No Match Found
Companies that have harmonised their data, processes, and systems can rely on a financial function that is flexible and can respond quickly. A lot of companies are discovering during the corona crisis that they (still) haven’t organised matters properly. It’s now up to the CFO to take the right action to perform vital 'first aid' and to demonstrate leadership so as to address the issues fundamentally.
In a previous blog I described the three main challenges that a CFO faces: to respond effectively to technological and also organisational changes, to distil meaningful information from vast amounts of data, and to put together a team made up of people with the right skills for utilising the data and the technological developments in the best possible way for the good of the company. These are not things that can be arranged overnight, and a lot of companies are now discovering because of the corona crisis that they (still) haven’t organised matters properly. It’s then too late for an effective initial response to the crisis, but the urgency of dealing with matters thoroughly (or more thoroughly) with a view to the long term – once the initial effects of the crisis have been averted – only becomes greater.
Immediate problem resolution, stabilisation of the company, and preparation for opportunities occurring in the long term – those are the three phases a company goes through when a crisis occurs. Immediate problem resolution is of course the most urgent of these, but in the stabilisation phase that follows you can take steps to become a flexible organisation that can be prepared for what’s happening in the market. Whether you could have actually anticipated the corona crisis… well, I don’t know. But what you can do is respond to it really fast!
A company’s response and the role of the financial function within it always involves information. What it basically comes down to is how quickly the company can come up with information from which you can extract insights and on which you ultimately base decisions and action. What I see happening is that many companies have ended up in 'crisis mode'. They only started looking for information and a solution when they had already been waylaid by the crisis. They now often don’t have an answer ready, or they don’t know where to get hold of certain information, or they may be unable to organise things the way they want – even though they could have prepared at an earlier stage.
A company can expect to have to deal with various different kinds of crisis, and it can draw up a sound plan for each type, setting out what information it needs and who will do what. With these scenarios, crisis and communication plans, it can accelerate its response enormously when a crisis does arise. You need to check exactly what information you need for each scenario. And if the company wants to have certain information available really quickly and flexibly, then the financial function needs to be streamlined pretty tightly.
In normal business operations, and definitely during a crisis, you ideally don’t want there to be any discussion about these three important questions: what information do I need, where can I find it, and is it reliable or not? It’s therefore vital for companies to make their data consistent and to harmonise it. Determine the data elements in advance – for example financial data, HR data, logistical data – and make sure you define the measurement units. And also make sure you clarify where they are stored and who is responsible for them. What you need to avoid, especially during a crisis, is a lot of frantic searching, because then your initial response to the crisis will be come later than necessary.
The aim of harmonising processes is for all the operating companies to carry out certain defined processes in the same way. In addition, all interdependent processes need to be properly coordinated. Harmonising systems basically means that – instead of a patchwork of systems that are connected to one another somehow or other – you should ideally have a system that is automated to the maximum extent, and that supports the processes and data structures as much as possible.
If you’ve organised all this properly, then you’ll have the basis for a financial function that is flexible and can respond rapidly. You can then move on to the third phase and progress from accurate data to meaningful information with which to prepare for the future and the opportunities it will offer. The urgency of tackling phase two thoroughly is only increasing now that companies, during the crisis, are finding it difficult to obtain data, information, and insights. It’s now up to the CFO to take the right action.
In the initial phase, the CFO is a crisis manager, i.e. someone who can influence decision‑making on a basis of rationality. He or she creates calmness and clarity in this phase, during which responses range from objective assessment to total hysteria. A CFO – certainly one supported by data and information – can take the right action to perform vital 'first aid'. In the second phase he or she has to demonstrate leadership so as to actually lay the foundations. It’s only in the third phase that he or she ensures another kind of creativity so as to think about the direction of business development, and how the company can make use of the opportunities that will occur (again).
It’s still too early to argue that the corona crisis will act as an accelerator to get things done. The worst panic of phase 1 seems to be over, but CFOs are in general not yet moving towards phase 2. Whether they actually will do depends in part on other priorities. After all, companies are not only having to address the coronacrisis; they are also experiencing normal competition and pressure from customers and suppliers. There may also be no budgets available. That’s understandable, because major – often fragmented – operations are involved that you have to work with for quite some time and that often require substantial budgets. Depending on the role and position of the company in the value chain, you’ll have either a lot of time or only a bit of time to deal with these fundamental issues. However, I would definitely like to conclude with an appeal to the CFO and the financial function to adopt a broader approach as regards the foundations. There’s often no time for that (yet) at the moment – after all, it’s all about performing vital 'first aid' – but a CFO who demonstrates real leadership seizes phase 1 to implement substantial improvements in phase 2. As the proverb says, you need to “make hay while the sun shines”, and every crisis helps emphasise just how essential that is.
In this podcast (Dutch), Alexander Staal, Finance transformation leader PwC, discusses the three most important challenges facing the finance professional. Listen to the podcast now.