How CFOs can help businesses emerge from the crisis

Turnaround specialist Dr Philip Smith and Rick Payne from ICAEW’s Business and Management Faculty share their thoughts on how CFOs can help their organisations emerge from the coronavirus pandemic.

Accept uncertainty and ambiguity for the foreseeable future

We do not know when lockdowns, social distancing and economic turmoil will end. What if no vaccine is found or immunity is short-lived? ICAEW’s report Business Performance Management – working with tensions remains relevant.

Assume life will be different

Human behaviours and consumer preferences may be permanently changed. Services were moving online before the pandemic and homeworking was increasing. These trends have accelerated and are unlikely to fully reverse. Business models which have not already been reviewed need to be re-examined.

Make newfound agility the norm

Many businesses have implemented change at breakneck speed. Given anticipation, forecasting and planning will remain difficult, those who continue to respond rapidly to new information will be able to compete most effectively. Are you geared up to obtain and synthesise relevant information quickly and feed this into rapid decision-making and implementation processes?

Keep options open

Strategy should be designed to allow rapid adjustment to changed circumstances, and not be based on fixed assumptions. Scenario planning should be used to enable the rapid implementation of alternative strategies and facilitate a rapid response if the worst-case scenario begins to materialise.

Focus on learning, not blame

A retrospective blame culture, as seemingly run by the media, is unhelpful and counterproductive. Hindsight should not be used to criticise decisions which were made quickly, in good faith and based on the evidence available at the time. Fear of blame can lead to inaction with likely worse consequences. Accountability remains important, but the focus should be on learning from the past, innovation and continuous improvement.

Develop resilience

This can be done in a variety of different ways, for example through holding contingency cash and liquid assets, and also carefully managing people, infrastructure, supply chains and inventory.

Recognise the organisation’s risk appetite

This needs to be discussed and make explicit. A high-risk, high-reward approach may be acceptable, for example with entrepreneurial businesses willing to have a go, confident they can bounce back from failure.

Beware of cross-subsidy

Where there are multiple business activities, assess them as separate entities, so that currently unviable divisions, products or services are maintained for the right reasons. Not because the drain on overall resources is not visible.

Recognise unviability

If it is clear the business model is no longer viable under all reasonable scenarios it is better to accept the inevitable now and extract as much value as feasible for all stakeholders. Carrying on may produce a worse outcome for all concerned.

Embrace sustainability

While short-term survival is the most pressing concern for many businesses, it’s also important to remain committed to the UN’s Sustainable Development Goals, such as stopping global warming.

We will be looking to develop these thoughts further over the coming weeks. Please email your ideas on how businesses could (and should) change to bam@icaew.com