June 2020

I am a great one for old sayings and idiomatic expressions and my offering in these current times is ‘don’t throw the baby out with the bathwater’.

Sure we are experiencing difficult times, I don’t like using the word unprecedented because whist that maybe relevant to our current personal lives, in business it is not so unusual that we face disruption and all sorts of crises on a regular basis.

The key to success is how we handle it during the time and how we prepare ourselves better for when things improve as they always do.

Let’s face it, a business that only works in good times is not in for the long haul.

To better understand how to manage this mayhem, in this practical guide, we will look into four major dimensions:

  1. Business disruption impact
  2. Risk assessment, risk mitigation and managing uncertainty
  3. Digital transformation and digital initiatives
  4. Human capital – the impact of working from home.

Business Disruption impact. 

COVID-19 has disrupted the business significantly. There are two main pain points:

Where should Finance teams focus in order to help the business cope with the current situation?

Liquidity: examine the current cash flow condition and manage working capital through the liquidity cycle.

Controlling Costs: curtain discretionary expenses to improve the cash position.

Debt Restructuring: revisit current debt arrangements considering whether there might be potential breaches of financial covenants and determine a short-term debt management plan.

Business and Finance Continuity: reshape strategy for business and finance continuity.

Stakeholder Management: embed stakeholder considerations in the company’s decision-making process.

Operational Resiliency: assess the impact of potential supply delays and guarantee operational strength.

Agile Budgeting & Forecasting: streamline the robust budgeting and forecasting using stress tests.

 

Risk Assessment and Mitigation

Risk assessment and managing uncertainty is entirely different than just a couple of months ago.

Previously, risk assessment and mitigation had bigger timelines – one year and more. Risks were associated on more of a strategic front than on day to day operations and were not determining the going concern of a business.

Today companies focus on getting through the day, next quarter and identifying the relevant risks. This assessment needs to occur on daily basis.

To manage stakeholder expectations effectively, the CFO is now required to have a different skills set – they should be quick, agile, factual, with ready solutions, and be able to discuss with the Board action plan in evolving situations. .

Digital Transformation and Digital Initiatives

The digital transformation and digital drive have been a trending topic in the pre-corona times.

Organisations that are ahead on the digital curve are surviving the crisis.

Everyone needs to embrace and drive digital activities, but Digital is not E-Commerce or CRM. It is the mindset to embrace new technology for connecting with customers and automating and improving internal functions for more efficiency.  All functions need to work towards a digital mindset that focuses on keeping the customer engaged.

Customers expect a response immediately. The ongoing disruption is changing buyer’s behavior in the supply chain. Customers are now spending more time online. The old way of doing business by maintaining rapport and visits to the purchase department is not working. The end-user customers no longer want to meet you; how can you maintain and get their share now? This is where digital initiatives empower the teams.

Internal processes also need to be upgraded to provide the ability to address the key point above. Using antiquated Excel spreadsheets for Budgeting and Forecasting does not allow for and agile approach and multiple scenarios and what-if analysis.

Companies use Excel because its cheap and most finance people have some knowledge of using it. It is a personal productivity tool, never designed for today’s sophisticated, dynamic business.

It is these initiatives that will ensure companies maintain their business.

Human Capital – Work from Home. How to Increase Productivity?

The current mix of remote and office work is creating anxiety and stress. Working with social distancing is challenging. This can be mitigated by creating new small team structures, offering flexibility, better usage of technology, and a humane approach.

When the work from home scenario (WFH) emerged, my belief had been that it would be an uphill task to provide the same results and productivity as finance professionals cannot work in silos and need immediate actions on many fronts.

As we have seen, technology is the key, Zoom, Teams and other online meeting platforms are being embraced and are working well.

Finance teams will need to implement better more collaborative multi-user environments to facilitate remote working as Excel and old style Budgeting and Forecasting systems just don’t work in this new style of working.

Conclusion

It’s hard to predict how long the pandemic impact will last but after a while business and daily life will find a new equilibrium. As the SWOT analysis tells us, there are not only threats but also opportunities. Finance leaders need to ensure a strong balance sheet with cash reserves to innovate, outdistance their competitors, and grow more quickly to transform challenging times into opportunities.


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