The Challenges and Evolution of the CFO Role in the COVID-19 Era
As we approach the last quarter of 2020, all departments including finance are reviewing the year’s performance. The COVID-19 pandemic has impacted every organisation in varying degrees and has changed the way companies operate whether internally or externally.
In an effort to understand how our clients, and more specifically CFO’s, are adapting to the changes, Huxley Japan organised a by-invite only virtual roundtable to host a number of finance leaders across pharmaceutical, FMCG, IT, manufacturing, corporate services and wholesale/retail sectors. We discussed a few key topics around their organisational and operational changes due to the COVID-19, and also discussed how the role of the CFO is evolving in the COVID-19 era.
Below are some of the key highlights from the discussion.
Financial impact of COVID-19 within an organization
We found that the financial impact of COVID-19 differs greatly depending on the industry they are in. For example, some products such as home cleaning products or IT equipment that enabled remote working were in much higher demand compared to previous years. As a result, companies who were primarily selling these products are in a much stronger financial position. Some were even happy to give back to the community what was needed to survive this period. A similar trend was seen globally too, but one of the biggest challenges was getting the supply where it was needed. Logistics management and local manufacturing thus became key to support this growth in demand.
Other industries that were less essential during the remote working period have been impacted more, however the consensus in Japan was, despite a drop in revenue, the country was definitely less affected compared to other countries within the region simply because it did not go into a full lockdown. In fact, the pharmaceutical industry was one that saw an interesting behavioural change in patients and customers. Many now visit a pharmacy to get medication without prescription just to avoid going to a clinic. As a result, many clinics suffered a challenging second quarter.
Internal and external digitalization
While each organisation had a different level of adoption with regards to digital infrastructure and remote working tools, they were all able to acclimate well to the new way of working internally.
However when it comes to working with external vendors, there were some specific day-to-day challenges in regards to transactions with banks or invoicing from external vendors and partners as many of these still require manual paperwork and handling of documents, making it extremely difficult to transition to remote working.
Although some of their partners have tried to adopt a more digitalized approach such as e-invoicing, there are still many who have yet to progress digitally where some of them do not even have access to video conferencing tools such as Zoom or Microsoft Teams. Whilst this pandemic may have moved the needle in the speed for adoption towards digitalisation for many, others may take a longer time to evolve.
Future role and responsibilities of CFOs
All of our speakers agreed that the role of a CFO has become more challenging during times of instability and uncertainty. Below are the key points which become even more important:
Financial leadership: As business projections and forecasting become even more challenging, CFOs are required to conduct increased contingency planning.
Business partnership: CFOs must be a close counterpart to the CEO in making investment decisions. They will need to guide other board members in making huge business decisions such as revamping supply chains, M&A, and even organisational restructuring which may include redundancy.
Vigilance and controls: More vigilance and due diligence for business processes and approvals need to be in place. A stronger explanation about the controls to internal stakeholders will be required which includes the importance and how these need to be followed through.
Automation: More processes may need to be automated, including accounting. Robotic and human driven process will need to co-exist and managing this in the right ratio will be key to success.
Entrepreneurship: Changes in the business and market may mean new opportunities and CFOs must be ambassadors of entrepreneurship. CFO’s must be able to prioritize business initiatives and lead action, as well as adapt to using data intelligence to drive decision making which is rising in importance.
Changing talent landscape within the financial sector
An interesting consensus that rose from our conversation was that the experience of having entire teams in a remote working have given people the confidence to manage everyday tasks on their own. This may lead to a situation where it is no longer necessary to have a CFO within the country. Given that it would be less costly for these seats to be in other countries outside of Japan, organisations might potentially shift towards having non-local CFOs, with greater regional responsibilities. This would in turn lead to greater regional competition for this seat.
At the same time, this could potentially open up more opportunities for talent in Japan to take a more regional focused role. Geographic diversity in leadership is already happening in many industries but could likely be accelerated post-COVID-19.
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