I think that is once again, we're talking on our level that we cannot see two meters away to do our financial planning. Imagine at the government level, how many more unknowns, there are to planning. But I believe that, to come to the subject under discussion, I think some form of clarity in direction or rules, as we were mentioning, for example, the issue of credit. Now, are we going to resort to the traditional way of collecting your debts? Or, you know, there is agreement at whatever level that there has to be a period of tolerance? And what is the cost of this period of tolerance, for example? So, yes, it has to be industry driven, but the public sector must give direction and support, by way of adjusting the economic tools. Because the traditional tools we're used to, are not the tools required for the present situation. This is completely uncharted. 

Taking an example from the maritime industry, we have seen these last weeks, something which happened in the 70s, at the time of the oil crisis, where ships are not coming through the Mediterranean, but will sail around the cape. So, going all the way down to Africa, and coming up again, to save money from crossing to the Suez Canal, the Mediterranean and proceeding to Europe. So, industries are looking out for different solutions. 

Nadia:  And opportunities. Yes, I think this brings us to something very close to your subject Roberta, innovation, business models etc

Roberta:  In fact, Godwin also mentioned resilience a few minutes ago, and that also requires a degree of innovation. No? And from my experience, at least working with businesses, particularly smaller businesses, again, very few of them would have like a line item in their budgets, which they reserved for research and innovation. So now that we're experiencing this, would you think that maybe this will become more of a common practice to make sure that we are actually investing in research and innovation on an ongoing basis as a tool to give us resilience and adaptability if something had to happen? I don't know who might want to react to this. Maybe Andrew? 

Andrew:  I think after this, the mind-sets will obviously change? I mean, I think and again, it's the mind-set rather than having a specific line item on the on the budget or on the P&L (Profit and Loss) I think it will do it will be a lesson to take home after all this that it all goes back to planning maybe not all of it’s financial, but there is a lot of other planning which to do when it comes to business continuity when it comes to dividend policy when it comes to risk assessment of your company and risk assessment of your company. And surely, I mean, the business model, the business model will change. I mean, the way we do we have done business a month ago, will not be the same in six months’ time. So at the beginning of an investment of understanding and I think the reason in our case, I mean, our biggest asset is always the employees. So the investment. I mean, I think investing, investing on the employees have to be part of the company when it comes to identifying it and being creative and thinking outside of the box of how to operate in the future.

Nadia:  I’m with you on this one Andrew, I think the employees should be part of the process part of the transition because at the end of the day, they're part of the organisation, you can’t go through change without them.

Andrew:  Most of the most cases, I mean, up to now, I mean, the training and the training we give to our employees or is knowledge based, right? I mean, it's you go into a training session, you learn, like a number of points, and then you hopefully, you will apply them. I think moving forward, and that is where they just got a research budget. You can call it anything, really. But it's investing on the creative thinking on how to reap the benefit of, of really just creative thinking. And it comes from all departments within the company. So I guess Yes, I mean, that there has to be a budget, like the typical IT budget review, remotely, but more and more importantly, it's just it's just a mind-set shift moving forward. And that is, it goes beyond the budget preparation, because it goes to the shareholders level, board level because I mean, what is said there, the mind-set trickles down to the organisation.

Roberta:  Affects the actual culture and personality of the business. Right? 

Andrew:  Correct. Perfect.

Nadia:  Kenneth you've seen a lot of changes as well on this point and witnessed a number of changes even in terms of how they relate with the banks and how they actually visit the bank. Or maybe there was a cohort, particular cohort that actually was more inclined to visit the bank rather than go to ATM and contactless payments. How do you, you’re very much, I think, on the on the side that we have to learn lessons, and to have to take them away with us and learn from something from this transition?

Kenneth:  Yes, like as always this as you were saying, creativity and innovation will always be the hallmark of successful companies. And, you know, they should form a strategic component of any strategic brand of any organization. It is ironic in the banking world, really, and truly what brought about the shift towards channels that I think many financial institutions were really keen to see to come to fruition. 

So, you know, traditionally, we are still a cash based and check based driven economy. That is very unfortunate in this day and age, despite the significant investment in technology and government level at a government level. And as you know, we ranked quite high first, for the e-government technology. You know, we've seen this shift, I mean, the drive towards managing this contagion, and to decrease the footfall of clients calling into bank branches, as obviously, instilled a number of [unintelligible] play a number of policies, such For example, we launched policies [unintelligible]… Central Bank a few days later, that customers that wish to go to a branch would need to withdraw a minimum of 500 euros or otherwise, and they want to withdraw less than that they need to go to an ATM. And as a result of that, we saw a shift towards other means of payment. So we saw people increasingly use their cards, and their mobile payment apps to pay for goods and services. And we saw an increased demand for debit cards, because you'd be surprised how many clients we still have, collectively as banks that have a bank account, but don't use their debit cards for, you know, traditional payments of goods and services. 

And some argue that the younger generations will not adapt to this reality. And I always shoot this down by looking at countries like the Scandinavians, where you know, checks don't exist at all. And if you go with cash in a shop, they frown on you, right? So I don't think this is a generational issue, or this is restricted solely for the millennials. But it is a culture change that we need. 

We're pleased to see these shifts towards alternative channels. You know, my point on this, I think, this pandemic will have the number of learning outcomes. And I know, we discussed this in preparation for this for this event. And I think we need to literally take the opportunity to hard code, these changes into our business models, and even into our economic model, which as we know, created some pains along the way, in the housing and the environmental, right. And we know the for example, the benefits that teleworking has had on the environment, right? You go out you can sense the fresh air, right, which is markedly different than what we experienced three months ago. Right? 

So why don't we look at this and take e this as an opportunity to hard code these changes into our economic Model going forward, right. And I think it's the right time at national level, with all the economic factors, to come together and literally see how we can strengthen our value proposition as a country by taking these changes and seeing what are the catalysts that will increase the take-up of these changes, right. So we, you know, from any ESG perspective, you know, we contribute value, I think it's opportunity, you know, to be creative, to be innovative, and to hard code, these positive outcomes into our economic and business models.

Nadia:  And this transition is long enough, Kenneth, to give us the opportunity to do that. We're already two months in, and we still have a few more weeks, or months. But let's focus on weeks for now. Maybe Godwin would like to offer views on this one?

Godwin:  I completely agree with the observation made by Roberta regarding research and innovation, I would just add to that training, because they go very much together. I think one big challenge you have when it comes to management, the idea of extreme specialization, as we have been used to, is being very seriously challenged by the events, the current events, where you need people who are more flexible, and who are prepared to adjust. And we see this on a day to day basis, you have very valid people who are doing very valid work, but are falling out because they cannot adapt to the changing situation. And I think this should guide us for the future, that our management training size and skills have to depart from, you know, I am specialized to serve to sell or promote this service to a style where I have to understand what the client requires and fit the services to what the client requires. 

The phenomena which has hit Malta, these weeks is the home delivery. Now, people are tripping over each other to do delivery to your home. It saves a lot of traffic, by the way and a lot of pollution and time. We have more time on our hands, because we're wasting less and more time from giving up or whatever. And having said that, I don't think that any business can really survive, unless business development and innovation is within the DNA of the organization. I don't think that there is…

Nadia:  I've witnessed as well in the shift from specialists to generalists. And in terms of management teams, I think most companies I deal with, especially even CEOs that are kind of struggling, the ones that are that are at within organizations that are more focused on growth rather than restructuring, for instance. Because it's a completely different set of skills, particularly, and the fact that we don't adapt, if we're not flexible as individuals or as employees, sort of as organizations, I think yes, those people who suffer so completely. I think that's a very interesting lesson and interesting comments, I must say. So thank you for sharing that. So I think Roberta…

Godwin:  Sorry, to carry it on at a national level because Malta has to realize that it cannot anymore rely on three particular products be they tourism services or… I think we have to be more creative as to how to attract investment to Malta and to be less reliant on specific sectors.

Nadia:  And less on dependency that's important. Roberta would you like to close off?

Roberta:  Yes, I think it was an extremely interesting discussion coming from someone who does not like numbers very much. I think it's a very interesting observation. I don't know if our guests can relate to this. I think, for me, at least, the key takeaway is that financial planning is essentially just translating the vision and the ambition of the company into figures. Perhaps the way we used to look at our figures in terms of revenue coming in and costs being addressed is not perhaps the way we have to carry on looking at our financial structure going forward. And I think it's beautiful how human elements tie into something that appears to be, you know, so, so cold as financial planning, I don't know about our guests can relate.

Nadia:  Indeed, but even myself, I think the main takeaway has been definitely balancing out investment and cash reserves for companies. I think that something which diligently each and every company has to think not only through pandemics or crisis, but even for the long term. We've discussed a lot, let's take the opportunity even to collaborate together as a business, not only with our competitors, let's create new things. Let's take this opportunity as a community to help each other to maybe some industries are suffering more than others. But we have enough talent, we have enough skills on the island, where we can cooperate and take the businesses to another level and transition. So I take the opportunity to thank our guests Andrew, Kenneth and Godwin. 

Thank you for very much for being with us and sharing your insight on the subject. Thank you, Roberta. And thank you, and we look forward to our next session next week, same time on Thursday 30th. Thank you very much. Thank you.

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