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COVID-19: How CFOs Enable a Successful Pivot to Recovery
Almost overnight, the COVID-19 pandemic transformed how businesses interact with their employees, suppliers and customers. As companies transition out of Lockdown, there will be a small window of time to reset and prepare unique recovery plans to succeed in the new environment.
At an enterprise level, leaders must focus on the following priorities through each phase (See “A&M COVID-19: Pivot to Recovery, Thrive in the ‘New Normal’” for more details):
The CFO’s primary job during Lockdown was survival – focusing on liquidity and pivoting to cash. Activities during this period centered on maintaining adequate levels of cash to keep the lifeblood of the company flowing.
In the Reset and Recovery periods, executive teams must act decisively to develop and implement recovery plans that redesign the business to emerge stronger following the crisis. The CFO will play a significant leadership role in developing and executing the recovery plan over the next twelve months and perhaps longer.
A&M Recommends Taking the Following Four Actions Immediately: 1. Establish a dedicated recovery team that is empowered to make decisions and act quickly
2. Align key stakeholders—the board of directors, executive team, employees, customers, suppliers and creditors — to establish an all-hands-on-deck approach
3. Determine when and how to provide earnings guidance to stakeholders (e.g., Board, Owners, Wall Street); evaluate the appropriate format, channel, type of update and frequency
4. Define and execute a Recovery plan to ramp up operations and redefine the company’s strategy, business model and cost structure
CFO-Specific Measures to Include in Recovery PlanWhile the Recovery plan should cover all areas of the enterprise, the CFO must focus on activities that protect margin, generate liquidity, drive improvements and inform stakeholders to assure the long-term viability of the business.
Sample Deep Dive: Flexible Workforce – Future-State Finance & Accounting Staffing Model
New workforce strategies enabled by technology and automation are the future of business. With barriers to change at an all-time low, CFOs have the opportunity to reimagine the Finance & Accounting organization and transform it to a blended model that effectively balances traditional on-site and remote workers with digital tools and managed services.
To what extent an organization utilizes each component and how quickly it transitions to future state depends upon
specific industry and company characteristics.
Cash Requirements
Working Capital
Forecasting
Capital and Maintenance Expenditures
Digital
Real Estate
Sales and Customers
Flexible Workforce
Continue focus on cash and liquidity as business ramps up. This ramp up will cause a shift in timing of cash outlays (e.g., shift from furloughed employment to payroll)
Adjust working capital requirements based on ramp up of supply chain, production, inventory and sales; Revise supplier payment and discount terms and adjust customer credit terms where possible
Adjust demand drivers and recovery scenarios to optimize fixed and variable cost structure for varying levels of demand (i.e., bend the fixed cost curve)
Evaluate ongoing Capex projects, shift spend to immediate payback initiatives; Evaluate if maintenance projects need to be performed immediately or if assets can be retired sooner
Deploy new enabling tools (e.g., bots and portals) across order-to-cash, procure-to-pay, general accounting and FP&A that can be implemented in <6 months; The crisis creates opportunities to automate and create enhanced delivery models
Use revised workforce plan to analyze footprint for next 12 months (e.g., expand / consolidate and / or close facilities) and develop multi-year real estate strategy (e.g., number of locations, owned vs. leased, eliminate excess capacity)
Focus on margin generation, not just top line revenues; set clear margin goals at different levels and raise prices or eliminate low margin / low volume products and services
Particularly for back-office functions, reinvent the workforce strategy; Develop a plan that combines onsite, remote and digital workers in addition to managed services
Ben TathamManaging Director
London +44 0 797 985 0962 [email protected]
© 2020 Alvarez & Marsal Holdings, LLC. All Rights Reserved. 113000
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ABOUT ALVAREZ & MARSALCompanies, investors and government entities around the world turn to Alvarez & Marsal (A&M) when conventional approaches are not enough to make change and achieve results. Privately held since its founding in 1983, A&M is a leading global professional services firm that provides advisory, business performance improvement and turnaround management services. With over 4,500 people across four continents, we deliver tangible results for corporates, boards, private equity firms, law firms and government agencies facing complex challenges. Our senior leaders, and their teams, help organizations transform operations, catapult growth and accelerate results through decisive action. Comprised of experienced operators, world-class consultants, former regulators and industry authorities, A&M leverages its restructuring heritage to turn change into a strategic
business asset, manage risk and unlock value at every stage of growth.
When action matters, find us at: AlvarezandMarsal.com
Cody ChenaultManaging Director
Houston +1 713 547 3745 [email protected]
Deb CashManaging Director
Houston +1 713 547 3754 [email protected]
How Can A&M Help? Navigating the challenges left in the wake of COVID-19 can be trying for any CFO and finance team. A&M’s CFO Services professionals thrive in fast-paced environments and specialize in leading full programs and implementing individual point solutions that drive immediate value.
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