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Coronavirus: A Weekly Update from Teneo – Call Transcript and Recording from 4.9.20

April 9, 2020
By Carsten Nickel, Christian Buss, Kevin Kajiwara & Orson Porter

Bradley A. Connor, M.D., Carsten Nickel, Christian Buss, Orson Porter & Tony Sayegh join Kevin Kajiwara to discuss the latest updates and developments regarding the effect of the coronavirus.


Listen to the Call


Kevin Kajiwara (KK): Welcome everybody to today’s Teneo insights call. I’m Kevin Kajiwara, Co-President of Teneo’s Political Risk Advisory Business and thank you for joining our latest weekly coronavirus-related call to talk about the outbreak itself, as well as the political and economic and corporate impact of all of this.

We will start as usual with an assessment of where we are and an update on the outbreak itself. That conversation will be led by Dr. Bradley Connor. He is a Senior Advisor to Teneo. He is a Clinical Professor of Medicine at the Weill Cornell Medical College and he is also an attending physician at New York Presbyterian Hospital. He is the Founder and the Medical Director of the New York Center for Travel and Tropical Medicine and he is a consultant to the CDC.

We’ll then turn our attention to the latest developments in Washington at both ends of Pennsylvania Avenue. Joining me as usual is Orson Porter, a Senior Managing Director for Teneo and the Head of our Washington office. He leads our government affairs efforts. He was formally the US Director of Government and Public Affairs for Nike and he served in the White House as a Special Assistant to President Bill Clinton.

Also joining me is Tony Sayegh, Managing Director. He joins Teneo Strategy and Consulting following his tenure in the Trump administration where he was Assistant Secretary of the Treasury and he led the Office of Public Affairs for Secretary Steven Mnuchin.

We’re then today going to turn our attention to Europe for a couple of reasons. One, not least of which is that we’re starting to see some countries contemplate how they are going to restart their economies. We focused on this in China last week.

We’re going to talk to my colleague Carsten Nickel today. He’s a Managing Director and one of the Heads of Research of our Political Risk Advisory Business, focusing on the UK, Germany and on the EU institutions and he has been posted with us in Berlin and Brussels and now in London.

And finally, as we’re in earnings season we’re joined by my colleague Christian Buss who’s joining us very early from the West Coast today. He’s a Senior Managing Director and the Head of our Investor Relations practice.

And prior to Teneo he was the Director of Investor Relations for Columbia Sportswear and he had previously been a sell side analyst in that space. At the conclusion of our prepared remarks today there will be time for questions so please think of what you might like to ask these gentlemen and you will be instructed on how to enter the queue at that time.

It’s another day of major headlines both on the virus as well as economically. Global cases yesterday hit 1.5 million and that’s notable in that it’s only less than a week ago that we hit the 1 million mark. Also, another grim statistic will be that the US surpassed Italy today or this week for the country with the most fatalities.

But I would also note that the United States has a population that’s five times the size of Italy. So, if you add up France, Italy, Germany, Spain and the UK where you get roughly closer to the US population, they’ve had a combined 52,000 deaths and the US has had about 15,000.

The other major data point this morning just dropped a moment ago and that’s the latest initial jobless claims number, the third major jobless claims data point since the outbreak really hit the US workforce in force. The number was 6.6 million. And the international labor organization has also now predicted that in the second quarter we will lose 6.7% of working hours globally. That’s the equivalent of 195 million full-time workers.

Stocks are mixed today on the last day of trading before the holiday and other markets are watching the OPEC-Plus and G20 energy and oil ministers meeting to see if there is any agreement reached. There are talks of a 10 to 15 million barrel a day cut. But I would note that demand destruction is and remains at between 25 and 30 million.

The US government is contemplating what it’s next moves are going to be both in terms of dealing with the outbreak, as well as contemplating the restart of the economy and Congress anticipating what a Phase 4 or 5 or more fiscal packages could look like.

China, we focused on last week and we’re going to continue to watch very closely. Xi Jinping today indicated that they are seeing rising pressure from imported cases and he is talking about long-term external uncertainty. They have closed the border with Russia today and while schools are starting to reopen there, large-scale social events remain off-limits. So, China is restarting in fits and starts.

So, let’s turn to our speakers today. And I’d like to start with Dr. Connor and perhaps you can give us an update on where you see things right now and really where you see things going contextualized with the administrations, health officials and its economic advisor trying to develop the criterion for reopening.


Dr. Bradley Connor (BC): Thank you Kevin. So, Kevin mentioned my role with the CDC. I’m the New York City Site Director for GeoSentinel which is the emerging infectious disease network of the US Centers for Disease Control and Prevention and I’m a consultant in their Division of Global Migration and Quarantine. So, we’ve been through this before with SARS and with Ebola, but this is actually unprecedented.

What I’d like to do is give you a little context behind the numbers and discuss the so-called flattening of the curve. I’d also like to discuss an approach to return to business which I think I want to provide at least for the science and medical underpinnings of making decisions about return to work and reopening our population to going back to the workforce.

We made terrible mistakes, not just the US but globally in terms of the response to the pandemic. Our hope is that we’ve learned from some of these mistakes and when we reopen or return to work, we don’t make some of the same mistakes.

So just a few words, by the numbers Kevin mentioned 1.5 million cases now globally. There will be 100,000 deaths by the end of this week. And as Kevin mentioned, 50% of these cases have occurred in the last nine days so this is significant. And when we talk about a trajectory or what we call an epi curve these numbers are significant because they allow us to do some modeling.

In the US now there’s almost 450,000 cases, 15,000 deaths. And this is occurring in 181 countries, so this is a true pandemic. And if we take any comfort in that we realize that we’re not alone, that this is a global problem that needs to be solved not just locally but globally as well.

So, let’s talk about the numbers because these are very significant numbers. We look at the New York numbers for example which I’m very close to and if you look at the number of deaths and the number of cases in New York for example, New York State 150,000 cases, 6000-7000 deaths.

You look at what we call case fatality rate. And the case fatality rates based on these numbers appear very high, over 3% which we don’t believe is really the case. We think that the number of cases is actually probably ten-fold higher than what is being reported because of the large pool of asymptomatic positive patients or mildly symptomatic positive patients.

Our colleagues in France for example, in Paris early on found that the districts in Paris, the arrondissements had the highest rates of COVID-19 hospital admissions, they swabbed schoolchildren who were completely asymptomatic and found in those districts 50% of the schoolchildren were positive for COVID-19. So, this pool of young children positive for the virus is a reservoir of infection.

And until we do adequate testing and do some contact tracing, we’re not going to get a true picture of what the scope of this is. So why hasn’t that been done? Partly because of the lack of availability of point of care, what we call PCR tests, especially in the United States. This is something that would have been very valuable early on in stopping the spread or at least slowing it down.

So, the R0 or the doubling rate, at least from the European data is considered to be almost 3 or 2.79. A lot of this depends on factors involved in the virus itself, the host and community situations. But it also informs us as far as what we need to do as a population to have immunity in order to allow people to return to work.

So, let me discuss that in the context of how we determine that. We know the cases. We know people who get sick. We know the number of deaths.

The number of deaths is something that’s a given. You can’t fudge that number. We know who dies. We don’t know the total number of cases. So, if you look at the ten-fold increase in cases based on projections, case fatality rates are probably under 1%.

But as I said, we know the people who are infected will develop immunity. We don’t know how durable that immunity is and this is something that we’re looking to our colleagues in China and in Europe to help us with. We know that with any infectious disease the body mounts an antibody response and that protects you from reinfection. How long that protection lasts, we don’t know yet.

But we do know that somebody who was infected, and recovers is likely to be okay to go back to work and to go back into the community. And we’re looking at something that we call an immunity passport, something that you can show proof of immunity either by way of having had documented infection or doing an antibody test which is a blood test that shows that you have mounted antibodies if you were asymptomatic or mildly symptomatic.

There’s a version of this being employed in Wuhan right now on your cell phone. If you have a yellow light on the phone, you’re free to do certain activities, a green light you can do anything. We may have something similar to this in the US, but we don’t have the same sort of infrastructure here that would allow enforcement the way they do perhaps in China.

So, the antibody test, what we’re calling immunity passport may be very helpful to allow people to go back to work, to start congregating, to go to shows, to restaurants, etc. And this is something that as soon as we have good antibody testing hopefully will be rolled out.

Let me say a few words about treatment. We are very eager to start clinical trials, and some have already begun with a few different medications. The one that you’ve heard most about is hydroxychloroquine. It was actually our GeoSentinel site in Marseille, that first published data on hydroxychloroquine.

It looks like a very promising medication if started early. This is a medication that is not for someone who is terribly sick. We feel that it helps prevent the virus from going from the upper respiratory airways into the lungs. It prevents binding to what’s called the ACE to cells of the lungs.

So, if you get on board with hydroxychloroquine early there is some evidence that it may actually mitigate the course of the disease. We’re doing a clinical trial at prevention in healthcare workers. There are numerous other trials of hydroxychloroquine either by itself or with azithromycin being rolled out.

Convalescence serum, the serum or blood of people who have recovered as a way to get antibodies and deliver them to a sick person, there are trials ongoing with this. In other diseases convalescence serum has been very effective. Remdesivir, it’s an antiviral intravenous so it’s reserved for people in the hospital and clinical trials are promising.

And also, BCG which is a vaccine that’s given in Europe. It’s not given in the US and elsewhere, but this is used to prevent tuberculosis. There’s some evidence that it may have a beneficial effect on reducing the infection with COVID-19.

So, we’re waiting for the results of these trials. There is some enthusiasm particularly about hydroxychloroquine and perhaps convalescence serum. For the antibody test, as they roll out and as we learn more about the immune response to this virus, we will be able to act on that.

Let me close with something which is a bit of a lie I suppose but in terms of spread to animals, there was a case of coronavirus in a tiger at the Bronx zoo, probably acquired by a zoo handler who was completely asymptomatic. We know that cats and tigers can contract this virus. Dogs apparently do not. So, just by way of saying we’re learning more about transmission of the virus and this is a virus that probably started in the animal kingdom and jumped to humans.

So, there is a lot of work underway in the science of coronavirus COVID-19 and hopefully we’ll see some short-term benefit and certainly long-term benefit from this. I’ll stop here and make myself available for questions. Thank you.


KK: Well one follow-up to what you were just saying, and we’re about to turn now to the political responses in Washington and in Europe. And obviously the balance being that policymakers are walking right now is a real tight rope to mix all my metaphors here. But basically, on the one hand, they’re trying to mitigate the fatalities and the overwhelming of the health system and on the other hand they are now trying to not kill off their economies.

So, we’re seeing the staggered restarts of economies in Asia and possibly now in Europe. As this happens and as we start to contemplate that here in the US as well, what are the things that you’re really watching for, or others in the healthcare field are really watching for or are most concerned about as we contemplate restarting and attempting to not do so prematurely but at the same time to mitigate the long-term effects on the economy?


BC: I think you’ve raised a very good point and part of the problem on the initial response was driven by the same concerns. We don’t want to shut the schools because the parents are going to have to stop working to take care of their kids. I mean this was the rationale in New York when we knew that you needed to shut the schools. Having a sort of schizophrenic approach to this is not going to work. It hasn’t worked so far.

I’m all for mitigating and minimizing the risk to the economy. I think that’s exceedingly important. But at the same time, I think we have to be mindful of the epi curve. And I have to think, we could try some measures as I mentioned before with people who have recovered, with people who are proven to have immunity have a gradual return to work in that way.

But I would caution against opening the doors prematurely. What would happen there is we would begin to see a secondary peak and then we will be back where we were and probably even in a worse position. So, I think this has to be guided by the mathematical modelers, the people who look at number of cases, the flattening of the curve and where that is. And I think, as much as people wonder why do we talk about these numbers so much, it’s really one way to keep our hand on the pulse of this outbreak. Epidemiologists look at epi curves and look at where they’re going.

We’re encouraged by what we’re seeing this week even though 50% of the cases occurred in the last nine days are here in New York. The projections that we made even locally at our hospital are lower than the projections by let’s say 200 bed admissions in the past 24 hours than where we should have been. But we have to watch those numbers very closely and have a very gradual return to the workplace.

And the problem with that is people are going to have a false sense of security, be in denial to some extent. We have to be vigilant as we go through that phase. The mistakes that we made so far we cannot afford to repeat them going forward. So, I think it has to be guided by science not just wishful thinking.


KK: So, I want to turn attention now to what’s happening in Washington. And of course one of the bits of context here in addition to what we have just described as far as the outbreak is concerned and the jobless numbers that just dropped a few minutes ago, you know, the latest polling data suggests that the administration, the approval of the administration’s handling of this has started to decline again. Approval rating for Congress is lower yet again.

Governors on the other hand tend to be doing relatively well in terms of the public’s perception of their handling. Tony, let me start with you as far as the implementation of the Phase 3 fiscal deal is concerned. We’ve now had a week plus of trying to get this underway. We’ve heard varying stories from both the highest level where, you know, some airlines are frustrated by the process and facing bureaucratic hurdles past the deadlines.

I’d really like you to focus as well on the SBA front. The Paycheck Protection Program has gotten a lot of interest obviously but that has also led to bureaucratic problems as well as banks being so caught up in the onerous sort of know your customer rule in a sense that they may be limiting their work with pre-existing customers and the like. What are you hearing and what is your sense of the administration’s handling of this at this point?


Tony Sayegh (TS): Thanks Kevin and good morning everybody. Let’s put this in the perspective of about two weeks ago, two weeks ago tomorrow, Phase 3 passed with overwhelming bipartisan support in Congress which is a tribute to how seriously everybody is taking this moment. A lot of burden in that legislation was placed on the Treasury Department to really create an infrastructure that really had not been prepared for this crisis to do what it was designed to do, which is to flood the market with liquidity.

And the first phase of that was this SBA PayCheck or PayCheck Protection Program of close to $400 billion. Anyone who had dealt with the federal government knows that’s a lot of money and that’s also a lot of money to try to create a vehicle to administer in less than a week. And that was the mandate that was given to Treasury.

It rolled out last Friday with some kinks admittedly. I think they’ll own that as well. But for the most, there was some miscommunication or just maybe lack of agreement initially with some of the private sector lending authorities and the banks on some of the rules. Nonetheless they plowed forward with it.

And look, I think the administration will say it wasn’t perfect but they had no choice and you can’t make perfect the enemy of the good, something you’ve heard often I think from both sides while putting together solutions during this very precarious economic as well as public health time.

So I think what you’re seeing now is, it’s beginning to move a little bit more as it was planned, although there are still admitted kinks, billions of dollars are being sent out through the banks to a lot of the businesses who qualify under 500 employees, who are going to use the money for payroll and operating costs.

There is a renewed and I know Orson will touch on this certainly in discussing what is happening on the Congressional side but there’s a renewed focus that the White House and Republicans certainly want to see another I think quarter trillion dollars added to this Paycheck Protection Program and there are some disagreement as to should it be part of a bigger package or just a standalone. That is a Congressional fight that’s probably about to happen. Nonetheless there is some recognition that more money should be invested into it.

The second part that’s not getting as much attention but that is a massive, massive lending vehicle is the Treasury Fed Lending Authority that is going to have rules I believe releasing guidance this week which is really targeted more toward medium-size businesses. And there is going to be similar criteria. I think you saw in the SBA’s side but again you’re talking now about businesses over 500 employees that are going to be able to qualify for these types of loans and investments.

This all goes toward I think the broader goal of the administration and focus of the administration as you’ve been seeing Kevin and I think has been alluded to already on the call which is the idea of when can you responsibly reopen the American economy? And there’s going to be an announcement today if not this week of another sort of Task Force that’s going to focus on economic recovery chaired by the new White House Chief of Staff Mark Meadows that’s going to have on it all of the economic principles inside the administration as well as I believe some private sector individuals who will help advise a responsible way forward in opening up the American economy and focusing on the American come back after we’ve stabilized the impact this public health crisis has had on the American economy.

You know, you hear various ways they are thinking about it. But the most consistent thing I’ve heard is it’s phased in opening. They’re going to start looking around the world to see some of the best practices and try to model those but the idea of being based on the region of the country, the percentage and ratio of outbreaks and containment and also in assessing specific individual sectors they’re going to start phasing in a reopening of the economy.

And I know that the President certainly would like to see it sooner than later but there is a lot of understanding that you have to continue vigilance and I think he is going to continue to follow the guidance of some of the public health advisors he has with him. But I do think that there is more of an eye toward trying to reopen the economy probably in the next month.

So those are the type of conversations being had in the White House. There are a few other smaller aspects that I still think are important that deserve mention and then I will turn it back to you Kevin. For those of you on the call who were ever concerned or had an eye about the affiliate guidance, so this is basically about companies that private equity firms or venture capital firms are invested in and do they qualify for the SBA loan program? And there had been a lot of ambiguity around that. Initially the answer was no they don’t. But Treasury has cleared up this guidance and said if you have 51% control of your company or control of your board even if you have a minority ownership of your company you still can qualify for these SBA programs.

The last thing I will mention, and this goes toward the reopening of the economy, you saw CDC last night put out guidance for critical workforces and basically this gives the clarity of if you are in a facility where there have been confirmed cases of COVID among your co-workers you still can go work in that facility so long as, you take your temperature and you don’t show fever and that you wear a face mask for two weeks. So, people are believing all of that guidance is moving toward how do we get back to some level of normal functioning in our economy. Thanks Kevin.


KK: So, can I just go back for one moment to you. You talked about this formation of the second Coronavirus Task Force that’s going to be headed up by the new Chief of Staff, Meadows, that is going to be focused more on the economic restart.

And I’m wondering why there is a separate task force, rather than housed? I mean, I know of course that Dr. Fauci on NBC this morning has now indicated that the US fatalities could be as low as 60,000 which is a horrendous number obviously but is a fraction of what some of the earlier projections were. But can you give us a little insight into what you’re hearing out of the White House in terms of this balance, right? And are they putting the economic advisers sort of in competition in a sense for the President’s attention with the scientific advisors by separating these two task forces?


TS: No, in fact I would say it’s actually very responsible for them to bifurcate how they review both issues. And I’ll tell you having run two White House teams on two major issues in my time at both Treasury and the White House, you know, there’s a massive interagency coordination that has to happen. And that’s what you’re seeing with the Coronavirus Task Force marshaling for the public health side.

But on the economic side you have to remember you have Treasury, you have the National Economic Council, you have the Council of Economic Advisers, you have the Office of Management and Budget, you have labor, you have all these departments, commerce that have a role in preparing and planning and architecting the recovery.

So instead of bogging it down in one massive task force it’s smart to bifurcate it, allow those principles to then focus in those workstreams in a separate entity. And then that entity as well, develops larger and gets external input from various market participants, stakeholders, business leaders, people who are understanding what’s happening in the outside “real economy”.

I think if you talk to people in the White House there’s actually a hope that people consider this completely separate from the existing Coronavirus Task Force. They’d like to think of this as being much more forward-looking, focused on the comeback.

You know, Kevin, you started with the president’s approval rating, etc. Look obviously, anyone who knows the president and it’s kind of intuitive. Everybody likes to have good poll numbers.  But I think the White House largely realizes you have to win the war. And you might lose a battle here and a battle there, but you’ve got to win the war. The way you win the war is to make sure the American economy comes back as quickly as possible and they’re putting all the conditions in place to lead to that.


KK: So, given that, let’s move to the other end of Pennsylvania Avenue then Orson. There’s been a lot of talk about what’s going to come next. Speaker Pelosi and Minority Leader Schumer issued a statement, urging Congress to provide additional relief for small businesses and families. 

Tony’s already alluded to the need to kind of reload the Paycheck Protection Program. There’s been so much overwhelming interest in it irrespective of any bureaucratic hurdles to the disbursement of funds. But what are you hearing and what is your thinking right now in terms of what comes next from the congressional side?


Orson Porter (OP): Sure, good evening, good morning, good afternoon to all. I’ll start where I started last week, and I think it’s the most important thing to remember as we do these calls is in D.C. everything is political. And there’s 208 days until these members of Congress are on the ballot and we have a presidential election coming up. So, people are trying to be as bipartisan as they can be in addressing immediate fix. But ultimately every decision in D.C. is made through a political lens.

And politics haven’t stopped even though the virus has continued to take its toll, you still saw yesterday Bernie Sanders drop out of the race which may have been in part to what happened in my home state of Wisconsin watching voters stand in line. I think what you saw in Wisconsin is a pretty good litmus test to what will be debated in the halls of Congress on how to fund the election through potentially ballots or to make it easier for people not to go to the polls, particularly seniors.

Then you’ve also seen activity on postponing the convention. So, Congress is on recess.  Politics is still as lively as ever. Last week Speaker Pelosi indicated that she was going to rollout a stimulus package focused on infrastructure on Friday, rightly, I think. She decided that maybe now is not the time and said that she would support any supplemental measures to address the previous bill.

So, with that McConnell rolled out as Tony alluded to a $251 billion supplemental for the Employee Buyback Program. Following that, Speaker Pelosi and Senator Schumer immediately rolled out that they were supportive of the supplemental but thought that they too should press upon things that their constituents were pushing for through the emergency lens such as, additional funds for hospitals, additional funds for state and local governments, additional funds for food stamp recipients and a more dedicated program to minority businesses that have been impacted in a lot of the target communities.

So, their package along with the $251 billion almost doubles. Both sides had hoped to move on a potential piece of legislation in the Senate today. I know Senator McConnell and Schumer and Treasury Secretary Mnuchin have been meeting throughout the evening and this morning trying to reach a compromise. Hopefully they will.

Nancy Pelosi has come out fairly strong this morning saying that if the current bill does not address some of or if not all of the provisions they would like to add, there’s no way that she could get this through Congress through a voice vote. And there would be a high probability that, people would probably reject it as is and you know, it may be stalled.

So, all that to say is I think, you know, look for a compromise to be reached in order for Congress to move this through. The thing I think both sides are trying to do is to keep their members home and to make this pill as easy to swallow as possible. If members come in the harder it gets, the more partisan discussion is which I think will kind of take over the next phase of the Phase 5 discussions.

So, if Speaker Pelosi, Schumer, McConnell and the administration is unable to reach a compromise today, it may go into the weekend. I doubt it.  But look for some kind of announcement by mid-afternoon.

I think all this is kind of pointing to how hard this is for members to pass these $250 billion or half a trillion-dollar packages without congressional debate. How hard it is for these political leaders to rally their members to be supportive and not be able to come in to voice a vote on it.  And then, Congress is supposed to return in a couple weeks. The news in D.C. is the pandemic is heading towards the D.C. area within the next week. And it should reach its peak about when Congress is supposed to return.

So, there’s a lot of discussion on even when the recess is over, members will be able to return.  And more importantly will have the ability to have an earnest debate on the next stimulus package. So, as Tony alluded to, the shifting discussions in D.C. will be the upcoming package. How do you add some of the things that were discussed in the infrastructure bill into the next wave? Potentially you’ll see a lot of talk on expanding support for easy to build items, like technology that doesn’t necessarily need state bonds to offset.

And then I also think, the hot political discussion will be what comes out of the taskforce. A lot of governors of course will push back on when do you restart the economy. You know, this discussion will not be limited to the beltway. A lot of state and local and congressional leaders will have a strongpoint view on it.

So, those will be fought through the airwaves. But it will be very interesting to see what happens today on how we reach a compromise. I think they all agree that this supplemental needs to be passed. But I think it really forces Congress which is a positive thing to roll up their sleeves to find compromise and provide solutions to people who need them most.


KK: Yes, thanks Orson. I want to turn our attention here a little bit to Europe because, it’s easy listening to all the detail that Orson and Tony have gone through to get very unnecessarily focused on the U.S. But Europe has really seen obviously the brunt of this outbreak. Certainly, in terms of the fatalities as we’ve spoken about earlier.

And clearly we’ve seen a bit of everything in Europe from overwhelmed healthcare systems in Italy and Spain to countries that look like they got ahead of this pretty well in Germany to countries that aren’t really doing much of anything at all relatively speaking, like, Sweden. We’ve got a prime minister who is in the intensive care unit in the United Kingdom.

Carsten, tell us what’s going on in Europe and particularly I would like you to focus if you could, I know it’s a small market but Austria as well as I think Denmark and Norway starting to talk about their economic restarts. And what that actually really means. It certainly doesn’t appear to be an all-out green light. 

So, what are you seeing and what are we looking for and how would you characterize the overall kind of response? At the moment the European Union seems like it’s a bunch of countries that just happen to be connected with one central bank. But other than that, are operating in a pretty desperate manner.


Carsten Nickel (CN): Yes Kevin, I think that’s a fair assessment overall unfortunately. But the Austrian case and the question of the lockdown exit I think that’s definitely a very interesting factor to look at right now given where we are here in Europe.

We have Austria, we have Denmark, Norway, the Czech Republic as well which we see under this headline of, you know, restrictive measures coming to an end. But if you look at the substance of that I think that gives you a better idea of the fact that this is a very gradual process that will probably take months and months.

So, if you look at Austria for instance, exiting the lockdown means an extended ban on public events that takes you through to the end of June for instance. It means new requirements such as the need to wear face masks if you want to use public transport. And only under that condition the government has said perhaps we will be at the point in mid-April where we can allow smaller shops to reopen again with social distancing measures still in place, i.e. the number of people who will be allowed into those shops and so on extremely limited.

To your point regarding overall European coordination, the Commission in Brussels is always very keen on that. And I think it was a very telling incident a couple of days ago that the Commission wants to go ahead with a roadmap plan towards exiting lockdown measures across Europe.

And within a couple of hours of the news coming out you had several member state’s capitols calling up Brussels and telling them you’re not going to publish that, we will keep this under national control and we certainly don’t want to send that signal to our home populations right now that, you know, a real exit from the lockdown is ahead. So, there’s going to be a very gradual process.

Maybe an interesting question that clients have raised and that I think has already been raised on this call today is, how political is this, how ideological is this, what drives government decision making? And I think if you look at three of those countries that have moved ahead - Austria, Czech Republic, Denmark - you see that in terms of government composition, you have a Center Right government together with the Greens in Austria. Rightist Populous in power in the Czech Republic and a Social Democratic minority government in Denmark.

So, you see all sorts of political parties in power who overall however end up choosing a very gradual exit from those restrictive measures. So, I think that is a positive sign because it suggests that across the Baltics governments, they are listening to the experts and are taking a very careful approach.

But I think at the same time it’s important to highlight that this does not mean that no politics is involved. I think that the politics that were mentioned here going forward over the next couple of months is the politics of institutional capability and institutional capacity. So not so much in terms of immediate crisis response, you know, how many ICU beds can you add, do you have an Army or a National Guard that you can use that can help, how long does it take you to construct a makeshift hospital? All these immediate crisis measures but more these kinds of longer-term questions. Some of these aspects have already been mentioned on the call. You know, what is your ability to roll out a testing system for a prolonged period of time? What is your ability to provide something like, contact tracing with all the difficult political questions that this obviously raises in Europe where there is a need for privacy and supervision and so on? What about the provision of protective equipment, perhaps your ability to manufacture that at home?

So, all of these, the capability to provide for this, those are deeply political questions. And I think what we see is that those countries who are moving ahead with this very careful exit strategy right now, those are countries that have been extremely strict in the beginning. And that across the board perhaps do have the political capacity that makes them so confident that they do think that they have this capacity for these longer-term monetary tools and so on going forward. We certainly don’t have this in place everywhere in Europe. And I think that institutional capacity, the politics behind that will be a huge differentiating factor over the coming months.


KK: I just wanted to turn for a moment to the United Kingdom where Prime Minister Johnson remains in the ICU. And I know that they’ve got some significant decisions upcoming with regards to the state of lockdown in the UK, etc. Is the decision-making ability of the Cabinet compromised at all with the Prime Minister being essentially out of commission or how does that work?


CN: I think that the key point to look at here is the fact that compared to some of these other countries, for instance Austria, the UK still seems to be at a different point in time regarding the outbreak of the disease.

And I think that realistically limits the options that are in fact and really available to political decision makers. So politically it’s obviously a complicated situation especially under the British Constitution where you don’t have, you know, like, in the American case a vice president who could take over. That is not so clearly regulated under the constitution here.

But the reality is that the decision whether to extend the lockdown comes up between Monday and Thursday at the latest next week. I think given the numbers we’re still seeing here in the UK, the problems that we’ve seen also with loaning out some of these testing capacities and so on, I think realistically there’s no alternative to extending that lockdown for now.

So, to me the question would be more politically charged, more politically interesting and problematic in a situation where you’re actually facing real alternatives. But unfortunately, it doesn’t seem that the UK will reach that point within the next couple of days.


KK: So, in a few minutes we’re going to get to peoples’ questions. But I want to get to where the rubber really hits the road now for, you know, our clients which is how corporations tactically and strategically address what they are dealing with. And Christian thank you again for joining us from the West Coast. I could have let you sleep in for another half hour, I guess.

You know we’re in earnings season here in very special circumstances obviously. So, you know, in your view and in how you’re advising clients, what should investor relations teams be considering here in terms of transparency and messaging, in terms of preparation and the format for their earnings calls. And I think maybe extremely importantly, what are big risk factors that you’re thinking they should look to avoid this earnings season?


Christian Buss (CB): Yes, thanks Kevin. The most important consideration is really the scope of what constitutes relevant communication is larger today than it has ever been. Messaging for earnings will need to consider a broader range of stakeholder groups than ever before.

Customers and the public at large are looking to companies to provide guidance. Employees need reassurance. Government officials are looking at closely at how companies are responding to this crisis. Investors and debtholders need to be considered. Partners within the organization and partner organizations that companies are working with need to be considered.

This means bringing in government affairs teams, human resources, treasury, ESG teams, sales leaders early in the earnings creation process to ensure that the right information is brought to the forefront. This is going to play as a unique pressure on IR teams and senior leadership who will have to find new ways to build consensus internally to ensure that these groups are considered and addressed in an efficient way on time constrained earnings calls.

Considering messaging and priorities more broadly is not just important for the stakeholder groups it’s also important because large institutional investors, ratings agencies and the SEC are looking beyond the financials this quarter. BlackRock recently commented that it would not be easing up on its sustainability priority this proxy season.

A group of over 200 institutional investors published a set of expectations of all companies during the crisis including fair treatment of employees, limits on executive compensation. And Glass Lewis has come out and said that all government issues are going to be impacted and is saying that there is no better way to observe the effectiveness of governance than in a crisis.

Now when it comes to investors and debtholders, what I would say is that uncertainty is the single impediment to investment in the current environment. It is skewing investment decisions.  It is leading to dislocation across debt and equity markets.

To address that, demonstrating a commitment to transparency throughout this crisis and ensuring regular and consistent engagement with investors even when the solutions are still unknown will be critical to stabilizing markets and supporting valuation in the weeks ahead.

As plans develop, we think investor relations teams need to consider implications for investor engagement. And whether stepped up IR teams or executive engagement is warranted when the impulse may be to restrict and hold back on engagement.

In many cases we think outreach through virtual equity conferences, special calls or NBRs may prove advantageous. Holding modeling calls following an earnings call may be appropriate.  Where we’ve seen these types of engagements already, they’ve been well received by the investment community even in challenged industries.

Ultimately, we think creating stability in markets will really require a comprehensive program across industries and companies to reassure the investment community and the public with concise messaging focused on three key areas of concern. First supply and demand. Investors are unsure as to what the underlying demand environment and the supply environment look like today. Not to mention what it will look like in 4, 8 or 12 weeks’ time.

Providing any visibility into the slope of the demand and supply versus job one for executives when engaging with the financial community. Providing even a modicum of visibility will help avoid eschew to the worst scenario which is already where investors are. On the cost side, it is no secret the demand environment is declining rapidly across most industries. Finding clear ways to identify cost containment options in the face of double digit or worse declines in demand is critical. That will allow investors to successfully evaluate downside risk, create pricing floors for their investment and create the conditions by which value driven actors will be able to step into markets.

The third piece is on capital. Investors are deeply concerned that debt markets are exhibiting signs of stress and are increasingly worried that liquidity enhancing initiatives may become more challenging. The Fed is helping by reintroducing commercial paper funding facilities and offering unlimited quantitative easing, but liquidity remains the forefront of investor concern.

To that end we are seeing pre-emptive action to enhance liquidity including revolver drawdowns, suspension of shareholder return programs, tapping of the additional liquidity wherever possible. We think that has to be considered in this environment and disclosed frequently and often even for companies that are well capitalized and cash rich.

When it comes to the risk factors, going back to the earlier statement, I think the first risk is really not considering all of the relevant stakeholders on the call. Beyond this over promising, there’s really asymmetry of risk when it comes to guidance. The downside risk of providing guidance or targets but later need to be revised is really a loss of credibility, a reiteration of uncertainty right at the moment when investors are looking to find their feet.

The upside to providing more robust or more positive guidance in what actually ends up happening is near term stock support driven frankly by arbitrage of short-term focused investors.  And that is a zero-sum game as far as I’m concerned.


KK:Great well thank you very much Christian. And we do have a few minutes here that I’d like to address questions. But Christian let me just follow up with you on one other point. How should companies, you know, on the earnings call, how should they handle questions about really the big macro picture? 

You know whether it is, you know, economic forecasting or some of the other big picture elements we’ve talked about earlier in the call. Or even more speculatively, of what is the world going to look like for your industry on the other side of this.


CB: I would argue that very few companies have the visibility at this moment to be able to carry the weight of providing visibility into the macroeconomic environment where it’s going. What the timing of impact looks like, what the slope of recovery looks like. Those are big questions that really remain incredibly challenging to answer.

Now we have seen some companies provide scenarios that lay out several options for how they are considering recovery. And that’s been very well received. I would call out high test market which has done this incredibly effectively laying out earnings expectations for a 3Q, 4Q and 2021 recovery. None of those scenarios has been established as their framework, as the rule of law for what they’re going to be delivering. But it’s helped create an understanding of what the dynamics are under their control with respect to earnings and cashflow generation.

This is not just limited to industries that are seeing relatively stable demand. Even Marriott and Uber, two highly affected companies have attempted to bracket the risk on special calls by providing visibility into the scenarios that they’re considering.

I would also call out that I think there is an exception to this guidance which is that in industries that are seeing heightened demand, I think there’s an opportunity to reiterate commitments to investment not just in employees but in willingness to commit capital to ensure that the economy keeps moving. And I think those industries have in some sense an obligation to demonstrate a willingness to support the continued functioning of the economy.

I will say in all of this considering macroeconomic projections, becoming the voice of the economy adds significant risk and will likely dilute take up of other messages by the public and the financial media. So, it really has to be considered very carefully.


KK: Great, thank you. And Dr. Connor, I wanted to turn to you for one last question here because there’s increasing concern obviously about the developing world, not only because of their populations but also their capacity with which to test and to deal with the outbreak. And I do think that next week in particular, or the next week or so, we’re going to get renewed attention also on things like debt sustainability and the like as we head into the IMF World Bank spring meetings. What are you watching for or are most concerned about or what are you seeing on the emerging market front particularly as we head into the fall and winter in the Southern Hemisphere?


BC: No that’s a very good point. You know, very little of our attention has been paid to the developing world. And we’re quite concerned as this virus spreads to the Southern Hemisphere in particular that the healthcare infrastructure ability to test, ability to contain is going to be very, very limited.

So, there may be a second wave of this in the developing world that will be even more difficult to contain. That’s not good news for us because, you know, something that happens anywhere happens everywhere. And those of us who are looking at developing countries have some concerns.

There’s already sort of a plan in place for healthcare assistance, containment assistance. But it’s just now being developed. I think this is something you need to keep on your radar when you think about the way that we do containment may not translate to lesser developed economies and it’s a reason to be concerned.


KK: Great thank you and we will pay greater attention to this on one of our future calls. I’m aware it’s the bottom of the hour. I want to thank everybody for joining us today and particularly our guests and speakers Dr. Bradley Connor, Orson Porter and Tony Sayegh, Carsten Nickel and Christian Buss. If you do indeed have a question, please don’t hesitate to reach out at or reach out directly to your Teneo contact.

And again, we will be back next week with another edition of this coronavirus conference call for Teneo Insights. Thank you again for joining us and have a good holiday weekend. Thank you.

The views and opinions in these articles are solely of the authors and do not necessarily reflect those of Teneo. They are offered to stimulate thought and discussion and not as legal, financial, accounting, tax or other professional advice or counsel.

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