10 ways CFOs can support business resilience in a changing world

While CEOs may take the limelight (whether they want to or not) as they adjust their businesses, as the CFO, you’re the guardian of the purse-strings and the key decision-maker when it comes to the company’s essential asset in complex times: funding.

So how can you contribute to corporate resilience in a changing world? Here are 10 essentials to add to your armoury, courtesy of the world’s leading analysts, consultancies and technologists.

1. Act with confidence and commit to a strategy, even when it’s challenging

Analysts McKinsey have surveyed a huge number of businesses dealing with multiple historical downturns.

It suggests that the most agile firms had a crisis plan long before trouble emerged. But even for those that did not, the most resilient were the ones which moved fast and decisively.

According to McKinsey: “They had a way of making decisions, some of which were quite counterintuitive.

“As an example: resilient companies shed assets very early on, and their performance in terms of revenue growth dipped in the early years – before their peers’.

“This was quite a bold action, taken to shore up earnings and profitability so they could later scale up again coming out of the cycle. That would be quite a courageous action that, in a normal business practice, management teams might not necessarily embrace.”

Then, during the upturn: “They leaned forward and became more opportunity driven, so they did acquire more on the upturn and picked up assets.

“At the same time, they did not take their foot off the accelerator on productivity and cost. They continued to go after those productivity gains year in, year out, even on the upturn.”

Smart businesses adjust fast to a frugal operating model and then maintain that model when the going becomes easier.

2. Optimise for liquidity

This is again likely something that you may have already have devoted their time to. But it’s interesting that the current three to six-month timeline of the coronavirus (COVID-19) pandemic means you have more opportunities to turn assets or processes into available cash.

Retail and office estates are certainly on the agenda, and operational restructuring of finance from factoring to analyses of bank fees and making invoicing more seamless are all worth investigation.

Analysts all agree that CFOs must head up a ‘control tower’ for cash availability.

Management consultant Avertim writes: “The CFO and her cash management team could set-up a Cash Control Tower, i.e. a SWAT team of cost category owners, cash management experts and business budget owners.”

Meanwhile, Accenture says: “An effective approach to managing liquidity, risk, and operations requires the finance team to create and maintain a liquidity control tower that provides an enterprise’s leadership with a single view of all aspects of liquidity, linking information related to receivables, payables, inventory, risk, taxes and cash flow, through a 360-degree governance framework.”

3. Think customer first

If you’re a CFO in the ivory tower of the back office, you’re missing your calling. A business stands and falls by its reputation with customers, and it’s when times are hard that those who have taken the customer relationship for granted lose ground.

In a survey of more than 1,000 European CFOs in 2019, asking to consider how they might tackle a downturn, the most diverse and prepared respondents were “focusing on using advanced technologies to improve efficiency as they put their customer base under the spotlight”.

In the words of Customer Experience futurist Blake Morgan, writing in Forbes: “It used to be that customer experience was the only way to differentiate your brand among a sea of sameness.

“Now the challenge is not just to standout, but to pivot, innovate and transform.

“This is not the time to quiver in fear and count our losses, but be a leader in helping customers get back on their feet. We must learn to move quickly and in understanding the new experience customer mindset, we will continue to have customers.”

4. Manage profitability, not just cost

Consultant PwC has been surveying leading CFOs in its CFO Pulse surveys for many years. In recent weeks, cost-containment has certainly remained top of the CFO agenda.

More than half of CFOs are deferring or cancelling investments. But in its 11 June 2020 Pulse report, PwC says: “Fewer CFOs today than in past CFO Pulse surveys say they will consider cancelling or deferring planned investments in R&D (14%).

“This is good news, given respondents’ belief in the importance of developing new products and services.

“CFOs are also not as likely to cut from their planned digital transformation investment (11%), which corresponds to findings about their plans to accelerate automation.”

The point is that ruthless cost-cutting, while sometimes essential, also risks harming the future agility of the business – whether to develop profitable new products or profitable new methodologies that increase margin.

5. Turbocharge your balance sheet

Three points to be aware of when it comes to your balance sheet.

Minimise your accounts receivable

Every business is, of course, different. But services businesses with 90 to 120-day payment regimes are particularly prone to cash flow complexity.

Focus on aging receivables and, as always, prioritise visibility of this data if it’s not absolutely clear.

Extend your accounts payable

Unfortunately, many businesses will find their accounts payable regime is not even in their own gift to change. You may well be being paid late (or not at all) further down the supply chain.

If so, this will no doubt already have influenced your cash flow. Either way, have those crucial conversations about extending payment terms with your suppliers.

Re-examine inventory

This may be conflicting: on the one hand, your supply chains may have been disrupted and you’ll be planning to hold more inventory of some parts/ingredients just to be able to service clients.

Equally, if you have expensive stockpiles of other parts, this may be ripe for optimisation.

6. Take part in a lively mergers and acquisitions market

The coronavirus disruption is an exceptional example of both crisis and opportunity. Business closures and bankruptcy programmes usually mean the writing off of debt and the availability of discounted assets; either wrapped in a potentially ongoing operation or piecemeal.

And that’s good news for firms either less affected by the pandemic, or those with solid cash reserves who might want to use that cash to buy other businesses to hedge their ongoing risk or capitalise on new opportunities.

Consultancy EY therefore writes: “Distressed assets will need buyers. Even in the midst of crisis, it is not too soon for CFOs to be planning a recovery strategy focused on the upside.

“This proactivity also applies to firms that emerge weakened by the crisis. Many companies may need to seek new partners, or to make divestments to raise cash.

“It is important that the firm’s fate is not dictated by outside forces. Instead, the CFO should step forth with a proactive strategy to navigate the recovery.”

7. Re-prioritise the mid-term portfolio

McKinsey writes: “Many companies have major capital ex and technology or platform investments –big-ticket items that were made in a different time and different context.

“We are seeing companies beginning to triage that book of work, figuring out things that are mission-critical and should continue, those that are more discretionary, and others where the ROI [return on investment] has to be re-evaluated given the current environment.

“A lot can be done in the near term to bring some science to the investment portfolio.”

Don’t forget, of course, that:

• On the one hand, the terms of some of those major investments may also be changed. Many suppliers will be happy to amend terms in order to keep the order alive.
• On the other, the very definition of ROI may be different in a down-market. The key performance indicators (KPIs) of your business may have changed entirely and you may now be buying on different criteria.

8. Support your talent

Never has leadership been at such a premium. You may find you’re the bearer of bad news, but you’ll need to join in an open and honest partnership with your HR colleagues.

Communication will also be essential as those remaining with the business move from a war-footing to establishing a new direction. Deloitte says:

• “Put the mission first. Resilient leaders are skilled at triage, able to stabilise their organisations to meet the crisis at hand while finding opportunities amid difficult constraints.
• “Own the narrative. Resilient leaders seize the narrative at the outset, being transparent about current realities – including what they don’t know – while also painting a compelling picture of the future that inspires others to persevere.
• “Embrace the long view. Resilient leaders stay focused on the horizon, anticipating the new business models that are likely to emerge and sparking the innovations that will define tomorrow.”

As the CFO, you’re a key officer in defining and communicating that long view to a team that’ll need support, nurturing and a vision around which to congregate.

9. Deliver data-driven decision-making

Data is the currency of modern business agility. Accenture reports: “The finance function should develop programmatic ways to manage liquidity by leveraging data and analytics, with faster decision-making, actions and impact assessment enabled in days instead of weeks or months, through dynamic scenario-based forecasting models.”

Smart CFOs have already become the guardians of data across the business.

James Hanson, head of strategic partnerships at financial management software company Prophix, says: “Finance folk are very data savvy. They deal with complexity and data all day long. They tend to be analytical and they’re often neutral about decision making.

“They also own the office of record of the business, and they’re trained to interpret, analyse and project forward.

“So boards should look to finance to help with their data strategy, not just for finance, but for the business as a whole.”

Nobody is better placed to own plans to extract data from discrete sources and the enterprise resource planning (ERP) systems that connect them, for reliable, real-time decision-making.

10. Be the conscience of the board

Finally, in changing times, you continue to be the guardian of compliance and governance. You’ll need to extend that role with the help of the board.

McKinsey writes: “Start a dialogue with the board that the company wants to operate from time to time in a different way to make faster decisions, to have a tighter alignment.

“It might mean there needs to be resilience governance that is quite different from the normal board governance, where some board members take on an additional resilience role in their nonexecutive capacity to work with the management team during that time.

“And they should be ready to kick into that mode.”