As global growth takes a sharp turn in the wake of COVID — 19, CFOs of companies large and small, are embracing for an extraordinary economic situation. In this situation, CFOs need to proactively take charge in assessing their company risk and vulnerability from both an operational and a financial point-of-view.
The crucial duty of a CFO now requires them to decisively manage risks and plan for possible recovery scenarios (rapid or slow) with possible impacts on liquidity.
What does this mean for CFOs and how can they manage risks?
The decisions made by CFOs now directly affect business continuity. Their leadership decisions ensure business operations run, supply chains continue, and employee payrolls are met. In testing times like these CFOs need to take skilled leadership to help ride the transition while managing risks.
The steps listed below are some highlights that can be considered by CFOs to manage risks and ensure business continuity in the near future.
● Managing internal employee risk
As a number of companies adopt the WFH (work-from-home) model to ensure costs are at a minimum and the spread of the virus is contained, CFOs need to have a sharp eye on managing employee risks internally. This means ensuring that if and when layoffs occur, employees are properly disengaged, and company assets are secured from them. In the case of remote working, CFOs should ensure with internal tech teams that fraudulent behaviours and illicit activities are restricted when it comes to company data.
● Restructuring for payments related to customers and vendors
In the present scenario, it is imperative that CFOs create and implement a restructured payment and supply model for existing customers and vendors. This is necessary to mitigate risk in case customers, vendors, suppliers find themselves in testing waters during the economy slowing down.
● Developing strategies around government policies
Given the uncertainty surrounding COVID — 19 and the impending re-opening of economy, business analysts, and economists are questioning the policy interventions of various state and central governments in providing financial assistance to stimulate business firms. CFOs should take an active role to develop strategies around such economic policies to offset unemployment and reignite economic demand.
● Ensuring cyber safety
As companies slowly adapt to the new business models and virtualize some part of their business process in the digital space, they throw themselves into being potentially vulnerable to cyber threats, phishing scams, ransomware, and potential data breach. In such a scenario, additional investments in cyberinfrastructure are crucial to the survival of businesses. Also, deploying cyber defence modules and increased vigilance is going to be a crucial point in any further investment.
● Adopting risk management interdependencies
Todays’ businesses are left hanging in the current economic condition and with it CEOs are CFOs. If a company wants to regain control, manage risks better and bolster liquidity it has to follow a rapid and coordinated response to support the internal system by creating an integrated, organization-wide risk management function as compared to risk management in silos. This means ensuring compliance, cost, capacity, capability, and connectivity across the board. While regular stress tests, investing in new capabilities, and focusing on low-probability, high-impact risks will build confidence and recover from losses in shareholder value.
Given the unpredictability of the intensity and length of COVID-19 and the related impact on the economy, we might not know what king od cascading risks will rise after some time. CFOs will have to continuously prepare themselves and should be able to distinguish which risks can badly affect the organization. In any case, there will be future risks that can’t be predicted or effectively alleviated, requiring liquidity and swiftness to react.
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