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It was observed that CFOs had to don the role of a change agent and shift gears into rigorous strategy building and contingency planning while keeping an eye on the level of liquidity. Cost control and micro monitoring only via digital screens, however, was new territory for all.
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Looking back at the initial reaction to the biggest humanitarian crisis in recent times is a perspective building exercise. And discussing the initial actions of CFOs adds definitive value to the overall approach to looking at a problem and then dealing with it. It was observed that CFOs had to don the role of a change agent and shift gears into rigorous strategy building and contingency planning while keeping an eye on the level of liquidity. Cost control and micro monitoring only via digital screens, however, was new territory for all.
Securing the Strongbox
The first reaction of CFOs was to avoid and limit the paralysing spread of uncertainty on daily operations. Taking stock of liquidity and adopting a zero-based budgeting approach allowed strict control over finances. The keen eye on liquidity also helped keep net debt low. Research by the SBI research wing notes that Corporate India reduced debt amount to ₹ 1.7 lakh crore of debt reduction in FY 2020-21.
Participating in a CFO Roundtable, Sudhir Menon, CFO, Torrent Pharma explains that such liquidity management here to stay and will be ingrained in the DNA of financial operations. And believes that the focus on zero-based budgeting and net debt reduction is expected to remain in focus too.
The crisis mode also inspired a discipline towards liquidity management with expenses categorised and analysed based on their immediacy. All expenses that hinged on business continuity gained priority and working capital was upon finer scrutiny to defer those categorised as not immediate.
Nitin Parekh, CFO of Cadila Healthcare notes that there was an order of importance that ranges from employee payment including salaries and loans, followed by payment of critical materials, single-supply materials, MSME partner, essential services, and insurance, statutory and other compliance expenses.
Next Steps
As liquidity management fell into place, the larger change of Work-From-Home also had effects on how CFOs managed their resources. IT expenses to ensure seamless communication between employees and better bandwidth became necessary to bridge the gap between internal and external stakeholders.
Praveen Maheshwari, Director and CFO at Hindalco Industries observes some advantages in this way of working. He says, “There is a big change in thinking and the pace of change is faster.
Work is happening on digital channels and technology has brought on a new dimension. There is greater communication and more people can be involved for social events, the level of integration is much deeper.” He observes how organisational culture and communication can reach more people faster and in a centralized manner.
Cybersecurity- a growing concern
As greater connectivity breeds, new operating procedures too fell in place, opines Ashish Kumar, VP Corporate Finance and Treasury of InterGlobe Enterprises indicating a greater adoption to change. With Board meetings happening on virtual platforms he senses that the awareness and responsibility of ensuring cybersecurity rises.
Phishing emails, ransomware, breaches have become more common and have notified the importance of having strong cyber-infrastructure. A dearth of cybersecurity professionals is also observed globally. According to the reports of the State of Cybersecurity 2021 Survey (Part 1) that was conducted by ISACA in partnership with HCL Technologies, it was observed that 49 per cent of the organisations surveyed had unfilled positions in their cybersecurity divisions.
Ramit Gupta, Associate Director, Digital Strategy, IBM Global Business Services notes that an attitudinal shift was necessary to understand the magnitude of the change. He states how IBM moved from a few offices to eighty-thousand offices, indicative of the work from home situation with agile cross-functional squads that had various skillsets to effectively solve problems and coordinate better.
Ankush Jain, CFO of Dabur explains that the pandemic was also a unique opportunity to re-engineer the process and relook at the details. To ensure there is no resistance, he advises that organisations can rope in external consultants, explain the larger benefit to teams and individuals, set realistic targets and employ a project management team to effectively manage change.
The consensus on the crisis management efforts and the evolving realities have become clear. Newer dimensions to financial monitoring and building a more participative culture have been the unexpected advantages that have surfaced. While the uncertainty of the duration of the pandemic might persist, effective strategies to deal with black swan events are now in place as we trudge towards recovery with CFOs consciously steering the rudder as agents of change and first respondents to crises.