Going Concern – are you asking the critical questions?
Shipping is a service industry dependent on world trade flows to create the demand for its services. Despite the shipping industry being very resilient on the whole, COVID-19 has impacted different aspects of the shipping industry, including the ongoing restriction of free movement of seafarers. For example, much of the cruise sector remains suspended and the offshore sector continues to be effected by a lack of capex spending by the oil majors. Meanwhile the mainstream shipping markets remain volatile and access to ship financing remains challenging for new vessels or for routine refinancing.
At present, the unanswered question continues to be what will be the longer-term impact of COVID-19 on world trade, commodity flows and our clients. This means it is more important than ever for shipping companies to prepare comprehensive integrated financial projections, including cash flow forecasts, which can provide management with sufficient information to make timely and informed business decisions.
In this context, the assessment of Going Concern is key. However, Going Concern assessments are not simple to do. There are lots of moving parts, judgments and estimates, which can change and lead to increased risk that the board’s conclusions on Going Concern do not pan out as expected.
As a Non-Executive Director (‘NED’), getting close to Going Concern assessments and the judgments taken by Management teams is critical to ensuring the inherent risk around Going Concern assessment is reduced.
In this video, BDO specialists from across audit, debt advisory and restructuring provide guidance to NEDs on what to ask, when to ask, as well as some key lessons learnt from experience to help inform the challenge areas NEDs can bring to the assessment over going concern. Although the guidance is directed to NEDs, the video also contains useful insights for Board Directors and Management teams.
CONTACTMICHAEL SIMMS Partner, Head of ShippingCONTACT MICHAEL
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CONTACTMICHAEL SIMMS