CFOs are the game changers in the new world

The advent of 2021 brings with it much hope in the wake of a troubled year gone by. Businesses were hit hard, jobs were at stake and, for many, life was turned upside down in 2020. Nevertheless, optimism has been emerged more recently, from the development of vaccines and some signs of economic recovery.

During the peak of the crisis, while business activities came to a halt overnight and supply chains and sales were disrupted, creating an instant liquidity crisis for all forms of business, the importance of the CFO was highlighted. This crucial C-suite executive was responsible for optimising cash reserves and modulating cash flows to ensure that digital transformations could be undertaken without financially impacting operations and human resource pay-outs.

Going well beyond the traditional roles of cost management and controls, today’s CFO is expected to add value by serving as the integration hub for key business processes, a catalyst for change, including business transformation, a business advisor to create sustainable growth and the conscience of the organisation.

On the rocky road to recovery, CFOs are still in the hot seat as they have to remain on top of the game until the crisis completely abates and even beyond, as companies move from survival mode to harnessing opportunities that arise in the new normal.

To glean first-hand insights from the experiences of CFOs during the past year and how the see their role and responsibilities panning out in the future, Forbes India in partnership with IMA® (Institute of Management Accountants), which certifies CMA® (Certified Management Accountant) around the world, brought together commendable CFOs to share their views at a virtual workshop themed ‘Understanding how CFOs are becoming game changers in the new world’.

Under the banner of Forbes India CFO dialogues, this esteemed group comprised Navneet Khandelwal, CFO, Zensar Technologies; Niranjana C, Vice President - Power Transmission and Distribution, L&T Construction; Raj Mullick, Senior Executive Vice President and Chief Accounts Officer, Reliance Industries Limited and Balaji Rangaswamy, Head F&A and CFO (Associate Director – Finance), KPMG - Bahrain.

The crisis was challenging like no other in recent times, as it had an adverse impact on human health and on the economy, across the globe. As Niranjana C explained, “None of us were prepared for a black swan event like this. It has really changed the way we do business. Our immediate priority was the safety and well-being of our staff and workers. The second, and equally important priority, was to take care of our finances - fixed expenses, costs, cash reserves, etc.”

With copious discussion around disruptions in recent times, Raj Mullick termed the last year as a perfect example of disruption. He shared that his company’s priorities were also people safety and managing finances and beyond that, it managed to raise around Rs 2 lakh crores through deals and the market. “Managing these deals after suddenly shifting to work-from-home was a major challenge but we manage. We also wanted to ensure that whatever happened, we would not let our business get affected. And I'm happy to let you know that we managed that too,” he added.

Navneet Khandelwal echoed the concerns of the other panellists, in terms of their apprehensions with respect to the well-being of people and security of finance. However, he was also happy to report, “It was a tough year but we coped quite excellently and emerged well, in terms of ensuring that there was no disruption to the business, the well-being of our employees was secured and we did a fantastic job from the cash conservation and collections perspective.” He also narrated how his company focused on more social aspects too. 

Located in Bahrain, Balaji Rangaswamy pointed out that as accountants, managing the cash flow positions, the challenge was to shift from long forecasting cycles to shorter ones. “Further, interaction with external stakeholders, like the banks, and even internal communications and board meetings were entirely digital. Fortunately, we were already tuned into it and were, therefore, able to manage the situation very well.”

Beyond the initial adaptation, there were abundant learnings that followed. For instance, Niranjana C narrated that although L&T had never given much thought to working from home before the lockdowns, her team was able to complete the entire annual audit remotely, without visiting the physical premises or access to documents. Further, they facilitated virtual inspections of progress on sites for clients as travel was a challenge. She was also very enthused by carrying out various other activities – like employee connect, certification of invoices, vendor negotiations and board meetings, etc - virtually. “I have connected with more employees during this period than I did during the past 10-15 years of my career. Resilience and process driven corporates recover fast and we got back on our feet very nimbly.”

Coming from the digital technology space, Navneet Khandelwal’s takeaway from the crisis was that it just accelerated the adoption of technology and made people realise its relevance for business growth. “It became a question of survival,” he said. “Whoever adapted to digital and could think out-of-the-box, could move ahead. Everybody had to rethink and revisit their approach to technology adoption.”

Tomorrow’s CFOs will also need to be very adept in leveraging this technology to spend less time on recording and verifying the numbers, and more time making the data connections and explaining the number implications to the business; effectively, they will have to apply the finance lens on decision making.

Further, the proliferation of large and complex data provides challenges as well as significant opportunities for analytical insight into the business by CFOs. Going ahead, the finance function is expected to be at the heart of this data revolution as better tools with predictive insight are coming on stream. Technological developments will serve to help gather, organise, standardise and make data timely. This will drive more effective business intelligence for identifying new market and profit opportunities, measuring and managing business performance, running simulations, or bringing customer insights.

Predictive analytics and forecasting future performance based on past performance will be a key enabler for tomorrow’s CFOs. However, in the current age of turbulence in which businesses operate, scenario planning and stress testing will be increasing priorities as outcomes for the finance function. Balaji Rangaswamy raised some interesting issues with respect to technology and remote working. Beyond the need to strengthen IT systems at the homes of employees, he pointed out that cyber security had to be made robust. “We used to speak about paperless offices and now we have achieved work-from-home; our aim is to facilitate agile working.”

Tomorrow’s CFOs will also need to drive change programmes that integrate and attune the finance processes of the organisation to the strategy of the business more effectively. Raj Mullick succinctly summed up the key learnings that could be carried to the future as, first and foremost, nothing is impossible; secondly, disruption can strike at any point of time; third, technology is like backbone infrastructure and finally, employees are a company’s true strength.

After the participants shared further learnings and wisdom from their recent experience of managing their financial and non-financial responsibilities during the time of lockdown and beyond, they fielded questions posed by the audience. They shared their views and counsel on how job cuts could be pre-empted by stellar growth in 2021, the impact of work-from-home on productivity and whether this model will continue once the crisis abates, managing costs, making balance sheets and cost structures more resilient, etc.

Although there is ultimately no certainty about how the year ahead will pan out, with the second wave of the pandemic on the horizon, it is clear that corporates and their CFOs are better prepared to face the future, on the strength of their experiences and learnings from the year gone by. Tomorrow’s CFO will need to ensure that finance is a catalyst for change across the business, driving outcomes that affect long-term business performance, not just short-term finance outcomes or one-off cost reductions.

All in all, the rules of the game have changed for CFOs, reflecting a more uncertain, dynamic and global economic environment in which their businesses operate, compounded by an extraordinary rate of technological change. Above all, tomorrow’s CFO will be seen as the internal safeguard to a better corporate ethos. Alongside the rest of the board, being the guardian of the organisation’s assets, the CFO will stand between a company’s governance and poor behaviour that can lead to value erosion.

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