Critical decisions that impact the business cannot be made unless management teams and boards of directors are on the same page.
Transparency, fair and balanced dialogue, and well-structured processes for reaching agreement on strategic plans – this dynamic should be present in all departments, at all times.
CFOs play a very important role in all organizations; however, in crises, such as the global spread of new coronavirusThe role of the CFO has become even more relevant, since they will have the most relevant and up-to-date facts and figures, which can help boards of directors find clarity amidst the chaos.
In corporate transformations, the pragmatic and data-driven financial leader is the only one who can bring data to the board of directors to assist in strategic decisions and induce reflection among everyone on the short- and long-term consequences.
Financial leaders have the mission of acting as reliable translators of critical market information, with a forward-looking perspective.
The most important functions of company boards of directors during and after COVID-19 are threefold: ensuring that employees are well treated, gaining an objective and insightful understanding of the business and its trends, and anticipating and preparing for the company's recovery in the market in which it operates.
The key in all three areas is having high-quality data to inform board decisions and share with employees. Obviously, obtaining data from a free-falling market is never easy.
Boards of directors need to know what is really happening with the company's revenue, what short-term measures can be taken to preserve the company's financial stability, how to increase cash flow, and all the actions that need to be taken during the initial stage of the crisis.
However, boards of directors should also have access to and control over long-term issues.
A key difference in the role of CFOs today, compared to their role during the 2008 financial crisis, is that they need to simultaneously manage short-term response capacity and future recovery.
The CFO must keep the ship afloat in turbulent waters – paying attention to employee health, ensuring business liquidity, monitoring cash flow, guaranteeing the functioning of the supply chain, reviewing the situation of clients and suppliers, and initiating cost reduction programs. And as if all these challenges weren't enough, they also need to observe the main trends that are emerging or have accelerated as a result of COVID-19, such as digitalization and changes in consumer behavior.
The balance between opportunity and risk has been substantially altered for most companies.
McKinsey research Studies show that companies that invest in transformations by balancing a performance and health agenda have a much greater chance of success.
The CEO might try to profit from immediate demands to meet current market needs – “let’s make ventilators, let’s make disinfectants.” The CFO’s job, on the other hand, is to point out how short-term actions can generate long-term consequences for the business and what the financial impacts of these decisions are.
It is also important for the CFO to present reports and preliminary readings to the board that objectively paint a full picture, including potential future scenarios. This is the only way that boards and senior management can make thoughtful and well-informed decisions – first for recovery and then for a sustainable future for all stakeholders. The word “crisis” has two meanings, one being “danger” and the other “chance.” Today’s CFO must consider both.
Outside of crisis periods, studies conducted by INSEAD and McKinsey indicate that boards spend more than two-thirds of their time on "household tasks"—financial reporting, compliance, environment, health and safety issues, regulatory matters, and so on. Only about 20% is spent on analyzing and discussing strategy. However, during times of crisis, this situation changes, requiring greater involvement from CFOs.
The board of directors is responsible for strategy, and the CFO must be prepared with data to support discussions about strategy.
The CFO should establish financial and non-financial KPIs and review the strategy process to see if risks and opportunities are properly assessed.
Adding to all of this, the CFO's role is now much broader and more challenging than it was five years ago, including additional responsibility for digital transformations and even IT initiatives.
To meet all these challenges, today's CFO needs access to relevant information in real time, monitoring key business KPIs, all in an integrated way and accessible from anywhere, at any time. This is only possible with access to a robust, flexible, and 100% cloud-based ERP (Enterprise Resource Planning) system.
Conclusion
The challenges facing today's CFO are numerous, ranging from being a point of reference on boards of directors and managing all aspects of the company's financial and accounting operations to participating in the digital transformation of the business.
Given this entire scenario, it is necessary for the CFO to have a modern and robust enterprise management system that, in addition to providing all the necessary data for managing the organization, will keep everything up-to-date and accessible anytime, anywhere.
