CFOs Guide to Minimize Business Risks During COVID-19 Crisis

Minimize Risks During COVID-19

A McKinsey study collected data from 1592 participants of diverse industries across the world between 2nd and 6th March 2020. Ranging across different verticals, company sizes, areas, tenure, and functional specialties, the report states that 84 percent of respondents believe that COVID-19 is a huge threat to the economy. It’s interesting to note that these results came before WHO declared COVID-19 a global epidemic.

The U.S. recorded an all-time low unemployment rate of 14.7 percent in April 2020. An environment so hostile for businesses demands attention from CFOs to ensure smooth sail amidst the turbulence. Hence, we’ve made a comprehensive stepwise guide to help CFOs counter the effects of COVID-19.

How CFOs can Minimize Risks During COVID-19

1. Measure and Plan for the Crisis at Hand

Safeguarding the organization from liquidity and cash flow problems is every CFOs first responsibility. Among the first steps towards crisis management, CFOs should assess their cash outflow in the context of their sales. CFOs should focus on retrieving as much cash as they’re owed by collecting pending dues from customers.

If the cash reserves and customer payments are not enough to continue operations normally, CFOs need to find ways to extract credit from banks or governments to sustain production. CFOs can use multiple tools, such as spend control tower, to manage cash flow issues using accurate metrics.

You can be future-ready by simulating various crisis scenarios and planning for them. Using CFOs experience and intelligence, CFO and his/her chosen team can determine which paths are most probable. Predictive analysis helps CFOs conjure an accurate picture of the post-COVID-19 world to understand which areas or industries are most affected. We recommend that CFOs appoint a specialized task force to seek useful information that drives business decisions and improve the financial conditions of the company.

Our four tips to plan ahead of time: –

  1. Use predictable trends and build your strategy on it.
  2. Upgrade technology to address your recurring and costly mistakes.
  3. Identify your USPs and reinvent yourself.
  4. Consciously direct your future.

2. Planning for the New Normal

After dealing with cash flow issues, CFOs should focus on improving the short-term circumstances by stimulating demand growth. CFOs can do that by producing new products and services to address post-COVID-19 needs. Your receptiveness to specific customer needs strengthens customer loyalty and improves the company’s revenue in the long-term as well.

For example, focusing on producing COVID-19 essentials like masks and equipment helps companies sustain their revenues through the crisis. You can also establish a caring and concerned brand image by the right messaging techniques. CFOs can also shift to alternate supply chains and deliveries to improve production capacity.

CFOs have to consider the long-term impacts of COVID-19 by reassessing various company investments. Exhausting existing inventory, refinancing remaining credit, and redirecting accounts receivable and payable capital need deeper diagnostics from the CFO. Other responsibilities of a CFO include guiding the R&D, capital allocations, and IT departments to improve the firm’s investment portfolio to drive more cash in the system.

The advent of a huge financial crisis is perfect for the financial planning and analytics (FP&A) team to assess the company’s budget. Forecasting a company’s financial future helps CFOs monitor various key performance indicators (KPIs) and provide relevant data to the decision-making teams.

3. Forging Ahead in New Circumstances

The post-COVID-19 scenario is irreversibly different. Hence, making permanent changes to improve business operations is critical for firms to prosper. So, CFOs must try to inculcate a transformational mindset in your resource allocation processes. Reviewing the company’s portfolio helps the FP&A team and CFO to reach the full potential.

In rough circumstances, you might have to consider if unloading your assets or subsidiaries helps your liquidity crisis. Reports suggest that resilient companies divest 1.5 times more than their non-resilient counterparts. If you’re in a relatively good condition, you have several merger and acquisition opportunities to grow your business. A detailed M&A approach improves your company’s portfolio in the long-term.

COVID-19 furthers the practice of remote working and made it a new normal. Are you currently struggling with providing a safe virtual working environment? Consider upgrading your infrastructure to improve the virtual workspace experience. Remote working not only helps you continue business during the crisis but it also provides a more productive experience as compared to traditional offices. 77 percent of employees have attested to the productivity benefits of telecommuting. The CFO and the FP&A team help level up the financial forecasts and collaborative dashboards to improve the decision-making and reporting process.

Read More: Roles and Responsibilities of CFO

Conclusion

“In crisis management, be quick with the facts and slow with the blame.” – Leonard Saffir

This crisis compels companies to stay on their toes and adapt to new technology to survive. Resting during this crisis is not advisable for resilient companies. CFOs should propel businesses by minimizing risks as much as they can. So, take this opportunity to renew your business and prepare for all your future challenges better. We hope you use these insights to minimize your risk by evaluating your liquidity position, connecting with your customers and employees, and creating an all-weather strategy.

Taking the help of a recognized CFO service provider would provide you the expertise to manage risk efficiently.

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