Immediate Need For Resilience And Agility In Finance For Recovery

The CFO’s function has gained important significance for the reason that pandemic set in final 12 months. No matter what, the CFO had to make sure that the house fires have been stored burning with none causes, as legitimate as they might be. The onus of guaranteeing enterprise continuity was all of a sudden thrust on the shoulders of the CFO  who from being perceived as an all-out quantity’s individual needed to plan for tomorrow and the close to future and make sure that the plans have been executed regardless of large useful resource constraints and uncertainty. The CFO additionally had to make sure that in all  the planning they did, the tradition and ethos of the group remained intact regardless of the urgent have to make cuts wherever required. The second covid wave was even brutal than what was imagined and it additional modified issues that appeared to have stabilized since early 2021. How then did CFOs handle to steer their ships to safer waters? BW Businessworld engaged a number of main CFOs in a digital roundtable dialogue to know their experiences and practices throughout these instances. Here are excerpts of the dialogue

BW Businessworld: How precisely has your function as a CFO modified? And what are the difficult elements that have gotten added to your function throughout this this era?

Deepak Ojha, CFO – Operations, Electrosteel Steels Limited:

Historically there have been comparable occasions which have disrupted life and enterprise. There have been a number of adjustments on account of these. This time the group stakeholders’ habits has undergone drastic change and it’s tough to foretell habits.  Now, the CFOs’ function has develop into much more essential and a number of other issues have come on our plate. These I imagine are the 2 most essential ones:

  1. Cross-functional intervention to make sure no cash leakage in procurement, advertising, capex and Opex. Now even small and mid-size worth transactions are reviewed and authorized by the CFO to maintain tighter management on funds outflow which in any other case was dealt with at a decrease stage.
  2. The duty to make sure safety of Information and forestall leakage outdoors the group. IT does report back to CFOs in most organizations and the chance seen as a result of Work from Home situation has elevated. India has witnessed thrice the rise in cybercrimes and was 2nd most focused nation within the pandemic. The influence of a cyberattack on the enterprise might be unpredictable and enormous and the CFO now have to upscale efforts for sooner adoption of threat mitigation applied sciences for smoother and secured distant operations. 

These are unsure instances; the best precedence is Business Continuity and forward-looking threat administration practices. We do steady monitoring and overview of funds place to satisfy exigencies and help working bills. The prime focus is on how you can deal with declining income, balancing working capital enhance since provider needs advance and buyer needs credit score. 

The total thrust is on liquidity and as a CFO, I’m specializing in three/4 essential issues 

(1) Tech-Driven Real time financials and analytics within the scenario via intervention of Technology instruments, Data Analytics and many others. to choose the best indicators on the proper time. 

(2) Top line and Bottom-line safety via engagement with clients to handle revenues, receivables, and product combine.

(3) Working Capital – Inventory norms are challenged and specializing in fashions like “Pay as you Consume”, Liquidate idle Inventory and Dead belongings and different methods of funding Capital expenditure via “BOO” or “BOOT” Model. 

(4) The third wave can also be anticipated and the plan is now to how you can maintain the success out of initiatives taken in Covid first section and put together for the worst by figuring out the unexplored avenues to lift funds, Credit Lines, Service Debt and meet mortgage covenants compliance to guarantee our buyers and stakeholders 

Lalit Malik, CFO, Torrent Power: The function of a CFO has develop into that of a Chief Risk Officer. It is now that of a enterprise companion to search for alternatives, in view of the prevailing uncertainty, guarantee their selections are versatile, immediate, supportive of enterprise capabilities, and searching into cross-functional areas, not simply of their very own groups, but additionally of distributors distributors. Considering that this isn’t going away anytime quickly, CFOs ought to put together for any eventualities. 

The second essential function is to be a change chief inside the group to drive the fee and technological penetration. When there’s a problem in income, the main focus has been on prices and it’s not simply price discount however price optimization. There is a necessity to have a look at zero-based budgeting to establish each expenditure. But that doesn’t imply it’s a one-way discount. There is a have to put money into applied sciences in areas the place it’s required. You are a loopy monetary situation when all funds are made on-line, audits are performed remotely, board conferences are performed remotely and shareholders conferences’ are performed remotely.  

The third, is the skillset one must hold upgrading among the many finance staff to adapt to adjustments and convert challenges into alternatives.

Lastly, the one everlasting factor in life is change. Being able to undertake to alter and to be at all times on the forefront to transform a problem into alternative would be the key this 12 months.

BW Businessworld: Most organizations indicated that issues have stabilized and so they have been working with new practices in direction of the top of final 12 months. This nonetheless has modified once more. Have any of those new practices that you just adopted till the previous few weeks in the past develop into redundant? What are these practices? And how particularly are you altering them once more?

Prabhakar Iyer, CFO, Ingram Micro Pvt India Ltd: Last 12 months all of us needed to change our method of working, mode of driving the enterprise and we noticed a dramatic shift within the function of a CFO. We all adopted to digitalization, earn a living from home tradition, digital conferences and digital audit practices. When we confronted the primary wave we allquickly put up sure processes which have been adequately good and resulting in a whole lot of price effectivity regardless of lack of productiveness. However, on the flip aspect for the reason that final wave the uncertainty has elevated and has led to a better stage of capital engagement, rigorous planning, frequent overview and monitoring the enterprise. What was a month-to-month forecasting turned weekly forecasting and typically each day evaluations.

MSMEs and people in enterprise house too have been dealing with stress and wanted help for capital. We needed to deploy extra working capital in stock, to help the shoppers. We needed to have interaction with the distributors to see how we will discover to get extra help from them. Working Capital Management was the primary problem we have been dealing with. In the primary wave, it was pretty beneath management as there was a certainty inside uncertainty. But at this time, some area is closed and others are partially open. Suddenly the areas will get into lock down. And within the course of, capital engagement within the enterprise has additional elevated on account of stock locked in as a result of areas lock down. Forecasting what income, you’ll be able to obtain and the way you possibly can drive when it comes to reaching the numbers and the underside line has develop into difficult. We are within the know-how sector and to that extent we aren’t affected by the demand era however we’re affected by the availability chain constraints and challenges of supply because it  was depending on the power of our channel companions and clients to open their warehouses and settle for deliveries.

Nitin D Parekh, CFO, Cadilla Healthcare Limited: The pharma sector is comparatively much less affected by the pandemic. After the lockdown, we began engaged on a number of new practices and we proceed to work with them at this time.

First is liquidity administration and we began doing it in a proper method by establishing a liquidity administration workplace. The second is how we used digital instruments and methods to handle numerous capabilities. 

The third level is price rationalization and value optimization. We have been capable of efficiently scale back the fee in absolute numbers. It is mirrored in our monetary outcomes. We have formally labored on zero-based budgeting (ZBB) idea. We are at the moment engaged on ZBB in our human formulations and biologics enterprise in India. Our goal is to get at the very least Rs 150 crore in financial savings over a two-year interval. 

The fourth level is that we’ve got taken a number of threat administration initiatives for enterprise continuity plan. We began with a lot of small initiatives, like earn a living from home, use of MS staff for conferences and Office 365 and VPN. Then there may be cybersecurity. Pharma corporations are among the many most weak goal teams for cyberattacks, extra so when they’re engaged on vaccines.

BW Businessworld: The Indian financial system is predicted to shrink or present stagnating development within the close to time period as lingering results of the COVID-19 pandemic proceed to influence on inhabitants and enterprise setting. What are tendencies recognized on how organizations can higher place themselves for the long run by strategically deploying know-how that may assist tighten management over spending? 

Mankiran Chowhan, MD-India, SAP Concur: COVID-19 has accelerated digital adoption, which has taken a quantum leap at each the organizational and business ranges.

Here are some key ways in which corporations are positioning themselves for the long term.

The future of labor has arrived forward of schedule and for us to create an worker expertise that gives a sense of meaningfulness, we should present we worth staff throughout each contact level all through their employment and that additionally means offering know-how that frees folks from menial duties to allow them to do the work that offers them essentially the most satisfaction, whereas contributing to the group’s backside line.

The second pattern is to contemplating the ROI which is threat of inaction. We did a survey final 12 months and we discovered that solely 11% of corporations in India use totally digital clever options for dealing with enterprise bills – this can be a good instance of a low hanging change administration alternative on condition that this disruption interval has allowed for change to be extra acceptable.

The third pattern is round strengthening innovation. In instances of disaster and when rising from a disaster, innovation is usually a crucial part of development.  We usually say change isn’t fixed. That’s undoubtedly true however once we consider the longer term forward, we’ve got to know that the tempo of change won’t ever be this gradual once more and put together accordingly

The fourth pattern is about utilizing clever know-how to work smarter. Decision makers are drowning in knowledge and, because the complexity will increase, they battle to establish what knowledge is most essential and the way greatest react to what the info says and that’s the place know-how may help. 

The closing pattern is sustainability. Growing consideration must be paid to directing capital towards sustainability companies and infrastructure, accounting for the chance posed by local weather change and guaranteeing that investments serve to guard, relatively than destroy our planets.

Sanjay Bohra, Group CFO, Force Motors: I really feel the slowdown is non permanent, with the proviso that we can not afford a Covid third wave. If this continues for an additional 12 months, we will probably be fully out of form. In May final 12 months, quickly after the lockdown began, we started trying into each portfolio. We discovered that the tractor, which was a low-contribution product, now rapidly had began turning into the primary product. We have to essentially have a look at such adjustments and to see whether or not we will scale up. You must be considered in spending now. We have taken some selections which have added to our backside line. I believe it will proceed for some time. The CFO ought to have vigilance, threat administration, compliance, and controls in place in order that there isn’t any leakage. I’m fairly optimistic in regards to the scenario within the subsequent 6 to eight months.

Sunil Bansal, CFO, Bikanervala Foods Private Limited: I agree with Mr Bohra that we’ve got to be optimistic. It just isn’t as harsh because it was final 12 months. But the influence could be very sector particular. There are sure sectors that are gaining out of it, particularly healthcare, meals processing and e-commerce. For CFOs, spend management is the code this 12 months. It is the governance of spending relatively, as a result of as of late a CFO doesn’t merely management, however takes the lead in spending selections. We can trim down our manpower, however we’ve got to maintain the human think about thoughts. 

BW Businessworld: At this stage, for what interval do you intend? Is it 1 / 4, one month or longer? And how are you managing this fixed change?

Swayam Saurabh, CFO, OLA Cabs: Numerous CFOs over the past one-and-a-half years have performed much more micromanagement and that displays on the planning course of too. Everybody wished to take management as no person knew the underside. Now, nonetheless, there may be far much less panic as we’ve got seen a restoration cycle.

If I take a step again and have a look at what has actually modified between a standard planning cycle and now, I put it in three totally different dimensions. First is the frequency — While the planning rigor is analogous, rigor and focus are much more on shorter intervals. The second is agility – Now the plans are much less static and much more nimble and principally with situations, particularly for shopper enterprise like ours. The final change is  extra use of know-how — leveraging digital and IT instruments, one thing one would completely must be efficient in at this time’s dynamic scenario. 

Lalit Malik, CFO, Torrent Power: Currently, the main focus is on brief time period, particularly once we discuss liquidity or money. It is however pure that individuals have micromanaged money. The want is to focus brief time period as issues are fluid. Today we have a look at know-how to handle on an actual time foundation and search for analytics to assist us take selections. We search for enterprise help in all areas, not simply in finance. We have to repeatedly concentrate on planning and managing it in a brief time period, however with a transparent eye on the long run. 

BWBusinessworld: Now, Cash is King or relatively Cash is God. How are you managing your liquidity in an ever-changing situation?

Nitin D Parekh, CFO, Cadilla Healthcare Limited: Liquidity is a lifeline of any enterprise. Just after the lockdown was declared in March 2020, my prime administration informed me to return out with sure measures to realize three primary goals. (1)  To guarantee continuity of enterprise operations, (2) to preserve money and (3) to rationalize prices and are available out with authentic and novel concepts. My administration informed me in March 2020 that we had Rs 1,200 crore in financial institution stability, whereas annual international remuneration for workers is Rs 2,400 crore. My administration informed me that staff is our first precedence and 6 months’ remuneration quantity, which is in financial institution stability ought to be maintained always and never a single rupee ought to be lower than the stated quantity of financial institution stability. We established in a proper method our liquid administration workplace. It was for the primary time after I handed my MBA from IIMA in 1985 that I carried out precautionary motive of holding money as per Keynesian economics.

We determined 5 precedence areas for funds. One, worker funds. Two, for supplies and providers. Third, for important providers like energy, gasoline, and insurance coverage. Fourth, statutory e funds resembling earnings tax and GST. Fifth, was reimbursement of loans and curiosity. We revisited all of the funds based mostly on these precedence parameters and determined what might be postponed. We additionally labored on sensitivity evaluation of enterprise projections taking optimistic, almost definitely and pessimistic situations, at a time when OPDs and hospitals weren’t working through the first wave. We supplied money reductions to advertise digital funds and likewise prolonged credit score in sure geographies to help the enterprise companions. The essential monitoring matrix that we formulated included 4 parameters which embrace (1) assortment versus gross sales (2) gross sales versus manufacturing, (3) manufacturing versus buy and (4) buy versus funds. Between April 2020 and March 2021, we managed to cut back our web debt by Rs 2,500 crore. This is over and above one other Rs 1,000 crore discount in web debt which we achieved diminished due to a capital elevate we did for Zydus Wellness Limited, our subsidiary firm. 

Lalit Malik, CFO, Torrent Power: As folks say corporates go unhealthy not as a result of they’re an issue or profitability, however the issue of liquidity. Given a selection, I believe liquidity comes as precedence, particularly throughout this disaster. It additionally offers you some cushion to satisfy contingencies. 

We arrange a money struggle room in order that it may very well be monitored and any exigencies addressed. We checked out each expenditure to see if it may be prevented, deferred or another possibility was out there. We overachieved our goal when it comes to price discount. 

The third side was price discount and we additionally checked out funding, together with in know-how. On the money aspect actual time info out there was in-built in order that we’ve got an actual time of receipts and funds knowledge out there. In the final one 12 months, as an alternative of a optimistic working capital, we have been destructive working capital.

The different was that taking a call on Capex versus Opex. Wherever there have been alternatives to take a position into new classes, we went forward. 

BW Businessworld: Most organizations have a long-term imaginative and prescient and plan. All of that will have been derailed over the previous 14 months. How has it impacted your group? And how are you dealing with these adjustments given a decent income scenario particularly from the attitude of your long run deliberate investments?

Sanjay Bohra, Group CFO, Force Motors: All of us typically work with five-year and seven-year imaginative and prescient. But the entire thing was severely impacted. Last 12 months, we moved to the brand new emission norms BS6. By March 20, we ensured that each one our pending inventories have been offered. We had new platforms for our ambulances, faculty buses, supply vans and hospitality automobiles vary of merchandise. We invested Rs 1500 crore final couple of years on these platforms.

Lockdown impacted in industrial launching of those new platform and  50% of our section resembling faculty, journey and hospitality industries are markets  but to open.  Hence it had a extreme influence on our gross sales. However, we’ve got continued our capex program assuming that higher instances are forward. Simultaneously now the necessity of using micromanagement is required. In reality, I’m accounts division for figures each two hours. We have to make sure banking help in addition to our skill to have ample sources. We managed to cut back our prices by 25% and which incorporates not solely materials, but additionally on the overheads. Also, to manage on inventories, new ordering coverage i.e., made-to-order has been carried out. This will assist in some ways. It has impacted total orders undoubtedly, however at the very least we all know what we’ve got to fabricate. There is pent-up demand and as soon as it opens up, we will certainly have a greater time.

Prabhakar Iyer, CFO, Ingram Micro Pvt India Ltd: We do each know-how and distribution providers to totally different segments. We have a number of verticals in our enterprise. The influence to our technique is diversified for every vertical. One of the vertical is superior know-how and providers which is catering to giant enterprise, giant tasks and authorities initiatives. The second verticals is in direction of the patron aspect, which is catering to the calls for from shoppers in direction of earn a living from home, be taught from dwelling and leisure and many others. and many others. The third vertical is from the industrial aspect, like giant servers and IP networks and many others. wanted by enterprise. We had a strategic plan for all of the three verticals and however needed to rule it out because the pandemic struck. We had headwinds due to decrease spend in capex by giant enterprises.

Also, the federal government needed to shift its priorities to healthcare which affected the federal government lead calls for in know-how sector. But there was spending on capex and tasks post-Q3 of final 12 months. However, the Covid second wave got here in and is turning into a spoil sport. What has continued as typical is the income and calls for from shopper enterprise. It has grown in double digits with the necessity for tablets and different IT merchandise by shoppers. That enabled us to match the applecart and enabled to maneuver in direction of our development imaginative and prescient when it comes to reaching the technique numbers. We are attempting to increase and make investments extra sources when it comes to know-how, providers and sources to help clients, and to help capital funding by giving bigger credit score to clients and offering financing options.

Sunil Bansal, CFO, Bikanervala Foods Private Limited: A: The financial influence goes to be brief time period. The long-term impact will probably be on unemployment, inflation and shopper confidence. But for FMCG and meals providers, it has been optimistic. The influence on us was non permanent through the lockdown, not due to lack of demand however due to provide chain disruptions. In brief and long run, the processed meals business will develop as a result of shopper habits on meals consumption goes to alter as they are going to transfer from non-branded to branded meals merchandise. Those who come out with progressive merchandise which might be able to devour, guarantee hygienic packaging and high quality certifications will develop.

Deepak Ojha, CFO – Operations, Electrosteel Steels Limited: The highest precedence for everybody now’s enterprise continuity and adopting forward-looking threat mining practices. The habits of distributors and clients are altering. We are monitoring and reviewing our fund place to satisfy exigencies and likewise to help working bills. The focus now’s addressing the declining revenues. Managing credit score strains to satisfy working everyday price is essential. We are figuring out methods to rescue ourselves from this example. With each business, you wish to hold the Capex until you wish to make investments it. We have to discover unexplored avenues to lift funds and safe extra credit score strains. With these, we will guarantee our buyers and stakeholders that the group is prepared with plans to cope with any situation. 

BW Businessworld: In instances of disaster, what are your suggestions for CFOs to show adversity into benefit? 

Swayam Saurabh, CFO, OLA Cabs: I imagine that full restoration will take time, however it can recuperate. I believe the primary alternative which exists is in executing inorganic plans. There is a big stress in lots of industries and this might create consolidation situations particularly with enterprise who needs to develop aggressively and have entry to money. 

Covid pressured many CFOs to reshape their financials and priorities – be it money or prices or working capital – by accelerating or leveraging smarter IT instruments. With a better organizational acceptance for “change”, this allowed corporations to develop into agile and smarter and so they confirmed significantly better outcomes beneath strain throughout Q3-This autumn final 12 months. If held nicely, this might create an enormous optimistic leverage when scenario fully return to regular and your clients totally return. I strongly assume that CFOs/ Companies who proceed to take a position and keep dedicated in direction of newer know-how particularly round analytics and resolution help instruments, would return a lot stronger as in opposition to precovid instances.

Mankiran Chowhan, MD-India, SAP Concur:

A disaster creates the chance for us to dig deep and to rise to the degrees of confidence, energy and resolve that in any other case we didn’t assume we possessed. The exact same applies now – The applied sciences wanted to reimagine Finance are already right here and we will concentrate on adapting and adopting them. There was a analysis by Gartner that talks about how corporations that proceed to take a position whereas holding price administration on the forefront outperform friends as markets and that just about 70% of board of administrators say that the consequences of COVID-19 are accelerating their digital enterprise initiatives. I That acceleration is designed to ship steady worth and agile strategy-setting, real-time threat evaluation and mitigation, higher knowledgeable and sooner selections, and hyper automation (any course of that may be automated ought to be automated). 

There is two-fold strain on the CFOs to speed up the digital enterprise and the digitalization of the finance operate itself, which is why CFOs are centered on digitalization imperatives, but additionally on bettering the workings and outcomes of the operate’s core actions. 2 key elements to think about on how you can get essentially the most from digital& monetary transformation are to 1. Challenge your core assumptions about digital transformation based mostly on the experiences of the latest disaster and a pair of. Prioritizing initiatives that improve money era, scale back working prices and enhance distant work circumstances.

Companies that get the best strategy to digital transformation may help re-invent and reimagine how they do enterprise. None of us is aware of for sure what the longer term will maintain, however all of us have a duty to be fascinated with what’s prone to occur, and to organize for it. In Finance, meaning working now to get the best folks and know-how in place to reap the benefits of the inevitable disruption forward.

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