How do CFOs reshape today to reinvent their tomorrow?

Bold choices to transform the financial function can improve resilience and drive a faster recovery.

For many companies, the economic impact of COVID-19 has pushed the need to reimagine, reshape and reinvent future financial and investor fundamentals to the top of the boardroom agenda. Unresolved issues that the C-suite have been debating since the global financial crisis can no longer wait. It is no longer a case of “can we afford to?” but “can we afford not to?” Central to resolving these fundamental challenges will be the CFO. Finance touches every aspect of the company.

Adapting operations and building resilience

CFOs reassessing their firm’s financial resilience in the post-COVID-19 world will need to consider several key actions:

1. Build a cash flow plan to inform strategy

As they navigate ongoing volatility, every step the CFO will take – from building a cash flow plan to advising the board of directors – begins with potential scenarios of the future. The critical element is having integrated financial scenarios for the firm, supported by cost and revenue forecasts and based on multiple macroeconomic, sector and governmental intervention scenarios. 

The scenario planning should be holistic. EY teams recommend a top-down approach – modeling the pandemic, assessing its economic impact, and creating working scenarios specific to your industry. While rigorous and exacting, the process should be flexible to adjust for changing conditions. These core assumptions are then established as anchor points for financial planning and strategy.

2. Create a new plan to manage today’s realities

Given the expected up-and-down, sawtooth-shaped economic recovery from COVID-19 recession, many companies will take some time to regain their financial confidence. Revenues are likely to be slow to return, cash reserves may be drawn down, and for many firms, this could mean a period of chronic shortage of liquidity and operating capital.

The old plans won’t work. The CFO needs to consider creating a comprehensive financial strategy, with steps specific to today’s realities:

• Ensuring liquidity – an aggressive plan to source cash, reduce costs, and build a multi-week cash flow plan
• Managing stakeholders – reducing risks through collaboration with creditors, suppliers, shareholders and regulators
• Staying compliant – with more complex accounting and tax issues arising from a more volatile environment and exceptional events
• Sourcing new capital – while it may be challenging, engaging with new sources to capitalize the company for the future

3. Align with government recovery programs

World governments have announced massive support and stimulus funding. But while this is a potential lifeline to many companies, it is also a bewildering mix of loans, grants, tax breaks and subsidies.  

CFOs should understand and seek out stimulus funding that their firms are qualified for.  A first step is to operate a global monitoring system to alert them of stimulus programs and their changes. The regularly updated EY global tax policy tracker helps you monitor rapidly emerging government policy and stimulus responses to COVID-19. A dedicated team should be set up to pursue and win government support. Finally, post-funding conditions such as hiring levels and payback terms must be monitored carefully for compliance.

They also need to be sure that any commitments entered into with state aid do not hamper recovery growth plans.