The current crisis around the world caused by the COVID-19 pandemic is testing all of us. A new normal has set in and this has become a time for business survival. While everyone is expected to come together to produce positive outcomes, it is also fair to say that responsibilities at the highest levels of leadership have changed. The CFO is now being called upon to demonstrate arguably their strongest leadership ever. Many people in multinational companies are looking to their CFOs for guidance and clarity when it comes to the strategic direction of their company, both now and in the future. It would not be outrageous to suggest that the Corona virus period and the response to it, could be considered a defining moment for CFOs everywhere. Their behavior and decision making over the course of the next six months may even define their legacy at a company. This is quite a bit of pressure for anyone to handle and in this article, we will look at some of the crisis management skills the CFOs will need to display in order to successfully navigate the strong and difficult economic headwinds they face right now.
The Voice of Leadership
A CFO has a duty of care right now ranging from company financial obligations to employees, investors and business customers. This person needs to be the voice of leadership for a range of key stakeholders. These stakeholders need to feel guided, trusted, empowered and secure. This voice of leadership needs to outline clearly defined plans and responses to an unprecedented series of events that is affecting not only an individual multinational company, but the entire economic world. What the CEO says right now will face greater scrutiny than ever before so choosing one’s words carefully seems like a good place to start. Communication needs to be strong, transparent and frequent- it also needs to hit the right tone- people around the world are suffering right now due to Covid-19 and the focus can't be solely on money or economic survival, crucial as these might be. The voice also needs to be flexible and recognize the changing or escalating nature the current crisis- the words of the CEO need to keep pace with rapidly breaking news from government and media outlets on the subject of the pandemic. A communication that worked yesterday might not necessarily work today- such is the rapid rate of change that is the nature of COVID-19.
Addressing immediate issues
Leadership has many parts, one of which is meeting your obligations on a daily basis. Managing company finances and ensuring their long-term stability is the primary obligation of any CFO. Their ability to do this is now hindered by an extraordinary set of circumstances that would test the liquidity, supply chains and financial stability of even the most solvent companies in the world. Maintaining cash flows through prudent financial management and necessary cost saving activities is very important during a time of crisis. Companies around the world are being forced to close their doors and many of them do not know when they will be able to operate normally again. People and businesses are not spending, and money is not flowing throughout the economy right now and there is no clear indication as to when things are likely to return to normal. Any cash available needs to be optimized and put to the best use possible- this is the responsibility of the CFO who must prioritize the distribution of this cash while fielding calls from all business functions demanding injections of further cash for survival reasons. The CFO will also need to work closely with the finance department to make budget forecasts, contingency plans and cash flow predictions that are incredibly difficult to quantify right now. The CFO will be attempting to control spending while also raising additional reserves of cash from any avenues available. Immediate issues like this are facing a CFO every day for as long as the COVID-19 crisis continues. Reports will likely need to be delivered to the CEO and others on a daily basis to help business leaders with informed decision making.
Promoting a spirit of resilience
Organizational resilience should be a key strength of any CFO operating in a multinational today. What they need to do right now is bolster this resilience in the organization structure and then transform it to other areas in the shape of a mindset or attitude that can be embodied by all employees in the company. This is example setting of major importance as good leadership has the potential to create a benchmark for how people should behave in challenging circumstances. Creating and promoting a spirit of resilience is especially important for employee morale, which is taking a beating right now. Employees across the board need a sense of hope, optimism and positivity that they can get through this period and that there are better days ahead. They need to feel that this resilience is within their grasp and that it is visible on a daily basis, taking identifiable shape in the actions and communications of their CFO. At the same time, the CFO cannot lose sight of immediate issues that require their attention- therefore, all these communications and behaviors must also include information and action plans around the financial and strategic goals of the company. It is a delicate balancing act, with few easy answers and subject to almost daily change- but those who focus on getting it right are likely to reap long-term rewards.
A plan for stability
During a period of heightened uncertainty, the CFO is called upon to develop plans for both current business continuity and future stability. A great deal of financial planning and analysis as well as an assessment of the human capital available is needed to make this happen. Plans must be fluid and adaptable, ready to change in line with both the market activity and government activity in response to the crisis. While everybody accepts that we are in a period of flux, both employees and leadership teams at multinationals still need to feel that a plan is in place and they are working within specific guidelines designed to deliver on this plan. Without such a plan, a sense of aimlessness could manifest and result in chaos. The CFO will work with the executive management team to outline and deliver a framework of realistic yet flexible actions that will constitute a crisis response for the immediate future. The CFO then needs to monitor the effectiveness of this plan in action and adjust cash reserves in response to daily results.
Mindset: Adapting to change
The COVID-19 economic crisis will subside at some point but right now, nobody knows when. Expecting the unexpected and working off the premise that the only constant is change may prove valuable. The CFO needs to develop a mindset that is about adapting to change and accepting that change plays a key role in the financial future of the company. It is about avoiding resistance to this change and instead approaching it as an opportunity. Acceptance of this new normal allows for a shift in mindset, one that recognizes what is happening right now and looks to operate in the present moment. A mindset focused on adapting or transformation can help with things like budgets, expenses, forecasting and financial planning. This new mindset will help sharpen the focus on generating new sources of revenue while reducing existing costs. An example of adapting to change would be introducing measures which increase the digitalization of specific tasks within business functions. Such an initiative corresponds to the reality that most employees are working from home and delivering remotely. This kind of thinking can generate results that are rooted in the here and now and also appeal to a dispersed workforce.
CFOs need to accelerate their thinking and embrace a new mindset if they are to develop a crisis management plan which can help their business survive, adapt and drive during one of the most challenging periods they are ever likely to face in their careers.