The COVID-19 pandemic, geopolitical unrest, and Brexit have created a perfect storm of uncertainty in the UK. This combination is cause for concern, especially for CFOs charged with navigating their organizations through rough economic waters in the upcoming years.
It’s critical for F&A leaders to understand the risks posed by these external factors and consider ways to better brace their organization for long-term flux.
The 2020 Deloitte CFO Survey report states that “after the sharpest contraction in activity in more than a century, a recovery is underway in the UK.” But CFOs of Britain’s largest businesses are expecting a slow recovery period and shifting priorities over the coming years to sustain the downturn.
As companies start defining their new “normal” in the wake of the pandemic, CFOs will be firmly focused on protecting their balance sheets, bearing down on costs, and building cash.
Here are the three key areas that CFOs should be focusing on to effectively lead their organisations through one of the most interesting, novel, and challenging seasons in history.
Charting the Right Path to Recovery
Uncertainty always presents heightened challenges to navigate, and this is a particularly troublesome element for any finance and accounting organisation. Accountants are typically risk-averse, and build their careers on routine, absolutes, and eliminating every possible shred of uncertainty.
As we all move forward one day at a time, CFOs must begin reevaluating their corporate strategies and priorities to chart an effective path to recovery. It’s equally important to acknowledge the fact that the recovery period will inevitably be slow and extra-challenging because of the uncertainty that remains.
So, set expectations accordingly and communicate as often as possible. You don’t have to have all the answers, but if you provide your teams with as much information and clarity as you possibly can, including complete clarity around your expectations, their trust in you will increase—along with their loyalty.
Realigning Corporate Priorities
We all began 2020 with carefully laid plans for the year, which were quickly disrupted at the beginning of Q2. For the past six months, CFOs have been revamping those plans and reevaluating their priorities.
Deloitte’s report found that reducing costs, increasing cash flow, and reducing leverage were still the top three priorities for CFOs in Q2 of this year, but their focus on these three defensive strategies isn’t as sharp as it was during the first quarter of the year.
Introducing new products, expanding by acquisition, and increasing capital expenditure are the next three priorities on CFOs’ lists, and these expansionary strategies have become a slightly higher priority.
The Impact of COVID-19 Overshadows Brexit
There is still no end in sight for the COVID-19 pandemic, which arrived on the heels of Brexit, and both are predicted to have a significant and lasting impact on businesses in the UK. But CFOs identified the pandemic as the top risk facing their businesses.
Looking ahead to the next three years, Deloitte’s CFO Survey found that 74% of CFOs expect hiring to decrease, 65% of CFOs expect capital expenditure to decrease, and 27% of CFOs expect mergers and acquisitions to decrease—all as a result of COVID-19.
CFOs also expect Brexit to affect these three areas, with 28% indicating that hiring will decrease, 26% saying that capital expenditure will decrease, and 17% anticipating that mergers and acquisitions will decrease because of Brexit.
The Key to Doing More with Less
F&A organisations were feeling pressured to reduce costs and do more with less resources before the pandemic began. Now, this has become even more important and more challenging.
Making the move to modern accounting is the key to being successful. Traditional, manual accounting processes aren’t sustainable, and this has become even more evident as F&A teams began closing the books virtually, with a distributed workforce, in March.
A virtual close that’s collaborative and continuous from wherever you’re working is achievable when your data and processes are unified, repetitive work is automated, and there is accountability through visibility.
Visit our Virtual Close hub page for the resources you need to lead your organisation through this unprecedented and challenging time.