The crucial role of the CFO and finance in times of COVID-19

Why the CFO and finance play a crucial role for the success of a company during COVID-19 times

Find out why finance holds the key to success during a period of crisis.

5 Mins

The tower of strength for the entire organisation

Why the CFO and finance play a crucial role for the success of a company during COVID-19 times

The CFO, the finance manager and the entire finance department should be the tower of strength in times of crisis, as we are now experiencing in these challenging times of COVID-19. They are the critical referees who must take or deliver challenging decisions. In addition to making difficult decisions, they should also be the scouts of the (near) future.

Such decisions cannot be taken if there is no cohesion in the Boards. Transparency, balanced dialogues, well thought-out observations and structured processes are a necessity for strategic decisions. In fact, this dynamic should always be present, both in good times and certainly in uncertain times such as today.

Therefore, we would like to explain what is expected of finance today and tomorrow in COVID-19 times, why this is essential and how they hold the key to success.

Chapter 1

3 important functions of the Board during COVID-19.

Respect

Its employees should be treated decently and the necessary precautions should be in place.

Insights

Gain insight into the direction of the company and the trends in the market, with the necessary transparency.

Anticipate

Anticipate and prepare for recovery.

De CFO of de finance manager zijn de enige personen die de raden van bestuur kunnen activeren om rekening te houden met alle korte- en langetermijngevolgen van de voorgestelde strategiebeslissingen.

The CFO and the finance department therefore play a crucial role. The key to these areas lies in having high-quality data. They are the first in line to come up with relevant, up-to-date figures and facts. The CFO or the finance manager are the only people who can activate the boards of directors to take into account all the short- and long-term consequences of the proposed strategy decisions.

Of course, it is challenging to obtain data from the market in uncertain times. In the midst of a crisis, it is therefore a good idea to use historical data. Previous annual figures, performance, credit analyses and scores, the measures that were previously used in times of crisis and what lessons were learned (such as during the financial crisis of 2008). Therefore, today's CFO needs to have access to good, quality information streams and needs to be 'on top of their game'.

Why is this important?

The board needs to measure/know what is happening with the 'topline', what measures can be taken in the short and long term to keep or retain money, how resilient the company is, what actions should be taken on  financial management level and payment strategy, as well as what should happen in a 'worst case' scenario. 

Chapter 1

Today's CFO is the captain who must steer the ship through troubled waters.

An important difference in today's CFO as compared to, for example, their role during the financial crisis in 2008, is the fact that they have to manage short-term responsiveness as well as eventual recovery.

Today's CFO is more dynamic and flexible. He or she must secure liquidity, keep cash flow under control, assess profit and loss positions, protect payment terms, monitor the financial situation of customers and suppliers, ensure the functioning of the supply chain, initiate cost-saving programmes and, today, must increasingly take compliance procedures into account.

But the story does not end here. Today's CFO also needs to be, as they say in football terms, a scout for key trends that are accelerating as a result of COVID-19 such as digitalisation, data automation, data-driven decision models, market developments, government decisions and changes in consumer behaviour. 

The CFO is the right person to support the strategy discussions

Eventually, the board of directors is ultimately responsible for making the strategic decisions, but the CFO is the right person to support and initiate the strategy discussions. The financial leader can serve as a neutral party who supports them with suggestions, insights and analyses.

Chapter 1

Customer (&) Success Management

Finance must weigh customer needs against costs and revenues. If customer priorities change during a crisis period, a strong signal is given to adjust the operational strategy. This helps the CFO to evaluate the efficiency of the organisation.

Inefficiency has two main causes:

Old-fashioned ICT systems resulting in the data that is entered getting lost, being too sloppy or not being able to be used.

Maintaining procedures throughout the organisation that take too long and waste too much (manual) energy.

This can be solved by centralising the data streams, so that this can lead to intelligent insights. 

For example, if too much manual energy is wasted on the 'credit check' of a new customer, you can choose to automate this part. This not only saves a lot of time, but also a lot of manual hours and minimises the human error margin. The time that is saved instead can be spent efficiently on the core tasks of the employees. This stimulates better customer relations, the teams' results increases and we are one step closer to achieving the company objectives.

By combining all the data and the customer database with the insights of the employees, only then does one obtain a 360° understanding and insight of how the company can be successful now and in the future. This formula forms the foundation of a flexible and efficient company. Such companies embrace change and dare to work and make data-driven decisions. This is the only way to counter a crisis period.

Chapter 1

Daring to contradict in the full extend of objectivity

An independent CFO will always be transparent with the board. A good CEO will always strive for an open relationship with the CFO.

Of course, the professional relationship between the CEO and CFO is important. But the CFO must always be objective, even if this can sometimes lead to constructive conflicts. The CEO is sometimes guilty of only presenting the positive story in the board meeting, which can sometimes be challenging for the CFO to link to the more objective (financial) framework.

However, this is the role of the CFO. They should put the strengths, the weaknesses, the opportunities and the threats on the agenda, formed by objective data and share this transparently with the board of directors. Only in this way can one effectively assess what is going well and where the challenges (will) lie.

The CFO should always be objective, even if this can sometimes lead to constructive conflicts.
Chapter 1

The CFO's newest role: ‘an agent of digital change management’

As we have already partly mentioned, the role of the CFO is much more extensive than, say, five years ago.

COVID-19 has shown us that (financial) processes must be digitalised. During a lockdown, companies are forced, even compelled, to work from home. Manual input, such as booking invoices and scanning forms, makes it practically impossible to do this from home - Automation is key.

The global economy will not look like before. Cost efficiency is the goal and digital automation is the path to follow. For example, companies save up to 70% of their administration time and costs just by digitalising and automating their expense and invoice management.

Not only the financial picture has to be accurate. The CFO is co-responsible for making the right decisions using substantiated, objective data insights. He or she has become a critical referee in the board of directors when constructive discussions are in progress. A CFO must be objective, transparent and, as already stated, dares to contradict if necessary.

Today, the CFO has acquired additional responsibilities for cyber and digital transformations, automation and other IT actions, and must also take into account the necessary compliance procedures. This has even moved up a gear as a result of COVID-19.

To grow in these (new) roles, as CFO you need to look at the organisation objectively on the one hand and take a step back on the other: "which other functions could I still perform in the company?"; "how do these overlap with my current tasks?"; "which initiatives would have the most impact in the company?" and "how can I realise quick (performance) benefits in these new areas?".

As a CFO, one should 'sponge'. Absorb as much information as possible, read as many business publications as possible and train yourself continuously. Step by step, your knowledge will increase.

Chapter 1

Compliance is the new "buzz-iness" word

As companies increasingly embrace digitalisation and automation because of this pandemic, the fraud landscape is also changing. Working from home and doing more business online are the underlying factors, as it creates the opportunity for greater C-level fraud, phishing and doing business with phantom companies (just think of the Belgian government's masquerade in March 2020).

Out of the 1.7 million active companies in Belgium, about 20% have the potential to be phantom companies, which translates to about 340,000 companies. Vigilance is therefore required, as 60% of all fraud occurs through such constructions. Existing compliance checks are therefore compromised and may even become irrelevant or irrelevant.

Compliance is a must for the cfo: he or she must be able to create a 360° picture of the entire risk profile and must therefore have access to all possible data elements.

Why does the CFO play a (new) role in this?

Because, as demonstrated earlier in this contribution, the CFO must be able to outline a 360° view of the entire risk profile. He or she must have access to all possible data elements.

A 'compliance' investigation is an important part of risk management because, in addition to checking the (financial) company information, one also investigates the reliability of the business relations. Doing business with a fraudulent organisation or person will damage the image of the organisation and its management, with a very real chance of losing customers. It may also lead to non-payment of the delivered goods and services, which will also threaten the financial stability of your own company.

What actions should the CFO take?

Awareness

Make compliance an everyday concept so that it becomes a conscious awareness of both the board of directors and all other employees.

Analyse

Review the fraud risk landscape. Stay on top of the latest developments, regulations and re-evaluate existing audits.

Take measures

Conduct impact analyses and install the required preventive and detective compliance measures.

Excellence in crisis management

Maintain focus on building trust through every possible communication channel by demonstrating excellence in crisis management.

Automation

Embrace automation by automating verifications along with the entire financial company business profile. This streamlines the necessary business workflows for the CFO.

We close with a quote that summarises the essence of the CFO of tomorrow and why the CFO, the finance manager and the finance department hold the key to success during a crisis.

As a leader in a company, the modern CFO needs to propel a culture of security. No longer is our job just about revenue, costs and budgets. There is a strong emphasis on managing risk, driving performance and ensuring the integrity and accuracy of company information.


Sankar Narayan, former CFO (now COO) of Xero

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