A CFO's Perspective to Rebuilding Businesses post the Current Crisis

The rampant spread of the COVID-19 pandemic and its subsequent impact on the global economy has adversely affected almost every aspect of businesses — revenue, liquidity, growth, supply chains, and consequently finances. CFOs have suddenly found their organizations in combat mode: preserving cash, assessing risks, and trying to quickly re-do financial plans and forecasts for the month, quarter, and year. 

This crisis serves as a catalyst to reinvent the operating methodology of the finance organization in companies. Trends that had earlier been placed in incubation mode have emerged as real working models out of necessity, and they are likely to stay. This includes massive workforce virtualization, digitization, and forward-looking scenario-based solutions.

Managing all this is a tough balancing act and requires the leadership team to collaborate. CFOs, especially, can play an imperative role in times like these, and their know-how and experience in ensuring financial prudence can act as pillars around which business transformation can take place.

Here are some critical elements to the COVID response strategy for organizations, and the CFO’s role is integral to all of them:

1. Establishing a Smart Finance Operating Model

The capability to operate virtually depends on deploying smart finance operating models that leverage the power of data, technology, and talent. From the perspective of the Finance function, this can be done by optimizing technology usage, thus freeing up the finance team to focus on more strategic activities such as planning, analyzing, etc. and making the best use of inputs from technology to strengthen forecasting models. The building of this technology can be through leveraging capabilities from within the organization.

2. Redesigning the Blueprint of Cost Structures

COVID-19 forced leaders to take a hard look at their cost structures and identify deep-rooted inefficiencies that may have sneaked in. It has also put the focus on using automation. The concepts of centralization, zero-based budgeting, outsourcing, marginal costing, and fundamental economics has gained a new meaning in the wake of this uncertainty. 

CFOs should do detailed scenario planning and maintain a realistic view to recovery while designing new cost structures. A fair and balanced conversation backed with statistics and numbers can provide much-needed clarity in discussions with stakeholders, which is needed given the uncertain market reality.

3. Building Transparency, Proactively

How a CFO manages relationships with key stakeholders, such as banks, rating agencies, lenders etc., during a crisis plays a critical role, as the support of these stakeholders in any crisis is critical. All stakeholders should be proactively informed about the ongoing efforts to manage the financial situation. During these crucial times, transparency and frequency in communication are vital to reassure stakeholders that the organization has the situation under control. And for a CFO to communicate the strength of the organization effectively and ably goes a long way in building trust and confidence.

4. Time and Cost Management 

Revenues for most businesses are significantly impacted, which puts tremendous stress not just on short-term liquidity and working capital planning but also on the longer-term financing strategy of organizations. On the working capital front, CFOs need to identify suppliers in the value chain who can be their partners in the long run and support longer payment cycles and variable economic models based on commitments. 

Striking Balance between Long-Term and Short-Term Goals

CFOs are responsible for financial stability and planning, which contributes directly to employee wellbeing.  He/ she needs to drive the right changes, especially when it comes to transformation, scaling, data, and the digital world. CFOs are the primary manager to ensure the business is not left behind by a narrow focus on short-term results or too much concentration on long-term goals. Radical changes and uncertainty call for a clear-eyed and well -crafted response. With the right talent, technology, and insights, CFOs can successfully navigate their company through the current crisis and help them emerge stronger.