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CFO Imperatives In Post Covid Era: Cope, Control And Conquer
With everyone coming to terms with what is being referred to as the “new normal”, the future poses more questions than answers for businesses and companies as we adjust to the pandemic and attempt to resume moving forward.
Photo Credit : ShutterStock
The ongoing COVID-19 pandemic has changed how the world will work in all facets for the foreseeable future. Perhaps no entity faces a more perplexing road ahead than the private sector. With everyone coming to terms with what is being referred to as the “new normal”, the future poses more questions than answers for businesses and companies as we adjust to the pandemic and attempt to resume moving forward.
To get a better understanding of how companies are planning to acclimatize to these new conditions, BW Businessworld organized a roundtable discussion with CFOs from some of India’s most reputed companies. The discussion was centred around the challenges, perspectives and strategies of businesses during the time of this outbreak.
Starting off the discussion, Daya Prakash, Consulting Editor, BW Businessworld said the following – “We’re now 65 days into the Lockdown. What was once a fear of economic slowdown has now become a reality. Organizations are going to be expected to do more with less. Additionally, no one knows when this pandemic will end, so companies have to constantly redefine and alter their strategies in these uncertain times in order to emerge as leaders out of this crisis.”.
Rakesh Batra, CFO, ITC Infotech, pondered on the various players involved in scenario planning. “Business continuity has to be looked at from an inclusiveness angle – impact on employees, customers, vendors, industry segments, society, economy, environment, country, world. Therefore, scenario building and business actions have to be focussed on each of these pillars & viewed holistically – end to end. At a Company level scenarios are created for individual elements such as revenue / cash forecasting, allocation of resources, capital investment etc. and each scenario is necessarily calibrated on the immediate, near / mid / long term. Obviously the key challenge is the validation of assumptions made in building scenarios. Actions have to be prioritised – ultimately, consumption and the ability to service the consumption will drive business.”
"On the topic of scenario building for different companies, Swayam Saurabh, CFO, Hindustan Zinc Ltd spoke about the tenets of scenario planning, linking it to the game of throw ball. “As children, we assess different variables before throwing the ball against the wall - speed, direction, angle of throw etc - in order to be able to catch it back. This is similar to traditional scenario planning CFOs are used to. However, right now the problem is that the wall itself could move, adding a new variability reducing predictability…...Right now we (Hindustan Zinc Limited) are moving forward with a dynamic response approach. It’s a combination of multiple scenarios, from the optimistic to the pessimistic, with predefined approaches for each”.
Lalit Malik, Chief Financial Officer, Dabur India Ltd stressed on the role of liquidity during the time of the pandemic. “This scenario with the COVID crisis is unprecedented. In scenarios like this, liquidity, in addition to profitability, become the key drivers for business survival and growth. Liquidity is necessary to ensure business continuity and to ensure health of the business in these difficult times. When Revenue comes under pressure, cost reduction and managing cash flow are imperative for any business. Companies also need to be agile and nimble footed to adopt changes quickly. So, continuous business review becomes a must. If reviews were done earlier on a monthly basis, now they must be conducted more frequently, and if needed, on a daily basis.”
Sanjeev Aggarwal, CFO, JK Tyre and Industries Ltd. explained what strategies are being used by his organisation “We are reviewing overheads on a zero based budgeting basis and adopting a focused approach for cost reduction and improvement of liquidity. Further, we are working on strategies to revive sales post lifting of lockdown and improve sales in the domestic and overseas markets. We are making sure that we find a way to create ample liquidity in the system by way of faster realisation of our receivables, arranging additional line of credits from banks etc.”
During a time when the uncertainty of cash streams in a company can be daunting, Jagannathan Chakravarthi, CFO, Sonata Software spoke on how his company was accommodating to the new climate. “IT companies are basically cashless companies, so we have to ensure that collections are made on time, payments are done electronically and monitored. The first thing we implemented was reviewing working capital on a daily basis, rather than the prior fortnightly basis. For us the more important thing is AR (accounts receivable) collections, how they are collected. Each industry faces different challenges. We are following up with customers also, and that takes away the effectiveness for them…. We don’t know when the cash flow will return normally, so this forces us to change the process of collection, and changing this process rapidly in organization matters a lot.”
Mankiran Chowhan, Managing Director, India, SAP Concur illustrated the benefits of spend management strategies, and how SAP Concur was using these strategies to help their clients. “When we look at intelligent spend management, it can be broken down into 3 broad capabilities - managing every source of spending, across categories and bringing that data into a unified view. An integrated intelligent spend management solution can help you in financial discipline, so you can strengthen control over spending and create a resilient, sustainable cost structure. If I look back to the conversations I’ve been having with our customers, they want visibility to their spends to ensure requisite controls and compliance, they want their finance teams to focus on managing the stress on cash flows and scenario planning, rather than spending time on applying policy audits, or just chasing paper based processes. CFOs today are looking at how technology gets interwoven into daily working so that they can ensure their employees are focusing on what matters most. .”
When asked by Daya Prakash about what spend management strategies they are introducing into their companies, Vikas Garg, CFO, PayTM said “We started looking at how we can use our current team of engineers to work in this lockdown to focus their energy on making every system automated. That helps them channel their energy into something that may not have been possible during normal business hours. Additionally, this kind of automation also puts great control on effectiveness and accuracy of the system. It also helps create further opportunities down the line as it lets people be available to be deployed in other projects once the automation is complete. In that sense, you also save on incremental costs down the year.”
Vikash Sureka, CFO, IBS Software emphasized the importance of transforming into a digitally adept company. “The word transformation has been heavily used over the last several years. What I have noticed is that events like these are really the right time for undertaking any transformative journey that can redefine you as a company over the next decade. For businesses, survival is key, but many are assessing how they can take this opportunity to grow. Everybody has realised that the only way forward is to go digital.”
Along these lines, Mukesh Mundra, CFO, Viacom18 spoke about how technology can be used to consolidate information and help in improving the efficiency in decision-making processes. “In any company, there are multiple systems existing. In a bid to transition the company into a digital state, one of the challenges faced is how to consolidate all the data from different systems. Data from different organs of a company can often get isolated, making it harder to assess. Without all this data consolidated, and access to only one data set at a time, the decision making process will be ineffective and delayed.”
The most concerning fact about the current crisis is that no one knows how badly it has or will impact their business. To tackle this period of uncertainty, the finance function will need to drive the change and reinvent itself - It will be the key designer and owner of navigating this new normal, and will increase its reach into the business in doing so.