As CFOs seek to build resilient organizations, they have to balance current risks with future growth possibilities
To succeed in this endeavor, CFOs must strengthen supply chains, improve decision-making, manage working capital and prepare for future disruptions
Digital technologies such as analytics, blockchain, artificial intelligence and machine learning will be key to driving agility
Prior to COVID-19, CFOs associated agility and resilience with the need to manage fast-changing customer demands and, more significantly, competition from disruptors. But the pandemic broke supply chains, altered customers’ buying behavior significantly and facilitated remote working to change business dynamics. Everest Group’s Global CFO Survey 2020, supported by WNS, shows that CFOs are now going above and beyond their immediate remit to respond to these challenges in a strategic way.
COVID-19 has ruptured global supply chains and caused many organizations to review their sourcing policies. According to the survey, nearly 32 percent of CFOs place supply chain continuity in their top three challenges. For manufacturing and Consumer Packaged Goods (CPG) sectors, ensuring supply chain continuity is the primary challenge.
CFOs can lead their organizations in developing new supply chain models and processes, and work with procurement teams to re-look the supplier base for building greater resilience. While increased flexibility of supply chains can help, digital technologies can identify shortages more quickly and enable orders to be placed automatically. Dynamic forecasting, underpinned by advanced analytics, offers updates in real-time so that inventory management is faster and more responsive to needs.
Improving visibility is one of the top three priorities for nearly 46 percent of CFOs, according to the survey. By the time comparisons of aggregated financials are made against actual performance, events may well have moved on. Neither do these comparisons offer sufficiently rapid feedback on actions taken by the company.
Analytics, Robotic Process Automation (RPA), Artificial Intelligence (AI) and Machine Learning (ML) facilitate real-time information flow, offer better visibility into crucial metrics and help compare real figures with forecasts instantly. These technologies help in identifying the most profitable products and services which the organization should focus on as per market conditions. In the current economic climate, products or services that are seeing less traction can be sidelined. Close collaboration with data teams can enable CFOs to take the lead in designing and managing performance metrics for sales, investment, marketing spends and other areas of activity.
As customer demand continues to fall in many sectors, CFOs need to ensure their organizations are sufficiently resilient to cope with the impact on income, and the resulting effects on investment and capital expenditure.
CFOs should be able to quantify cash available, and be ready to explore opportunities for accessing any incremental capital. RPA, AI and ML can be used to calculate and then improve upon the time taken to convert inventory into sales. In this new economic landscape, it’s also more essential than ever to review how long the organization takes to pay suppliers and the period required to collect payments for sales made. CFOs can re-negotiate with suppliers to manage payment terms more effectively. They can then create a number of scenarios in order to manage cash flow more efficiently.
A ‘liquidity control tower’ can provide CFOs with a single view of all elements of liquidity, integrating information about receivables, payables, inventory, taxes, risks and cash flow in a financial and governance framework.
CFOs need to ensure their organizations are sufficiently agile to contend with unexpected events related to any future crises, and general economic and political uncertainty. Digital technologies such as blockchain create a decentralized network for seamless collaboration between departments. As a result, the CFO and the entire organization has a single source of truth on which to create scenarios and develop predictions.
Solutions such as Financial Intelligence in a Box (FIAB) enable CFOs to analyze unstructured and transactional data in order to build realistic scenarios. AI and ML coupled with 5G technologies, as they are rolled out, can be used to predict shocks to the supply chain as well as future customer demand. CFOs can also leverage digital technologies to carry out routine work such as reviewing and analyzing tax, and other regulations as soon as they are enforced so that finance teams can provide insights and recommendations for the C-suite. It’s imperative to ensure these digital technologies are able to pivot quickly in response to changing markets.
“Build back better,” is the mantra of businesses and governments as they manage the economic landscape post-COVID-19. CFOs can turn the crisis presented by the pandemic into an opportunity to make their organizations more agile and resilient, and therefore better positioned to change future odds.
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