Essay:

1 In your opinion, what will be the impact of Enhanced Community Quarantine

on Investment banking activities like: (10 pts.)

a. Loan commitments

Loan commitments are the banking institutions’ promise to fund or finance

future credit which the borrowers demand. Banks experience unused
commitments-- credits which have not yet been used, just like what its name
implies. Such commitments cause drawdowns for banks during a crisis, just like
what we are experiencing now due to the outbreak of COVID-19. Banks fund the
drawdowns they experience, which may result in vulnerability of banks to
unexpected drawdowns if they experience a high level of the outstanding unused
commitment. This will cause them to raise loan rates, which will reduce its loan
supply as a result.

b. Investment Securities

Investment Securities are tradable financial assets that are purchased by

financial services firms that are being held for investments. They are held by
banks for their portfolios which become the source of their income. Given the
Enhance Community Quarantine (ECQ) that we are facing right now, I think banks
wouldn’t be able to profit a lot from such instruments because it will be difficult to
trade and there won’t be a lot of available securities in the market. This is because
this ECQ caused companies to slow down its operations, also resulting in reduced
profitability, which is why they may not be able to provide and sell investment
securities for the banking institutions to use for their advantage-- to profit, and to
be more liquid.

c. Working capital

Working capital shows the ability of a firm to meet its short-term obligations
and it generally includes trade receivables and payables, and inventories. At
times of financial crisis or events that greatly affect financial matters, working
capital increases as a result. This is because companies slow down its
operations, or sometimes pause, which results in a decline in their sales; and
when there is a reduction in sales, there becomes a surplus in inventories.
There’s also an increase in trade receivables because customers start to
experience economic distress especially now during the ECQ, and some workers
are forced to temporarily stop working, for their safety; this results to people
having no source of income which cause them to have debts because they don’t
have enough money to buy their needs especially to survive this pandemic. Since
there is a decrease in sales, companies need not to buy or purchase lots of goods
anymore, resulting in the decrease in trade payables.

2. As an Insurance company, what will be a good approach that you can

contribute to the country and your clients, considering the possible economic
crisis during and after the ECQ? Explain clearly. (5 pts.)

It is a known fact that insurance companies are very beneficial to

companies especially during an economic stress or when there are certain
crises that surely affect the economy of a country, since they help firms in
managing their risks and provide cushions when they experience losses. I think
they are the companies which make sure that commercial companies and
other types of firms have something to fall back on at times when they hit the
bottom. However, they are also vulnerable to the volatile financial markets,
given that they have a bigger group of investors. With the world’s current
situation, with the outbreak of the coronavirus, insurance companies are
expected to be helpful. With this, I think, as an insurance company, in order to
contribute to the country and clients, a good step to consider is to effectively
communicate with them and not tell them the basic facts that they already
know. Instead, tell them the actions that we will do as the insurance company,
and how such actions will affect them. We should prepare and be ready to
confirm our emergency communication. This will include how we will be able to
let the employees feel that they are still guided and protected by the company
and explain the certain changes that may occur in our business operations.
When it comes to the customers, we would assure them that we will be able to
stand up for them because we know how much they will be needing us.