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The Role of CFOs amidst a coronavirus pandemic


By Yogita Tulsiani

McKinsey’s newest survey collected data from 1592 respondents from all across the globe encompassing the full range of industries, company sizes, regions, tenures and functional specialities between 2 March 2020 and 6 March 2020. During this survey, 84% of the respondents stated that they saw the outbreak of novel coronavirus was the imminent threat to the global economy. And this was before WHO declared it to be a pandemic.

On April 2, the Labour Department of the USA reported that over 6.64 million people filed for benefits by March 28, 2020. It has been one of the worst economic crises in the past century to hit almost every nation. Many of the companies have lost more than 75% of their yearly profits in the first quarter of 2020. Others are laying their staff off, while some are trying to cope by curtailing costs and encouraging their employees to work from the safety of their homes.

Amidst the chaos one fact emerges with the utmost certainty – the role of CFOs in almost every company is of critical importance right now. CFOs have a central role to play during the financial crisis since they are the leader of the company who directly contributes to the organization’s financial health. COVID-19‘s biggest crisis is that of asset liquidity and the financial stress that results from it.

Here’s how a CFO can play an active role in managing and resurrecting the finances of a company –

Assess and plan for the crisis at hand

  • CFOs should set up the first line of defence- A CFO’s first responsibility is to find out and forecast the cash collections in the context of their latest sales. The next step involves collecting payments from defaulting customers. In case the working capital remains insufficient, the CFOs should consider other options to raise capital including tapping available lines of credit. At the same time, the CFO can utilize multiple sets of tools (spend control tower) to prioritize pending payments and establish reporting metrics for tracking real-time liquidity.
  • Hypothesize and plan for a range of scenarios- The virus impact can result in a range of scenarios. It is up to the CFO and his chosen team to determine which path the impact of COVID-19 pandemic can take – which geographies may be more affected than the others and which industries might suffer the worst hit. The CFO should create a task force that can deliver actionable information that guides the business decisions and monitor the finances or factor that directly/indirectly affect the finances of the industry.
  • Set up communication plans- During a crisis, it is important to communicate clearly and proactively with the investors and boards of directors. The first few months are most critical to ramp up the frequency and transparency of communication and the responsibility lies in the hands of the CFO.
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Planning for the “next normal”

  • Strengthening the productivity- Once the CFO has dealt with the cash preservation concerns, they should focus on the improvements of near-term performances. It’s up to the CFO to switch production to new products and services that assist customers in need. That will bolster their loyalty and improve the company’s quarterly returns. For example – several companies are now shifting to alternative sales and delivery channels including eCommerce.
  • Reassess the company investments- Reducing inventory, refinancing outstanding credit, accounts receivable and payable – are all parts of the balance sheet that deserve deep diagnostics by the CFO during this period. CFOs should encourage and guide the R&D, capital allocations and IT to optimize the organization’s investment portfolio.
  • Focus on financial planning and analysis – The beginning of a financial crisis is the right time for the financial planning and analytics team to revisit the company budgeting and forecasting. The FP&A team’s task should be to monitor the KPIs and manage them to provide data to the decision making authorities in real-time.

Succeeding in the “next normal”

  • Be ready for transformation- When a CFO wants their company to thrive in what comes after a debilitating economic crisis, they have to prepare for a transformation mindset during allocating the company resources.
  • The FP&A team headed by the CFO should review the company’s investment portfolio once again and focus on each business unit’s achievement of the maximum potential.
  • Considering if divestitures can improve company portfolio- CFOs should consider if divestitures can improve the company returns in the immediate quarter. History shows that the resilient companies (during the previous economic crisis) divested 1.5x more than the non-resilient companies. The plummeting economy can create multiple opportunities for mergers and acquisitions by companies seeing profit even during the crisis. A systematic approach to M&A may improve a company’s investment in the long period of recuperation.
  • Adapt digitization -The COVID-19 pandemic is the first disruption that has made the practice of remote working popular and productive for multiple companies. It is time that most companies keep the practice alive after the crisis is over. CFOs should consider the impact of a digital workforce on the company finances long after the COVID-19 crisis is over. The CFO and the PF&A team can help scale up the financial forecasts and collaborative dashboards to the entire company and its subsidiary which can be invaluable for informed decision making and reporting.
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In the tough days, when employees or their loved ones may be struggling with health issues, anxiety or financial concern, CFOs much exhibit empathy. Financial officers should adopt bounded optimism to deal with the rising concerns about unemployment and financial insecurity across every rung of their company.

Yogita Tulsiani is MD & Co-founder, iXceed Solutions.





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