TABLE 2: EMBRACING TECHNOLOGY

Action Role

Deploy ERP or inventory management systems

Determined at strategic level—the key is to identify what goal the technology serves, rather than giving too much detail

Financial controller/director manages budgeting for major cross-function initiative

CTO and IT functions implement solution, integrate with existing system, and identify which legacy systems to keep; procurement teams buy in to leveraging learnings; strategy/ product teams adopt agile stances in readiness for change; HR develops training strategy to say analytics should be the bedrock of your decision making. This not only better empowers businesses to ride out any recession, but any technology investment can lay the foundation for resilient future growth as the economic cycle turns.

Potential actions you can take include investing in automated solutions that can take on manual processes like invoice processing or creating purchase orders and expense reports. Scaling automated solutions across your organization could cut costs significantly, reduce the instances of human error, free up human resources, and free up capital to invest in your key priorities as the downturn progresses.

There are platforms on the market now that offer consolidated dashboards that surface real-time data on spending and other financial information. There’s also a growing number of platforms that can facilitate sophisticated enterprise resource planning (ERP) systems. Perhaps most usefully, they can act as a single source of truth for your organization—something that can add significant value, especially the larger and more complex your operations are, and markedly smooth internal communications.

Meanwhile, innovative new inventory management solutions are available that will allow you to distribute resources, personnel, and assets more efficiently and can open up opportunities to find efficiencies in intricate supply chains that may not be immediately apparent on the surface.

Before embarking on any large-scale program of investment in technology, however, there are multiple factors you should take into consideration. For instance, what legacy systems do you wish to keep—if any? Which of your team members will need training on the new platforms, and how? How will any new solution integrate with your existing operations and those of your external stakeholders and suppliers? Will you need to convert your existing data? If so, how will you define, examine, and analyze your existing data sources, and avoid the delays and increased costs associated with poorly managed and executed data conversion? And, finally, will you require an external third party to support you as you find answers to these questions? See Table 2 for further tips on embracing technology.

Prioritize Sustainability

As we head toward a likely recession, one notable change to the business landscape compared to recessions prior to the pandemic is the radically expanded importance of sustainability as a consideration in business operations.

Sustainability truly is at the core of the future economy. Unless decision makers across the private and public sectors make it central to their thinking, the long-term picture becomes a dark one. As such, whatever shape global supply chains take after this period of disruption, all stakeholders are highly likely to make sustainability a priority.

For all the breadth and scale of its impacts, it’s easy to forget that COVID-19 was, at its core, a natural disaster (of a kind). There are serious arguments that its global scale and brutal damage to business activity served to dampen illusions that we’re invulnerable to shocks emerging from the natural world.

Therefore, keeping sustainability top of mind in future strategy is a core element of any effort to embed long-term resiliency to any business. This is easier said than done, but there are a number of potential actions available that will make your organization truly sustainable.

Culture comes first: If sustainability has until now been an abstract idea rather than a reality for your company, embark on a cultural transformation project with the mandate of finding any structural obstacles to sustainable business practices.

Having done so, you’ll be in a strong position for making a company-wide commitment to finding innovative new ways to improve your sustainability posture. This means you’ll be able to embed ethics, values, and a sense of mis- sion into your culture alongside, more practically, an organization-wide understanding that sustainability-related risks are material and not optional to manage.

Building ambitious diversity, equity, and inclusion (DE&I) strategies will allow you to include diverse new perspectives in this conversation and find solutions that may not have immediately presented themselves to your leadership team.

Turning to practical applications, you could explore strategies for incentivizing stakeholders in your supply chain to embed sustainable practices in their activities, perhaps by offering a supplier finance program. Gathering and leveraging accurate and actionable data around sustainability-related issues is critical—and this data could potentially be integrated into your ERP platform.

For your staff, there’s an educational opportunity to develop both broad and deep knowledge of any existing or new regulations across your business. You could embed sustainability criteria into your teams’ key performance indicators (KPIs) and incorporate them as you structure your leadership teams’ incentive packages.

The CFO has a vital role to play here. The unique nature of the role means that you have the opportunity to act as a node for the sharing of information on sustainability questions throughout your organization and developing new accounting frameworks that take into account nonfinancial KPIs. The CFO also has a real voice in the setting of strategic goals and developing the finance strategy that will meet them, managing the compliance and control systems that will ensure sustainability targets are being met, and identifying and relating any connected risks that can (and will) emerge. A CFO can catalyze change, steward success, and take responsibility for the intermediate steps between.

In terms of scenario planning, there are any number of sustainability-related scenarios to take into account in long-term planning. Climate risk is the most obvious, but everything from sudden shifts in regulations to the viability of a factory’s water source to the integrity of a supply of raw materials are just a small selection of material risks connected to sustainability issues. See Table 3 for suggestions for centering sustainability in business operations.

TABLE 3: PRIORITIZING SUSTAINABILITY

Action Role

CFO Finance Department Other

Build DE&I strategies Determined at strategic level; build incentive programs for leaders; culture of openness and inclusion set from the top

Incentivize suppliers for sustainable practices

Embed sustainability into KPIs

Embed sustainability into compliance function

Model sustainabilityrelated scenarios

Determined at strategic level

Determined at strategic level

Targets determined at strategic level; rewards for success (and penalties for failure) determined

Nature, time horizons, and severity of scenarios determined at strategic level

Finance managers ring fence budgets, examine own practices and culture

CEO and board buy in and set tone; review of team practices across all functions, in particular HR; internal communications support and sustain

Corporate treasurers and finance managers build program

Payroll manages; finance managers construct

Finance managers and treasury function manage consolidation and interpretation of data

Finance director manages cross-function collaboration

Product and procurement teams deploy and feed back

Board and CEO incorporate into own incentive packages

Procurement teams own sourcing, gathering, and sharing reliable data

Board and CEO buy in to incorporating learnings; all functions contribute ideas, insights, and input to planning

TABLE 4: EMBEDDING LONG-TERM PLANNING

Action Role

Review management incentive structures

Seek out innovation

Ring fence forecasting and research budget allocations

Adjust subordinates’ compensation to encourage longer time horizons

Determined at strategic level

Determined at strategic level; support offered to subordinates in disputes

Finance director and managers adjust payroll budgets accordingly; payroll team implements

Finance managers accept that not all research and development spend pays off immediately

Finance teams police budgets meant for long-term strategic innovation against short-term demands

Board and CEO buy in to possible cultural shift away from short-term thinking

All colleagues pursue new ideas, working practices, and technologies

Buy-in from CEO for potential operational constraints caused by budget ring fencing

Embed Long-Term Planning within the Management Structure

It can be tempting as we move toward a likely economic downturn to think only in the short term, with even medium-term planning in danger of becoming considered a luxury. This is a mistake: Recessions are tough, but they do offer the opportunity to innovate and retrench for the future and can serve as a stress test of the resiliency of business practices.

The challenges mentioned already around sustainability and the broader economy won’t address themselves, yet neither is there a simple ready-made solution. Giving your leadership teams the semipermanent mission of long-term scenario planning—creating teams specifically for this purpose—will move you out of a purely reactive stance and allow you to take control of your business’s future.

There’s no right or wrong way to do this, but there are several approaches that can orient your company to the future. There are solutions available now that can enable you to build digital twins of critical parts of your supply chains for detailed scenario planning, which is useful for both long- and short-term planning. Almost every organization, regardless of size, is siloed to some extent—seek out opportunities for productive data sharing to make these models as powerful as possible.

Again, much of the success in long-term planning will likely be culturally determined. You can encourage a culture of long- and not short-termism by reviewing incentive structures for management accordingly and making it routine to extend time horizons for planning to five years or even longer. Innovation will be happening outside of the business, too—promote detailed research about consumer and business trends that could come to define your industry. You might just spot them before the competition.

On a practical level, an option is to separate forecasting from annual budgets. Rather than managing crises—and provided you can afford to—allocate capital in ways that are aligned with a long-term strategy.

Even during a recession, the most obvious but nevertheless most important way in which a business can orient itself to the future is in how it invests. Redefine what’s core to your operation and what could play a role in the emerging trends so the business is well-placed to benefit as the market evolves.

Recognize, however, that not all of these will be totally successful. Some will fail outright. This requires skillful stakeholder management, especially if your company culture is one that isn’t used to the iterative nature of experimentation and incorporating the learnings gained along the way. Table 4 presents ideas for long-term scenario planning.

Optimize Working Capital

From supply chain finance to dynamic discounting programs, CFOs have a number of options available to them for getting as much value as possible from their working capital arrangements.

Management teams tend to default to focusing on profit and loss figures at the expense of the rest of the balance sheet, and not many companies manage their liquidity as attentively as they manage their costs. This can be a mistake, especially during a recession, as adroit management of working capital can free up liquidity to the extent that companies may be able to avoid cutting staff numbers or restructuring operations.

To do this successfully, build a team of key internal stakeholders, from treasury to procurement to IT to accounting to legal, and ensure communication structures are in place to bring them along with the program and ensure their buy-in at every stage.

TABLE 5: OPTIMIZING WORKING CAPITAL

Action Role

Review and reform accounts payable and receivable procedures

Review and reform supply chain

Cfo

Determined at strategic level

Determined at strategic level; colleagues encouraged to find and embrace opportunities; metrics selected for determining success