The following is a contributed article from Kevin Dancey, CEO of the International Federation of Accountants. Opinions expressed are the author's own.
The transformation of senior finance roles, including the CFO, is nothing new. Yet, as the COVID-19 pandemic presents society and business with the most pressing challenges we’ve seen in the past century, there is new urgency behind this transformation that few could have imagined.
For CFOs, the pandemic presents shrinking balance sheets, growing risks, and challenges to the supply chain. It means human capital is stretched and stressed. According to PwC, 87% of CFOs expressed concern that the pandemic would significantly affect their business, and 80% said they expect a decrease in revenue or profit for the year.
The burden crushes small business more — by one count, one-fifth of small & medium-sized enterprises in the U.K. might collapse. In the public sector, finance and accounting leaders face enormous fiscal interventions that will have long-lasting impacts on government finances.
In a post-COVID world, resources will remain constrained, and a slow re-building of the economy will require the right leadership. As senior leaders, CFOs must seize the opportunity to lead organizations in both short-term survival and long-term success.
To respond to the current crisis, and lead beyond it, CFOs must focus on three main areas.
Putting people first
A company’s most valuable asset is its people. While short term cash flows and earnings will be impacted by factors outside anyone’s control, much of the basis for long-term value creation is not in financial or manufactured capital, but in human and social capital.
As the pandemic spread, going to work clearly put many people in danger and posed unacceptable public health risks. For all but a few businesses, this has meant the suspension of work in shared spaces. Remote work, while a good option for some, is not possible for all. The toll on employment has been devastating.
In organizations where remote work is possible, CFOs should respond to productivity threats by adapting to new ways of working. To support employees, they must understand their business' technological capabilities, and work quickly to use those capabilities (and find new ones) to support people and operations.
Safeguarding the wellbeing of employees and contractors must go beyond contractual obligation to keep people in jobs and to promote productivity while working virtually. Traditional views on productivity may evolve as organizations embrace remote working and encourage more effective ways to do it. Research shows remote working may actually lead to greater productivity.
CFOs and senior finance leaders have an obligation to support employees, and will be well-served by doing so.
Delivering trusted information
With ongoing uncertainty in day-to-day life, there’s a huge appetite for trustworthy sources. CFOs have an opportunity to show that their organizations are serving customers, employees, and shareholders responsibly — and to protect their brands in the process.
The most visible leaders of the COVID-19 response are often not the most trusted. In eight of ten countries surveyed in the Edelman Trust Barometer, "my employer" is seen as better-prepared for the virus than my country.
Businesses need investors and customers to recognize their confidence and leadership amid so much disruption. Achieving confidence requires clear and effective communication, much of it forward-looking, to both internal and external stakeholders. The CFO is critical to this process.
From short-term survival to long-term planning
CFOs will lead not just through this crisis, but also beyond it. This will certainly require short-term actions to keep companies running and people on the payroll. Cash flow, liquidity, and supply chains will be immediate issues. But long-term value creation must remain at the top of the agenda.
Shifting the focus from accounting for the balance sheet to accounting for value creation will be a critical piece of navigating this crisis. In addition to their financial duties, CFOs need to serve as business partners across all parts of the organization. They need to understand and deal with factors that will drive survival and future value creation, including people, customers, supply chains, and cash flows.
In working across their organizations, CFOs need a comprehensive understanding of and confidence in performance and results. They need to drive enterprise risk management. And they need to evolve their finance teams to meet the needs of the business — both in a post-COVID world and in the decades to come.
For CFOs and senior finance leaders, there is an opportunity to deliver more than disaster-response by safeguarding the organization and its people, honing new ways of working, and identifying new opportunities to deliver value and positive societal impact.
COVID-19 is the crisis of today, and tomorrow, and months to come. Lives and livelihoods are on the line. And as demand falls across huge sectors of the economy, supply chains go haywire, and liquidity evaporates, next week — let alone next quarter — are no sure thing for a huge number of organizations.
By focusing on its people, providing clear information to internal and external stakeholders, and driving long-term value creation and impact, CFOs can lead organizations through this challenging time.