The impact of the COVID-19 emergency acts on several fronts: exports, imports, limitation of transport and movement of people, limitation of production activities etc. and has wide and widespread impacts on all economic activities.


It is a phenomenon that, due to its characteristics, speed of occurrence, extent and violence of its effects, has no equal in recent history.


In moments of very strong shocks, such as the one we are experiencing, the information underlying the assessments of creditworthiness (e.g. historical balance sheet) cannot reflect the effects of a crisis that has manifested itself with this violence, with this intensity and with this speed.


The CGS is the summary indicator that Cerved adopts to evaluate the subjects who have commercial and financial obligations. In this situation, the score will progressively incorporate in the coming weeks and months, starting from the Payline data, the changes in the reliability profile deriving from the changed context.


To estimate and anticipate to date the extent of the impact of the COVID-19 emergency, Cerved has developed an original forward looking approach, which has seen the implementation of wide-ranging tools and skills: econometric forecasting models, statistical analysis techniques data, skills and knowledge in sector and company analysis.


The assessments on the risk profile of companies therefore incorporate two elements:


  • The forecasts on the trend of revenues and the riskiness of the sector / geographical area in which the company operates, based on the impact of the emergency linked to the spread of Coronavirus and the measures progressively implemented by the Italian government and the governments of the countries touched by the virus.
  • The current assessment of the company's risk profile according to the CGS - Cerved Group Score, in addition to some specific characteristics of the company (eg operational rigidity / flexibility, size, initial financial conditions). In fact, the analyzes conducted on the data relating to the negative phases of the cycle show that, with the same external conditions, financially more solid and structurally more flexible firms are less conditioned than more fragile firms characterized by a more rigid cost structure.


We have developed two scenarios, according to assumptions considered reasonable at the moment:


CAREFUL SCENARIO

EXTREME SCENARIO

Gradual reopening of activities starting from May.


Very different recovery path for the different sectors.


Still slow but steady recovery. The precautionary, control and contagion monitoring measures avoid the need for further lockdown periods.


Full support of monetary and economic policy.


World economy slowdown.


Marked recovery in 2021, but at overall lower levels than in 2019.

Gradual reopening of activities from May, but with subsequent lockdown periods, even if not so "severe".


Very different recovery path for the different sectors.


Slow and erratic recovery.


Full support of monetary and economic policy.


Strong slowdown in the world economy.


Recovery in 2021, but at lower levels than in 2019.


Italy's structural weaknesses and the weakness of world demand weigh heavily.


On the basis of these assumptions, two different macroeconomic scenarios have been developed which provide a forecast of the main economic and financial variables.


Through the application of our econometric models, we have therefore estimated the impact of the two potential scenarios on sectors / geographic areas in terms of reduced revenues and increased risk of insolvency. These general trends were then combined with the current reliability profile of the company (current CGS) and some specific characteristics of the company, in order to predict the overall effect on the company's risk profile and on the level of attention suggested. 


It is necessary to underline that our estimates are not specifically aimed at foreseeing any temporary and immediate liquidity problems of companies related to the closure / strong slowdown of production activities, but are aimed at predicting the company's ability to meet the commitments undertaken in a broader time perspective.


The assumptions underlying the two scenarios, and the subsequent assumptions, were formulated trying to take into account all the factors of a systemic and specific nature on the company on which Cerved has developed and tested its valuation models over the years. However, in a context such as the current one, our hypotheses may not immediately incorporate all the elements that will manifest themselves in the coming days / weeks (for example, a further closure of production activities). 

Similarly, the assumptions underlying the macroeconomic scenarios that we have drawn may not fully incorporate monetary and industrial policy actions that could be implemented in the coming days / weeks to counteract the economic effect on businesses. Finally, our forecasts do not take into account any specific mitigating measures and safeguards that could be adopted by individual companies.


The model chosen guarantees a formalized and self-consistent transmission mechanism and will therefore be updated when it is appropriate to review the scenario hypotheses, in light of the evolution of the emergency.

 

Disclaimer

As well as any other evaluation data resulting from the re-elaboration of public or publicly accessible data, the projections represented in the Covid-19 impact analysis cannot be used as the sole or prevalent basis for making business, commercial, financial, economic and / or credit, which remain, in any case, the exclusive relevance, competence and responsibility of the Customer.