Coronavirus Insolvency: Monitor the risks

Be aware of the increased risk of default by debtors. With the spread of the virus, there is a heightened risk of financial difficulties leading to default or potentially bankruptcies, particularly in sectors more vulnerable to the virus such as maritime and air transport, retail, tourism, insurance and entertainment.


Monitor the revenue and solvency risks of borrowers. Lenders should closely monitor via contractual reporting requirements the ability of their borrowers to perform their obligations and the impact this could have on the borrower's revenue and solvency risk.
Perform due diligence of the security packages for lending deals. Lenders should perform due diligence on their security packages for lending deals and make sure all security interests are properly perfected under relevant local laws and prepare a short-form summary of all guarantees and security interests in place and the available enforcement options.


Monitor cash flow. Borrowers should monitor the cash flow of their business on a regular basis in order to mitigate any financial difficulties and insolvency risks and plan any cure period they could benefit from under their existing financing arrangements.