Deloitte releases new intensive report on role of CFOs in COVID-19 times

Deloitte releases new intensive report on role of CFOs in COVID-19 times, illustration photo

The global COVID-19 pandemic has put the role of the CFO under the spotlight. Given the uncertainty and lack of perfect information, Southeast Asia (SEA) CFOs have found themselves in an unprecedented position to offer strategic counsel to the CEO and provide the financial leadership to drive business strategy amidst this crisis.

In response to the present situation, Deloitte has interviewed CFOs of various industries across SEA in the second quarter of 2020 to launch the report.

Specifically, the report examined some of the new realities that have emerged and the actions that that SEA CFOs are considering – or perhaps should consider – to address their top-of-mind issues along five dimensions: new business models; digital transformation; workforce agility; risk management and cyber resilience; as well as restructuring and mergers and acquisitions (M&A).

As the COVID-19 pandemic evolves, SEA CFOs need to make quick decisions to ensure that they are responding appropriately to the crisis while preparing their organisations and employees for challenges in the longer haul.

Many have found themselves playing increasingly important roles as strategists and catalysts during this crisis, in addition to their traditional roles as operators and stewards.

Before the onset of COVID-19, SEA CFOs had ranked a global economic slowdown and recession, global trade wars, and currency fluctuations as their top three external risks.

In terms of internal risks, the survey found that disruptions in products or markets, inability to execute strategies, and technology implementation were the SEA CFO’s top three concerns.

The report reflects that as SEA CFOs look ahead to the future, they recognise that agility – the ability to respond quickly to market needs with new business models – is key to enabling them to gain a competitive edge.

For most SEA CFOs, investing in product innovation and diversification strategies is crucial to enabling their organisations to capitalise on some of the new, emerging demands.

Whether they are launching new products or selling repurposed inventory, SEA CFOs also highlighted the need to enhance their distribution channels to enable them to deliver on these new value propositions.

The COVID-19 pandemic has made many SEA CFOs acutely aware of its critical importance in ensuring business continuity and driving growth.

There is increasing emphasis on analytical tools as many of them had been tasked with increased reporting activities, including profit-and-loss forecasts and cash flow forecasts, as both C-suites and boards demand frequent updates.

According to the report, CFOs are also placing increasing emphasis on scenario planning during this crisis, leveraging technology tools and predictive analytics when planning for specific scenarios and modelling their impacts on margins.

As the economy begins to resume operations, SEA CFOs recognise that some of the adaptations that they have had to make represent not only temporary arrangements but irreversible and permanent shifts in the way they do business.

With more remote working arrangements in the new normal, SEA CFOs will also find it easier and more practical to rapidly flex their workforce size, composition, and cost by leveraging gig workers and cross-border teams.

In addition to new financial reporting considerations, Deloitte’s study also indicates the need for SEA CFOs to watch out for the emergence of interdependent risks. In a volatile environment, the trigger of a single risk could lead to a series of cascading risks with unknown consequences or impacts.

With more volatility expected in the near future, SEA CFOs have also identified the need to keep a vigilant eye on their internal controls and guard against fraud and cybersecurity risks.

As SEA CFOs look towards the future, a combination of restructuring and M&A strategies should emerge as companies strive to safeguard existing markets, accelerate recovery, and position themselves to capture market leadership.

Given the emergence of new consumer behaviours and increased e-commerce uptake during the pandemic, the consumer sector is one industry that is expected to witness increased M&A activity. This, in turn, could also have spill-over effects on other adjacent industry sectors, such as payment platforms and other fintech players.