The Pandemic-Era CFO: Bold Financial Leadership Is a Strategic Imperative The Pandemic-Era CFO: Bold Financial Leadership Is a Strategic Imperative
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October 06, 2020

The Pandemic-Era CFO: Bold Financial Leadership Is a Strategic Imperative

By: Scott Carberry, Senior Partner

Every generation in history has faced crises that at the time seemed unprecedented and insurmountable. With the increased global interconnectivity and resultant codependency of today’s world, however, the COVID-19 pandemic and the economic disruption it has caused are truly without modern equivalent. The business upheaval is daunting — from supply chain risks to wild swings in revenues to a complete redo of how companies, colleagues, and customers interact — and CEOs are having to lean on CFOs more than ever to steer their companies through this uncertainty.

Organizations that have managed the pandemic most successfully credit this critical CEO-CFO partnership. In times like these, CEOs need agile CFOs at their side to help them strategize and lead multifaceted business responses that address not only current day-to-day challenges but also position their companies for economic recovery.

Some CFOs excel at sustaining business operations, and others are skilled at supporting growth or transformation agendas; the financial pressures that define these times, though, can expose shortcomings. Our ever-changing business landscape demands highly strategic CFOs who can achieve stability and exercise the clarity of mind necessary to support CEOs and their executive leadership teams.

As the workplace evolves and the “new normal” takes shape, CFOs will be pivotal in adapting business models to facilitate it. If the past is prologue, then it’s a safe bet that humanity will overcome.

What Are the Best CFOs Doing Now to Survive and Thrive Beyond the Crisis?

Since the pandemic emerged earlier this year, the CFOs who have been tackling the unique challenges of this crisis most brilliantly are those who have taken bold and decisive action. Critical steps being undertaken include:

Continuing to conserve cash.

The pandemic-era CFO provides frequent, comprehensive visibility into real-time financial and operational performance, allowing for informed decision-making. Cash is king, and it must be managed on a daily, weekly, and monthly basis to ensure liquidity is available for the worst-case scenario. The CFO maintains strong forward visibility into cash flows and liquidity, analyzing any pressure points to cut costs and bring down credit lines.

The best CFOs also understand that acting on what you know is key amid uncertainty; their approach is to prioritize, analyze, and decide. The daily dashboard has proven an especially important tool in these turbulent times. When speed and agility are paramount, CEOs can’t wait for the books to close to see how the business is performing; the CFO must closely monitor key operating metrics in frequent, rapid periods. CFOs in our network shared with us that they’ve come to depend on a simple, real-time dashboard focused on three to five meaningful metrics indicative of financial performance (e.g., employee productivity, bookings, and costs). Such key business intelligence is important in helping the executive management team drive informed, rapid decision-making.

Likewise, forecasting in this uncertain environment helps mitigate risks, allowing the leadership team to make optimal decisions while exploring new possibilities. CFOs are leveraging dynamic forecasting models that include a 13-week cash flow forecast model — essential in times of crisis. Such forecasts empower the C-suite to look at worst-case, middle-tier, and best-case scenarios and consider necessary responses for each. Prudent CFOs are currently managing costs to the worst-case scenario.

Customer churn rates also affect cash. CFOs are helping to minimize the impact and maintain cash flow, often collaborating with chief revenue officers who devise ways to retain customers through payment plans, modified pricing arrangements, or other means. Some amount of churn is still expected, and the analysis of best- and worst-case scenarios must remain ongoing for the foreseeable future to maximize customer retention and manage cost structures accordingly.

Communicating often — internally and externally.

Some C-suite executives respond to crises by keeping information close to the vest, but this can cause uncertainty and fear among employees, clients, and key stakeholders. The most effective CFOs are taking off their “finance hats” and showing empathy across the business through regular, proactive, transparent — and socially distanced or virtual — meetings about the company’s finances and associated limitations.

These CFOs are also working with their CEOs to create a pipeline for key stakeholders to ask questions, allowing for full transparency regarding information integral to the company’s viability. Regular and consistent communication is critical and will help ease doubt, decrease distraction, and keep people motivated.

It’s also critical that the CFO (perhaps in partnership with corporate affairs) continues to inform and reassure investors, customers, banks, and vendors of the company’s standing and plans for recovery. Staying visible and available is key to maintaining stakeholders’ trust and confidence through the ups and downs.

Going on the offensive.

The CFOs out in front of the pandemic have shifted from initial stabilizing reactions to more proactive stances. They understand the need to pivot from survival to transformation to resilience. The businesses destined to thrive are forward-thinking, strategizing today on the post-crisis recovery that will solidify and strengthen their positions in the “new normal.”

The pandemic has revealed weak points that must be addressed at many companies, yet there is a silver lining in the wake of such revelations: Leadership is forced to seek clarity into what their businesses do well. This critical understanding should lead to strategic investments that will yield big improvements and impacts. The impactful CFO provides insight into the areas that have performed well historically while also challenging closely held business beliefs.

Going on the offensive also means examining the people, processes, and technology to determine what needs to be enhanced, restructured, or replaced. Some CFOs are analyzing the financials to see whether their businesses are better serviced centrally rather than locally. Others are directing investments toward assessing and replacing manual processes with automation or with more efficient systems that will boost productivity.

CFOs in the thick of navigating the pandemic advise an opportunistic mindset. With great pressure to preserve cash and cut costs, opportunities for M&A will arise — though they may be few and far between. Public companies may be looking to divest non-core businesses, while private company founders may be ready to cash out. Be prepared to act quickly whenever an opportunity presents itself. The CEO must work closely with the CFO to review potential targets and conduct due diligence expeditiously.

Flexibility and adaptation are essential. Everything — even M&A — is possible in a remote-work environment. Deals are being executed surprisingly well via Zoom, Slack, and other online communication channels. Due diligence, leadership meetings, close processes, and post-merger integrations can all be completed virtually. The next generation of communication tools is essential to the “new normal,” and embracing those tools will keep productivity high.

Evaluating your team.

No CFO can do all of this alone; a high-performing team is necessary. Without a strong controller and FP&A leader providing support, even the most talented CFOs can’t be as effective as possible.

In a period of constant flux, the entire finance function needs to be comprised of “A players” who are ready, willing, and able to contribute to the financial insights and reporting necessary for astute, data-driven decisions. Especially during times of crisis, financial planning must accelerate the forecasting process with continual updates by incorporating digital collaboration tools. Embracing technology is now critical to increasing productivity, accuracy, and informed responses.

Savvy CEOs these days are engaging their CFOs — in addition to the CHRO — in helping to identify talent gaps across the entire business. The CFO can provide valuable insights into productivity metrics, headcount, etc., from a financial perspective — insights that can drive those tough but crucial decisions around hiring, firing, and pivoting people to new roles. Counterintuitive as it may seem, now is a fortuitous time to make strategic hires and invest in top performers. In a business environment defined by uncertainty, talented leaders previously committed to their roles are now open to engaging with recruiters touting exciting new opportunities. 

How will the second wave of the pandemic further impact the global economy? When will there be a vaccine? What will the “new normal” look like? What impact, if any, will the U.S. election have in November? Not even the most battle-tested CFO can answer these questions with certainty, and planning a sound and successful business strategy has rarely, if ever, been as difficult as it is now. The only thing certain as the pandemic rages on is that bold, forward-thinking CFOs will be the ones who save the day now — and well into the future.

Originally published on CEOWORLD magazine.