Rising to the challenge of post-pandemic planning
Finance bosses are using a range of techniques as they plan for post-pandemic threats and opportunities
With coronavirus restrictions easing in some countries and tightening in others, chief financial officers (CFOs) face tough choices between shoring up finances, guarding against future shocks and investing for post-pandemic growth. But they are developing some highly flexible tools and approaches to help them balance these conflicting needs.
Corporate share prices have experienced heightened volatility for more than a year. Economic uncertainty continues and could easily surge as the bumpy ride out of the pandemic continues.
Companies face different threats and opportunities. But those that have embraced digital transformation with careful, data-led planning and analysis have been agile enough to survive the past 12 months in good shape and have the best chance of grasping post-pandemic opportunities.
In the past 12 months, many have adapted to new products and services, such as home delivery or live streaming gym workouts, that could become staple revenue streams. They are now looking at how to sustain these profitably as normality returns, by expanding systems, training and external partners.
Organisations are also likely to be reassessing their entire portfolio of products and services in light of the changing market variables they may face post-pandemic. This will include thorough cost and profit analysis, and scenario planning over different timescales for each, to get a clearer idea of where to focus investment during the next few months.
Despite the challenges, CFOs have some useful tools at their disposal, not least of which is low interest rates.
Matthew Needham, an experienced CFO and director of consultancy The Big Red Tomato Company, says it is tempting to minimise cash in times of low rates and invest more, especially as economies rebound. But the continued uncertainty means it may be better to rebuild cash reserves first.
“Businesses with cash do not go bust,” says Needham. “Try to rebuild enough to cover three to twelve months of expenses.”
Anything above that can add to the safety margin or increase ability to invest in post-pandemic opportunities such as new products or acquisitions.
Over the past 12 months, technological capability has been crucial in helping many companies improve agility and manage wavering demand.
For example, some manufacturing companies have completed digital projects, in areas such as systems integration, robotics, digital twinning and intelligent automation, that enable them to flex production in new ways. Donna Edwards, managing director for business support and business finance at The Growth Company, says this has helped many realise they had more capacity than they thought.
Across sectors, companies have also used data-analysis techniques to help predict demand and better control capacity. CFOs and finance teams with advanced analytical skills can play a pivotal role in these projects, re-emphasising their importance and relevance in the business. Those who have yet to adopt such skills may struggle to cope with continued uncertainty post-pandemic.
Some CFOs are re-emerging from the COVID crisis with significantly reduced costs in areas such as transport and rent due to travel restrictions and closing or downsizing offices.
Edwards says: “Companies have proved they can run things remotely and flexibly; even sales meetings have worked remotely for many.”
Chris Ortega, director of finance, Americas, at marketing platform Emarsys, points out: “Companies have new cost baselines after the pandemic. How do we maintain those savings and use them to develop brand awareness when we can’t go to trade shows or travel to sales meetings? We don’t have to be the ‘number police’ because we’ve built savings. But we do have to find new and creative ways to grow the top line.”
One way to do this is through data analysis that uses the widest range of internal and external data possible to hone existing markets and find new ones.
Frequent scenario planning
Everyday tasks such as budgeting and forecasting continue, but their use in uncertain times is limited without frequent and data-led scenario planning, adds Ortega.
Emarsys serves the retail and travel sectors, and the pandemic has affected each customer differently. Scenario planning must be applied alongside detailed client segmentation on factors such as industry, size and recurring revenue or even one client at a time, he says.
“We’ve had to get specific in addressing each customer’s needs in America and globally,” says Ortega. “We provided customers free solutions to help them retain revenue in the pandemic, for example assisting retailers with physical stores move towards ecommerce as quickly as possible in case another lockdown happens. They appreciated that and it has helped our customer retention.
“Segmentation also allows a sharper focus on performance indicators for each tier. But there is still no one-size-fits-all approach. We still have to pivot to new events quickly and flexibly.”
However, as economies improve, the firm’s planning rhythms have shifted from daily and weekly to quarterly.
“Due to the uncertainty, we still can’t have confidence in a nine or twelve-month plan,” he says. “That makes it difficult to explore new products, services or markets, which usually need twelve to twenty-four months to plan and measure success.
“We are just trying to be as efficient as possible in core markets and refine our product for each segment. But my biggest takeaway from the pandemic is to be more empathetic and understand the human impact behind each decision. Reduce resources where necessary, but always be listening and taking a more qualitative approach. It’s a fundamental shift from the traditional CFO approach.”
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