How are you handling this mayhem?
 
You need to accept the pandemic as a Black Swan event and as the new normal in the interim. It is imperative that businesses recognize the current situation and make, revise, monitor strategies.
 
To better understand how to manage this mayhem, in this practical guide, we will look into four major dimensions:

1. Risk assessment, risk mitigation and managing uncertainty 
2. Business disruption, impact and what to make out of it 
3. Digital transformation and digital initiatives – have they lost their sheen in these times?
4. Human capital – work from home. How to increase productivity?

Risk Assessment, Risk Mitigation and Managing Uncertainty 

Risk assessment and managing uncertainty is entirely a different ball game now than just a couple of months ago.
 
Previously, risk assessment and mitigation had bigger timelines - one year and more. Risks were associated on strategic front than on running operations and were not determining the going concern of a business. The businesses were not evaluating risks for survival. Risks had to do with the medium to long term plans of the business, and the allied investments.
 
Current times are unprecedented. The COVID-19 crisis is a Black swan event, and no one has been actually prepared. Today companies focus on getting through the day, next quarter and identifying the relevant risks. This assessment needs to be on daily basis and the risks have to do with running operations and going concern. 
 
In current situation, it is a mistake to equate one business scenario to another. What works for trading of standard products may not work for an interior fit out sub-contractor. We cannot paint all business situations with the same brush.
   
To manage the Board effectively, the CFO is now required to have a different skills set – he or she should be quick, agile, factual, with ready solutions, and be able to discuss with the Board action plan in evolving situation .
 
Two specific actions from CFO that are needed now more than ever before:
 
1. Good financial and commercial understanding of business and ability to improve his or her understanding quickly.

2. Mindset to find solutions and expect things can go further worse. Paranoids do succeed.

Business Disruption, Impact and What to Make Out of it 

COVID-19 has disrupted the business significantly. There are two main pain points:

• Loss of the business.
• Impact on cash-flow across all business segments.

Where should FP&A professionals look into in order to help the business cope with the current situation?

1. Collection: the need for cash is at its greatest. Businesses are facing cash flow stress and combating risk. You need to get smarter with the use of cash. Previously, businesses have been offering flexible payment terms. Now they need to find ways of reducing credit. Customer ‘playing with our money’ is a no-no. For a new deal, insist on Cash / Current Dated Cheque (CDC). When giving credit act like you are paying from your pocket.

2. Liquidity: companies need to manage liquidity TODAY and also during the next 3 months (shut down and restoration of some normalcy) delving into optimistic or, more likely, pessimistic scenario. Companies should also manage working capital well with emphasis on inventory, debtors, creditors level. Another area for adjustments is the cost reduction / better cost management which may not have immediate cash flow impact but will improve liquidity on a short-term basis.

3. Inventory: FP&A needs to ensure optimal inventory levels. It is a good idea to invest in stock that generates fast-sales and/or higher margins. Your choice depends on how well you coordinate with your supply chain team. You need to support them with forecasts; it can now take more time from the order placement till it is received. 

4. Change in Product and Segments: the new environment has brought in a change of products in demand. How quickly we can adapt and meet customer requirements? There is a lot of room to grow even in the difficult conditions. For example, by taking market share or by doing business smartly.

5. Supply Chain / Customers: Engaging with them and recognizing their stress is important for the business. The ''one-size-fits-all" approach will not work. There is no point of pursuing revenue at any cost. Revenue is only an accounting entry unless realized in cash.

Digital Transformation and Digital Initiatives – Have They Lost Their Sheen in These Times?

The digital transformation and digital drive have been a trending topic in the pre-corona times. 

Has this area lost its sheen now? 
 
Organisations that are ahead on the digital curve are surviving the crisis. Everyone needs to embrace and drive digital activities, but Digital is not E-Commerce or CRM. It is the mindset to embrace new technology for connecting with customers. All functions need to work towards a digital mindset that focuses on keeping the customer engaged. Digital also means having an “Always ON” mindset. 
 
Customers expect a response immediately. The ongoing disruption is changing buyer’s behavior in the supply chain. Customers are now spending more time online. The old way of doing business by maintaining rapport and visits to the purchase department is not working. The end-user customers no longer want to meet you; how can you maintain and get their share now? This is where digital initiatives empower the teams. 

It is these initiatives that will ensure companies maintain their business. 

Human Capital – Work from Home. How to Increase Productivity?

The current mix of remote and office work is creating anxiety and stress. Working with social distancing is challenging. This can be mitigated by creating new small team structures, offering flexibility, better usage of technology, and a humane approach.
 
When the work from home scenario (WH) emerged, my belief had been that it would be an uphill task to provide the same results and productivity as finance professionals cannot work in silos and need immediate actions on many fronts.
 
Our company has been three weeks in the Partial WH mode, and I guess, I am proved wrong. Our Group Finance team did an incredibly great job.
 
How did we reach these results?
 
We created a WhatsApp group as we were not meeting each other in person any longer. We started having daily virtual meetings to discuss actions for the day which could range from banking, collections, compliance and even preparation of external audit. These online meetings also helped other team members realize what their peers were doing, and we got some brilliant initiatives.
 
There was an increased level of empathy, with more informality to discuss matters, even personal topics. This helped in appreciating what others were going through, which I believed led to an increase in energy levels. 
 
We worked beyond the normal working times, with a blurred line between work and home. Team members responded even after normal working hours.
 
As I look back, it was a great experience to become more productive in these 3 weeks.

Conclusion

The times are tough, and the uncertainty is looming large on all of us, but I hope the above action points will help in navigating through these times. I look forward to hearing your comments, suggestions and actions.