Five challenges every CFO must tackle immediately amid the great pandemic
By Mukesh Surana
The sudden increase in Covid-19 cases across the world and the lockdowns that followed, including in India, have had a direct impact on businesses and the economy. The shutdown of all public activity for long months resulted in a sharp drop in demand, putting companies in a perilous position. Even though it has been over a year since the first cases of Covid were reported in India, markets continue to struggle as demand has not been restored to pre-pandemic levels. Moreover, the second wave of Covid has dealt a heavy blow to the already kneeling manufacturing and service sectors.
Amid the pandemic, businesses are facing unprecedented challenges, especially when it comes to managing finances and ensuring the business stays afloat. It requires companies’ CFOs to come up with innovative ideas and make strong decisions to weather the storm. I want to highlight five of these challenges that CFOs face today, and how they can overcome them. The CFO can play a central and important role, alongside his peers, in stabilizing the business and positioning it to thrive when conditions improve.
Maintain liquidity and ensure the availability of resources.
With a cascading drop in demand and a massive drop in income and cash inflows, the immediate challenge companies face is an acute liquidity crisis. Businesses need healthy cash flow to keep operations running smoothly, manage day-to-day expenses, and keep the supply chain well-oiled.
In such a scenario, CFOs must focus their energies on maintaining proper cash flow, and the company continues to have a strong balance sheet with required working capital. To do this, CFOs should consider implementing strong measures to reduce trade receivable cycles and minimize all kinds of expenses within the organization.
Activating a sound merger and acquisition strategy can also help both the buyer and seller of a business during this crisis.
Challenges with a lot of paperwork and less digitization.
One of the expectations of any organization’s financial services during such a crisis is that they can quickly generate data, analyze and prepare plans on an almost daily / hourly basis. However, many businesses, even today, continue to use the old manual processes, which require huge volumes of paperwork, emails, and spreadsheets.
Therefore, CFOs must immediately implement digitization action plans starting from Business Intelligence, robotic processes, document digitization and business compliance to document digitization for and by banking channels, including digital LC, digital BL, etc., for exports. and imports to put money in the bank with proper care, system and processes. There is a need to introduce automation and integrate and leverage the technology in other functional departments and processes, as well as sales, supply chain, human resources, etc.
Planning for the relatively unknown
Working in the midst of the pandemic means CFOs need to plan their strategies keeping in mind that they may face new challenges; to which they have not been exposed in the past. For example, many companies did not expect a stronger second wave in India and the subsequent imposition of restrictions.
Therefore, CFOs will need to create multiple action plans keeping in mind the different scenarios that may occur in the future. This will ensure that businesses are prepared for a variety of possibilities and that CFOs don’t have to think on their feet. Therefore, prospective risk management for such a VUCA situation is the need of the hour.
Communicate challenges to stakeholders
When you are fighting an unknown and invisible enemy, it becomes extremely important that you have everyone who can help you by your side. While CFOs need to implement all of the strategies mentioned above and more than that, they cannot achieve the desired results if they do not communicate their importance to all stakeholders.
For example, implementing cost reduction measures will require communicating the need to employees and opening new lines of credit will require investors to be aware of the organization’s strategies. Likewise, conveying the right message to customers and suppliers is also an absolute necessity. Therefore, CFOs need to establish a solid communication plan and revise it as needed.
Ensuring the well-being of employees
Everything has been said, but one of the biggest challenges this pandemic has posed concerns the human resources of organizations. Employees are under severe stress due to the health risks, the work from home scenario and the added fear of losing their job or salary, which can adversely affect their mental health.
CFOs need to instill confidence in their employees about their job security and allocate funds to help them get the support they need during the pandemic. This includes responding to the need to focus attention on their mental health.
Reinvent and Reform: Thrive in the Next Normal
Once the crisis subsides, senior management will want to move forward. To enable the company to pursue bold strategic initiatives, the CFO and peer leaders must assemble a small group of talented leaders whose mandate is to focus on strategic planning, with oversight and support from senior management. and the board of directors. The team will establish the game plan for the investments, portfolio changes and major productivity initiatives that will allow the company to win after the pandemic. There are five big moves that research shows have the greatest impact on a company’s ability to significantly outperform: differentiation; strong organic growth; Programmatic M&A; breakthroughs and improved productivity and dynamic use of resources. All are important, but in the current crisis, the dynamic use of resources for future growth, realigning the business portfolio through acquisitions and divestitures, and increasing productivity and efficiency are the most critical.
(Mukesh Surana is the CFO of Garware Technical Fibers. The opinions expressed are those of the author.)