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How CFOs Went Above And Beyond Their Core Role Since The Pandemic
CFOs now need to be more responsive and much quicker towards the changing needs of the organization and adopt new ways to effectively handle the dynamic changes, says Sharad Jain, CFO, Rockman Industries
Photo Credit : ShutterStock
Finance has become one of the hottest and the toughest areas during the pandemic. Just when we thought that we got away with the first wave, the second wave hit us, and it did so with multi-fold intensity. Although exact economic numbers are not out yet, we know that we have seen approximately 7.5% contraction in the overall GDP. And hence, the topic, immediate need for resilience and agility in finance for recovery, becomes very relevant in today’s time.
BW Businessworld CEO, Hoshie Ghaswalla, in a recent roundtable with some of India’s notable CFOs, discussed some of the key challenges faced by the CFOs during the pandemic. He also discussed how some of the CFOs converted these challenges into opportunities for their respective organizations.
The changing role of a CFO and the most challenging aspects of the added responsibilities during the pandemic
The discussion started with the first question to Milind Kulkarni, CFO, Tech Mahindra. Ghaswalla's first question to Kulkarni was around the emerging role of the CFO and how it gained significant importance in the last 15 months. Ghaswalla asked Kulkarni how he sees his role as a CFO changing and the two most challenging aspects of his role that got added to his overall KRAs during the recent pandemic.
In response to Ghaswalla’s question, Kulkarni highlighted risk management and cost control as the two most challenging aspects of a CFOs role today. “Although cost control was always important for CFOs, but risk management, identification, and mitigation has become extremely crucial in the last one and a half years”, mentioned Kulkarni of Tech Mahindra.
As per Kulkarni, risk management plans never considered pandemic as a risk, before Covid hit us. He further added that cost control has become more important now than ever before because today revenue lines are not moving as planned and some of the existing plans are consistently getting delayed.
“Although cost control was always important for CFOs, but risk management, identification and mitigation have become extremely crucial in the last one and a half years” – Milind Kulkarni, CFO, Tech Mahindra
Responding to the same question, Sharad Jain, CFO, Rockman Industries, highlighted responsiveness towards the needs of the organization and operational efficiency through automation as two key aspects of the changing roles of the CFOs. While elaborating the first part, Jain said that CFOs now need to be more responsive and much quicker towards the changing needs of the organization and adopt new ways to effectively handle the dynamic changes that are happening. CFOs need to be in the frontline in devising new strategies and contributing to overall decision making. He further added that proactive scenario planning, aligning the teams to the potential impacts, working with them to prepare action items to address financial stress through actions on costs, inventory, capex, opex are crucial for attaining the desired responsiveness. He also mentioned that identifying alternate ways of managing our resources, making appropriate make vs buy decisions, outsourcing plans, and helping in overall organizational risk management are other key areas to be considered for achieving responsiveness towards the needs of the organization. Another part of his discussion focused around achieving operational efficiency, especially during the work from home scenarios. As per him, we need a lot of standardizations, digitization, and automation now. We need to see financial transformation from three perspectives - process, people, and technology. We need to leverage all these three components to service the organization. We need to look at various planning aspects, such as seeking external and internal support, developing our own IT systems, and staying connected with the teams. And lastly, and most importantly, CFOs need to keep the finance teams highly motivated to handle the dynamic changes that are happening. The CFO needs to ensure that finance teams continue to support the business teams with good financial insights and quick analysis. CFOs are no longer just book keepers. They need to switch from the traditional reactive mode to a more proactive mode.
“CFOs now need to be more responsive and much quicker towards the changing needs of the organization and adopt new ways to effectively handle the dynamic changes.” – Sharad Jain, CFO, Rockman Industries
A CFO has to be a kind of an all-rounder when it comes to the reality, said Rangaraj Komandur, President - Finance & Group CFO, Himatsingka Seide. As per Komandur, the role of a CFO has changed significantly in the backdrop of the recent pandemic. Today, the communication aspects to various stakeholders such bankers, institutional investors, internal stakeholders (such as employees or the board) has become broad based. The second aspect of the changing role of a CFO, as per Komandur, have more to do with the pace of digital transformation. Although his organization had already embarked upon its digital journey, the pace of digital transformation got accelerated during the pandemic. They are revamping IT systems and leveraging their data more effectively now to turbo charge the financial planning and analysis function. With this they are able to perform more accurate scenario building, scenario analysis, what-if analysis, and be prepared for the worst outcomes.
Practices that got redundant in the second wave and the ones that remained unchanged
After taking inputs from three finance leaders on the changing roles of CFOs, Ghaswalla moved to the second question which was around the practices that were adopted in the first wave of the pandemic. He asked the panel members about the practices that got redundant in the second wave and the ones that remained unchanged.
Rahul Mahashabde, Head Finance and Accounts, Forbes Marshall Limited said that when revenue comes to a standstill, the first response is to curtail investments in good-to-have things and reduce the overall cost. This is what they did when the first wave of the pandemic hit. Additionally, they shifted their focus to their business lines that fell under the priority sectors and were offering essential goods. These essentially included Food and Beverages, and Pharmaceuticals sectors. Secondly, Forbes Marshall reached out to their vendors, primarily the MSME vendors, to understand the impact of the pandemic on their business and consequently their financial/cash positions. “We helped our vendors get a moratorium from banks and helped them get their dues earlier. Additionally we helped them benefit from some banking schemes such as vendor bills financing. We gave them this financial support wherever needed because we knew it was not just about conserving cash but taking care of the entire supply chain”, added Mahashabde.
“When revenue comes to a standstill, the first response is to curtail investments in good-to-have things and reduce the overall cost.” – Rahul Mahashabde, Head Finance and Accounts, Forbes Marshall Limited
Answering the same question, Answering the same question, Abhijeet Kamasamudram, Wholetime Director, Finance & Supply Chain at McCain Foods, said that McCain witnessed a complete change in three strategic pillars during the pandemic. Earlier the pillars were profitability, sustainable cost advantage, and best-in-class execution. Post pandemic, the three strategic pillars became safety, revenue generation: and cash preservation. For example, McCain transitioned its entire global finance processes to India in its attempt towards cash preservation.
To ensure safety of its people, McCain moved to WFH model and also shut down its plant and created Covid emergency response team. Shutting down factories and imposing lockdowns impacted our revenues. But we lowered our revenue forecasts accordingly”, said Kamasamudram.
“Earlier the pillars were profitability, sustainable cost advantage, and best-in-class execution. Post pandemic, the three strategic pillars became safety, revenue generation; and cash generation and preservation.” – Abhijeet Kamasamudram, Wholetime Director, Finance & Supply Chain at McCain Foods, How can organizations position themselves strategically in the long term by deploying technology
Ghaswalla presented a new question to the panel members which was centred around India’s contracting GDP and shrinking of the Indian economy. He asked Kulkarni of Tech Mahindra and Mankiran Chowhan, MD – India of SAP Concur about how organizations can position themselves strategically by deploying technology that can help tighten control over spending in the longer term.
Kulkarni, CFO, Tech Mahindra, mentioned that the company is leveraging automation technology in order to optimise cost and enhance people productivity.
He further added, “When you want to work from home or work from anywhere, you need to ensure a high degree of security as you have client data with you. Hence ensuring a robust security coverage has been a top priority for Tech Mahindra.”
Addressing the same question, Chowhan, MD - India for SAP Concur said that digital adoption has really been accelerated by the pandemic. And hyper-automation has become a reality. Chowhan spoke about 4 key trends highlighting technology adoption. As per Chowhan, the first trend is that the future of work has arrived ahead of time. The way we look at employee experience has changed as well and technology plays an important role in this. The second trend is return on investment and risk of inaction. The third trend, as highlighted by Chowhan, is innovation. Quoting a McKinsey study, she said that organizations that have successfully responded to the crisis have deployed more advanced technology, more digital products to speed up innovation. The fourth trend Chowhan spoke about was around the role of intelligent technologies such as AI/ML, RPA, Analytics, Cloud, etc. “Finance analysts and decision makers have always been drawing in data. And these intelligent technologies would help anticipate and optimize spending and analyse behaviours”, said Chowhan.
“Digital adoption has really been accelerated by the pandemic. And hyper-automation has become a reality.” – Mankiran Chowhan, MD - India for SAP Concur
Highlighting the usage of digital technologies, Chithra H, (GM & CFO), South Indian Bank, mentioned that when we see that there are areas where the economy is not growing or staggering, there are opportunities as well. She further added that there has been a significant increase in the usage of mobile banking and net banking. Additionally, the usage of digital banking reduces the cost pretty significantly. She also spoke about how her bank has been able to reduce travel expenses through the usage of technology. She said technology doesn’t just help reduce the travel expenses but also saves time for all the bank’s executives and other officers.
“When we see that there are areas where the economy is not growing or staggering, there are opportunities as well.” - Chithra H, (GM & CFO), South Indian Bank
Short term and long-term financial plan and managing constant changes
Ghaswalla then asked the panel members about how they make their short term and long-term financial plan and manage constant changes. Kamasamudram, Wholetime Director, Finance & Supply Chain at McCain Foods, said that they no longer follow annual plans. Now it is all about rolling forecasts and scenario buildings now. They plan for a very short term and the plan takes into consideration many factors. Balaji Rajagopalan Head - L&T Shared Services mentioned that L&T always follows a policy of stability in operations and consequently revenue, cost, and target profitability generally stand protected. Further, L&T follows a 5-year strategic plan that is broken down to year-wise targets which is monitored on a monthly and quarterly basis.
Managing liquidity during this ever changing scenario
The next question was around how the CFOs managed liquidity during this ever changing scenario. Jain, CFO, Rockman Industries, said that when their cash inflows had reduced and payments were delayed during the pandemic, they ensured liquidity by securing facilities from banks for working capital, and secured short-term as well as long-term loans. Jain said that nothing can be achieved unless we have enough cash. Fortunately, they are now better prepared for future uncertainties. In addition to securing liquidity, they are prepared for immediate control on operational cost, cutting down on all the non-essentials, flexing fixed costs by different measures, cutting down on inventory, and monitoring cash flows on a daily and weekly basis.
“In addition to securing liquidity, we are prepared for immediate control on operational cost, cutting down on all the non-essentials, flexing fixed costs by different measures, cutting down on inventory, and monitoring cash flows on a daily and weekly basis.” – Sharad Jain, CFO, Rockman Industries
Balancing long-term plans with a decline in the projected revenue during the pandemic
Chithra, (GM & CFO), from South India Bank said that they had taken the pandemic into consideration while planning this year. In fact, there have not been significant changes at South Indian Bank as far as the long term planning is concerned. While preparing their medium term plan last year, they had factored in the changes in the economy, but the visibility was very short. With regards to the long term plan, they focused on accelerating the process of digitization. Addressing the same question regarding balancing long-term plans with a dip in the projected revenue, Rajagopalan, Head - L&T Shared Services said that while the pandemic has hit everyone, L&T was no exception. However, thankfully, there was no loss of revenue but only a minimal deferment of it. And most of their order book remained intact. In fact, their profitability was more this year due to various cost reduction measures. In fact, advanced planning helped them to mitigate the risks significantly.
Adding to the remarks, Komandur from Himatsingka Seide added that the current pandemic has not impacted their long-term plan in any material way. They would continue to move forward with their usual long-term and short-term plans.
Turning Adversity to Advantage
“We must embrace the pain and burn it as fuel for our next journey”, said Mahashabde from Forbes Marshall. During these tough times, we must stand very firm with each of our stakeholders that include employees, contractors, vendors as well as our customers. This is the only way we can turn them not only into our long-term strategic partners but as our extended family members as well. On turning adversity to advantage, Chowhan from SAP Concur, said that nearly 70% of board of directors say that Covid 19 has accelerated their digital business initiatives. And this acceleration of digital initiatives is designed to deliver the continuous value in terms of agility, real-time risk assessment, mitigation of risks, better-informed decision-making, and ultimately the hyper automation of the processes –any process that can be automated, should be automated. This overall shift will ultimately lead to creating a more resilient and agile enterprise.
“This acceleration of digital initiatives is designed to deliver the continuous value in terms of agility, real-time risk assessment, mitigation of risks, better-informed decision-making, and ultimately the hyper automation of the processes - any process that can be automated, should be automated. This overall shift will ultimately lead to creating a more resilient and agile enterprise.” – Mankiran Chowhan, MD – India, SAP Concur
The roundtable concluded with one quick tip for the CFOs from all the panel members. Some of the key tips were about CFOs being strategists and not just the head of the bookkeeping function. Agility of response was another key suggestion. It was said that Agility of response is far more important than the accuracy of your forecasts. Quick decision-making was emphasised by many CFOs. Another closing tip was to keep it simple - whether it is processes, systems, or even marketing. Another out-of-the-box tip for the CFOs was to be a storyteller. It was said that it is important for today’s CFOs to articulate complex things in a very simple manner. Being resilient in turbulent times was another important tip. One of the panel members said that CFOs must be on the forefront. Meaningful analysis and contribution to key business decisions for the organization was also highlighted. It was said that it is important to have an effective system-based support and monitoring mechanism to have a single source of truth for the CFOs. And lastly, it was said that it is the responsibility of the CFO to keep the entire team motivated.