The rapid global phenomenon of COVID-19 and its fallout has left chief financial officers (CFOs) facing unprecedented challenges, many of them changing by the day. In response, CFOs need to role model empathetic, skilled leadership to help ease transition from the “new normal” to emerge stronger in the “next normal.” Decisive action, albeit with incomplete information, is called for, but where to start?
Here are my top five areas I think CFOs should be focusing on (with links to KPMG material for more in-depth advice):
- Managing talent risk
Many organizations have moved part or all of their workforce to a virtual model in response to the coronavirus pandemic. This sudden pivot is perhaps one of the most significant cultural changes that we’ll see in our lifetime. After the heroics of rapid remote infrastructure and support have been set up, what happens if a significant percentage of your workforce becomes unable to work for extended periods of time? What if they become ill or if they need to become caregivers for a family member who is sick? CFOs need to mitigate risks to major projects and business-critical functions due to possible serious staff attrition.
Learn how to manage talent risk during periods of crisis: Managing Talent Risk.
- Forecasting and scenario modelling
The future isn’t clear. Will the pandemic tie us up for just a few months, or are we going to have health and economic disruption for years? “Staying the course” may be a grave mistake in this climate. Scenario planning can be used to build prediction models and forecasts to evaluate the potential impact of the pandemic. To stay ahead of the uncertainties, action plans should be developed to position your team for shifting strategic and financial decisions based on varied outcomes.
- Financial reporting
Although much of the world is on pause, public companies still have a fiduciary responsibility for financial reporting. And not just to fulfil legal requirements, accurate financial reporting is critical to drive decisions that run the business. The uncertainty and risk that companies are facing will have significant implications for preparers of financial statements.
KPMG has created a list of accounting and disclosure requirements that may be affected as a result of COVID-19: COVID-19 | Financial reporting.
- Working capital and liquidity requirements
As you evaluate the impact of COVID-19 on your business, assessing capital structure and cash on hand are good places to start. The pandemic has reinforced that cash is king. And effective cash flow management becomes the challenge.
Here are three fundamental steps to build a robust financial resilience strategy that can help you to navigate through the uncertainty: Liquidity stress testing and forecasting (PDF 180 KB).
- Reviewing costs in light of changes in revenue
You will need to update revenue estimates to reflect the current environment. For many companies there will be a need to urgently review the cost base to realign to lower revenue projections. CFOs may want to take a lead on cost-cutting measures, balancing short term financial commitments against long-term stability to determine which expenditures can be stopped or deferred. This requires a difficult balancing act between the need for short term cost actions against keeping the business ready to take advantage of the likely growth opportunities post COVID-19.