Opinions ##CFO role ## COVID crises ## ## Survival of the fittest ## Growth for the strongest ## CXO Strategy ## May 6, 2020May 6, 2020 Kaustubh Roplekar We have entered the 3rd month of COVID- 19 crises in India and it is evident that this will play out over many more months. The Indian Government has tried to maintain a stiff posturing in dealing with the health crises by announcing successive country wide lockdowns. This has brought the economic activities to a standstill as losses pile up and cash flows have dried up. This has put this business crisis squarely in the CFO’s office as much as the CEO’s. The full impact of this crisis has to be dealt by CFOs at a dual level Setting up a WAR room to deal with the immediate aftermath of ‘No Business’ scenario for the short term. Most companies would have done so proactively in April. What is equally important is to have a separate Focused Group to strategically plan and execute the steps to be taken post re-opening of business activities and get things up to speed. It will be important to focus on the long term while dealing with the short term. In terms of uncertainty, this financial year will be a challenging one like no other in distant memory. The problem started from the SUPPLY SIDE and has resulted in a crisis where DEMAND plummeted vertically. The fear factor would make consumers wary and tentative in scaling up demand when the businesses will be up and running. Social distancing norms are likely to be followed as a strict regimen till the vaccine/cure arrives. This will prevent both sides from operating at full throttle in the months to come. This means that a V shaped recovery is unlikely; it would be advisable to plan for a U shaped one. The CFO’s role will revolve around Ensuring minimum damage to the enterprise value. Markets will be valuing those companies that handle the crisis well and also make the most in the recovery phase that will follow. Planning and arranging adequate levels of liquidity at all timesin the next one year. For once, lowest cost capital formula can take a back seat. Follow the Golden Rule ‘Cash is King’ Give new definitions to costs – Those which can be avoided, reduced and those which are absolutely essential. Use this cost pressure to reset structures, get rid of unwanted elements and put the organization on a sustainable path of ‘Achieving MORE with LESS’ While many market players might prefer shortcuts to keep afloat and survive over this year, ensure that the standards of corporate governancedon’t get lowered. This has a circular reference to the all the points above especially 1 It would serve CFOs and all CXOs to remember that age old adage ‘Never waste a good crisis.’ The learnings to be applied are survival in the short term and growth over the medium/long term.