By MATHIEU DE LAJARTRE
As the fallout from COVID-19 continues, business owners remain concerned about their survival and the safety of their employees, and chief financial officers can help. Accustomed to managing the loss of a customer or supplier, CFOs are well-positioned to gauge the magnitude of the pandemic’s impact on organizations.
“When the crisis hit, one thing was clear right off the bat—we had to increase our agility, and this became a modus operandi,” says FCPA Maarika Paul, executive vice-president and chief financial and operations officer at the Caisse de dépôt et placement du Québec (CDPQ) and member of the Canadian chapter of the Accounting for Sustainability CFO Leadership Network. “Very quickly, we had to analyze the potential impacts of COVID19 so we could react and better understand the issues for the sectors in which the CDPQ is invested.”
From rethinking strategy to protecting employees, here are a few ways CFOs have been amending their business plans since the start of the global crisis.
Many CFOs of larger companies are still dealing with priorities from old business models, such as meeting expected shareholder returns. But guaranteeing growth in this environment can be a tall order—even for the companies who have reinvented themselves or have saved jobs thanks to government assistance programs.
“The [government assistance programs] have allowed money to be reinjected into the economy, often locally, but businesses must plan for scenarios in which, even faced with the second wave and an end to assistance programs, they’ll be able to stand on their own feet again,” says CPA Geneviève Provost, managing partner for Quebec and the national capital region at Deloitte.
That’s where CFOs will play a key role in the coming weeks and months, she says. “Obviously, injecting cash can resolve shortterm issues, but no company wants to survive for one year only. This is why we have to challenge what we’re doing and how we’re doing it and be prepared by leveraging the information available to look over a longer horizon.”
In a recent Deloitte study, Uncovering the hidden iceberg: Why the human impact of COVID19 could be a third crisis, the authors focus on the link between the economic fallout of the health crisis and the psychological effects on the population. While several actions can be taken, the report acknowledges there is no “cookie cutter” approach to dealing with the impact on the work environment. “However, organizations that will be able to turn this lemon into lemonade by engaging in a positive and transparent discussion with their employees may benefit from it in the short and long term,” the report says.
For Provost, who has more than 3,200 employees under her direction, collaboration between the people in finance and other company departments (human resources, customer service, procurement and so on) is crucial.
“Financial decisions can no longer be made in silos,” she says. “For example, laying off an employee who is no longer involved in the company’s revenue generating process because the position—let’s say reception—has been made redundant is far from being the only option, no more so than mass layoffs. Decisions can no longer be made on the basis of certain ratios or profitability levels, which only work in the very near term. We have to look at the medium term and think about recovery. What else could these people do? What does that say about our core values?”
In other words, if your employees are your main asset, protect them. “What message do we want to send to all stakeholders?” asks Provost. “There’s no going back to the way things were once a lot of drastic measures have been taken.”
Paul believes value creation is not only about measuring results—such as performance or returns—but also about integrating profound changes, namely technological shifts, work-tool adoption and sustainable investments.
In a nutshell, it’s long-term. For example, the CDPQ is part of the Net Zero Asset Owner Alliance, an international group of 29 institutional investors that is striving to achieve carbon neutrality for its funds by 2050. Despite the disruptions, Paul insists the CDPQ will continue to combat climate change, particularly in energy transition and responsible investment. [Read How accountants play a valuable role in helping organizations adapt to climate change]
“It’s hard to predict what 2021 will be like given the year we’re having,” says Provost. “There may be greater pressure on the finance function to make conservative forecasts, even though its mission is to inform the organization and decisionmakers of potential scenarios. After all, innovation and risktaking are hardwired into an entrepreneur’s DNA.”
“We have to remain optimistic,” continues Provost, “and do the best we can in the circumstances. It’s an opportunity to challenge a business model: Who are our suppliers? Who do we want to do business with? Which product or service lines should we keep or discontinue?”
All these questions aim to strengthen business resilience. A June 2020 PwC study of 330 U.S. finance leaders produced findings that supported this: 63 per cent of CFOs plan changes to products and services; 41 per cent are looking to alter pricing among other revenue strategies.
“We often do things automatically, because we’ve always done them that way,” says Provost. “Now we can bring things up to today’s standards to come out of the crisis even stronger and have a greater positive impact on society.”
Climate change impacts, greenhouse gas emissions, climate-related financial disclosures—see how accountants play a valuable role in helping organizations adapt to climate change.
Also, learn more about the Canadian chapter of the Accounting for Sustainability CFO Leadership network and find guidance on how to account for your social and human capital to make more informed business decisions for your organization.
This article was first published on 11.3.2020 by CPA Canada