4 minute read 24 Aug 2020
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COVID-19: How CFOs can drive resilience and value in an evolved role

By EY Global

Multidisciplinary professional services organization

4 minute read 24 Aug 2020
Related topics Consulting Finance COVID-19

The pandemic has caused substantial challenges for finance, but recovery presents the opportunity, even an imperative, to transform.

In brief
  • Identify and eliminate operational weaknesses revealed by the pandemic, and manage liquidity and cost challenges to safeguard business continuity in coming months.
  • Return to the growth path by fostering business agility and strengthening overall resilience in the company by rethinking the finance function’s role.
  • Work toward becoming the chief value officer by providing stakeholders with relevant insights on long-term value creation.

The COVID-19 pandemic has been dramatically different from prior crises, such as the 2008 crash and the dotcom bubble of the early 2000s . Although it came almost out of nowhere, organizations were more prepared than they could have realized: after several years of disruption, many organizations had already embarked on initiatives such as digital finance programs and a move to cloud-based solution. 

These transformational projects have embedded greater resilience and agility in the finance function and the wider organization, which in some cases they were able to leverage to avoid the pandemic’s worst economic impacts.

However, the pandemic has also exposed shortcomings in analytics, scenario modelling and planning, leaving some CFOs struggling to answer questions about the severity of the situation and how to best respond.

The situation and expectation for CFOs

Early in the crisis, the immediate priorities for finance included maintaining liquidity and managing the quarterly close process with a remote workforce. This was complicated, in some cases, by other areas of the organization viewing finance as more of a barrier than an enabler, as more pressing problems emerged in other business functions including supply chain, manufacturing, sales, distribution and critical customer-facing operations.

Becoming a true business partner to the organization has been a long-held ambition for finance – but some CFOs have discovered they’re not there yet. This is driving accelerated discussions about the role of finance and what it will take to drive real transformation, which some CFOs have wanted for years.

Five immediate actions for CFOs to consider

1. Reduce costs by rethinking the finance function

The economic fallout of COVID-19 will likely get worse before it gets better, with recovery not expected before the midpoint of 2021 and possibly into 2022. With significant economic disruption in the interim, CFOs will be expected to save costs wherever possible, as soon as possible, while balancing business continuity and financial resilience. As a result, a new finance function must be designed as a lean, agile and globally integrated organization that harnesses technology at speed and drives innovation at scale, while ensuring humans are put firmly at the center of every transformation initiative. 

2. Provide reliable long-term value information to stakeholders

The CFO’s focus is becoming broader and more complex, moving from reporting on past financial performance to providing insights on the company’s financial and non-financial long-term value potential. Importantly, companies failing in long-term value reporting will be challenged by active investors and socially engaged stakeholders. As a result, CFOs will increasingly need to report on long-term value drivers such as social contributions, new business models and customer relationships. Failing to disclose the true value of a company may even make it a candidate for hostile takeover. 

3. Help the business to manage uncertainty with fact-based decision-making

The pandemic has revealed some of the inadequacies of modeling, but also its value when it works well. While performance management often still acts as a scorekeeper, in future it needs to become a trusted business partner that enables CFOs to dynamically model complex scenarios and present the results to the executive leadership team in a timely fashion. Driving data to insights through technology, and translating insights to value through business partnering, will be essential drivers of decision-making.

4. Leverage digital tools to pursue speed to value

Finance functions that were already using cloud, AI and in-memory technology to build a flexible data and analytics engine have fared better than those with legacy on-premise infrastructure. Now CFOs must pursue the speed to value offered by appropriate digital and especially cloud investment. Given the true perception of some CFOs as barriers rather than enablers, slow and cautious digital and cloud adoption may not be the right answer any more. 

5. Accelerate the transformation journey

Finance has already been engaged in transformation, but as the COVID-19 pandemic recedes, CFOs can focus on the endgame and what is really needed from the function in the future. We know that digital technologies like blockchain, cloud computing and automation will play a much larger role in finance, and we also know that new ways of working remotely will have dramatic impacts. However, most CFOs still see digitalization as a fragmented, asset-based solution on singular topics. Entering the new digital age requires a new approach: not incremental optimization but seeing challenges afresh through a digital lens.

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Summary

COVID-19 has shaken up the finance function, with far-reaching impacts. In the short term, cost management, business continuity and financial resilience will be the top priorities. But sustaining this will require the function to transform from primarily reporting financial performance, to a set of diverse roles that span long-term value seeking and reporting, scenario modeling and fact-based decision support leveraging digital tools. Now is the time for CFOs to embark on this transformational journey.

About this article

By EY Global

Multidisciplinary professional services organization

Related topics Consulting Finance COVID-19