Five challenges that every CFO must address immediately amidst the great pandemic

July 03, 2021 10:00 AM

The Covid-19 pandemic has exposed the finance head of corporations with novel challenges. It is extremely important to adopt new strategies to deal with them.

modern workplaceTo enable the company’s pursuit of bold strategic moves, the CFO and peer executives should convene a small group of talented executives whose mandate is to focus on strategic planning, with oversight and support from senior management and the board.

By Mukesh Surana

The sudden surge of Covid-19 cases across the world and the subsequent lockdowns that were imposed, including in India, had a direct impact on the businesses and economy. The halt in any public activity for months at length led to a steep fall in the demand, putting the corporations in a perilous position. Even though it has been more than a year since the initial cases of Covid were reported in India, the markets continue to struggle, as demand has not been restored to the pre-pandemic levels. In addition, the second wave of Covid has dealt a massive blow to the already kneeling manufacturing and services sectors.

Amidst the pandemic, the businesses are facing unprecedented challenges, especially when it comes to managing the finances and ensuring that the company stays afloat. This demands that the Chief Financial Officers (CFOs) of companies come up with innovative ideas and take strong decisions to weather the storm. I want to highlight five such challenges that the CFOs face in the current time, and how they can overcome these challenges. The CFO can play a strong, central role, alongside executive peers, in stabilizing the business and positioning it to thrive when conditions improve. 

Maintaining liquidity and ensuring availability of resources.

With a cascading drop in demand and massive drop in revenues and cash inflows, the immediate challenge, which the corporations face, is an acute liquidity crisis. The companies require a healthy cash flow to ensure smooth functioning of operations, managing daily expenses, and keeping the supply chain well-oiled. 

In such a scenario, the CFOs need to focus their energies on ensuring that proper cash flow is maintained, and the company continues to have a strong balance sheet with required working capital. To do this, the CFOs should look at implementing strong measures to reduce the sales receivables cycles and minimize all kinds of spending within the organization. 

Activating a healthy Merger and Acquisition strategy can also help both the buyer and seller of business during this crisis.

Challenges with a lot of paperwork and less digitisation.

One of the expectations from the finance departments in any organization during the time of such crisis is that they can quickly generate data, analyse, and prepare plans on almost daily/ hourly basis. However, many corporations, even today, continue to use the old manual processes, which requires huge volumes of paperwork, emails, and spreadsheets. 

Therefore, the CFOs need to immediately put into action plans of digitisation significantly starting from Business Intelligence, Robotic processes, digitisation of documents and compliances of the Company to digitisation of documents for and by banking channels including digital LC, digital BL etc., for exports and imports to bank the money with adequate care and system and processes. There is a need to introduce automation and integrate and leverage technology in other departments and functional processes as well like sales, supply chain, HR etc.,.

Planning for the relatively unknown

Working amidst the pandemic means that the CFOs must plan their strategies keeping in mind that they might come across new challenges; which they have not been exposed to in the past. For example, many companies did not expect a stronger second wave in India and the subsequent imposition of restrictions.

Therefore, the CFOs will have to create multiple action plans keeping in mind different scenarios that may occur in the future. This will ensure that the corporations are prepared for varied possibilities and the CFOs do not have to think on their feet. Therefore, forward looking risk management for such VUCA situation is the need of the hour.

Communicating the 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 the CFOs must implement all the strategies mentioned above and much more than that, they cannot achieve the intended results if they do not communicate their importance to all the stakeholders.

For example, implementing cost-cutting measures will require communicating the need to the employees and opening new line of credits will demand that the investors are aware of the organization’s strategies. Similarly, conveying the right message to customers and vendors is also of utmost need. Therefore, the CFOs need to establish a robust communication plan and revise it as and when the need arises.

Ensuring the wellbeing of employees

All said but one of the biggest challenges that this pandemic has posed is to the human resource of the organizations. Employees are under severe stress because of health risks, work-from-home scenario and the added fear of losing their jobs or salary, which can negatively affect their mental health.

The CFOs need to instil confidence in their employees regarding the security of their jobs and allocate funds towards helping them with getting required support during the pandemic. This includes addressing the need for focusing the attention towards their mental health.

Reimagine and reform: Thriving in the next normal

Once the crisis abates, senior management will want to move forward. To enable the company’s pursuit of bold strategic moves, the CFO and peer executives should convene a small group of talented executives whose mandate is to focus on strategic planning, with oversight and support from senior management and the board. The team will set the game plan for investments, portfolio shifts, and major productivity initiatives that will position 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; productivity breakthroughs and improvement and dynamic resource utilisation. All are important, but in the current crisis, dynamic utilisation of resources for future growth, realigning the business portfolio through acquisitions and divestitures, and boosting productivity and efficiency are the most critical.

(Mukesh Surana is the CFO of Garware Technical Fibres. Views expressed are the author’s own.)

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