EXL recently hosted a CFO webinar to discuss how finance functions are adapting to the unique challenges posed by COVID-19. The conversation centered on data and analytics – specifically, how organizations are using them to quickly respond to new challenges and opportunities.
Together, these finance leaders shared insights into how data and analytics figure into the immediate, medium-term, and long-term priorities of CFOs.
Assessing the Immediate Impact of COVID-19
The pandemic has impacted almost every aspect of the economy. There is a 26% increase in US bankruptcy filings over 2019, and 42% of businesses have stated their supply chains have been majorly disrupted.
One of the most discussed aspects of the COVID-19 crisis is what the path out of these current economic conditions will look like. Opinions on this subject vary. According to a poll of executives carried out by EXL, 11% believe a recovery will occur within the next two-to-three months, 8% expect conditions to remain depressed for the long term, and 81% see an uneven recovery occurring in the future.
It’s this unpredictable market environment that’s making data and analytics more important to CFOs than ever before. Embracing digital initiatives, preserving cash in order to come out of this disruption in growth mode, and assessing risk have all become essential. Accomplishing these and other goals will require an agile and resilient business model based on data.
The New CFO Imperatives
Unique challenges require unique solutions – and today’s CFOs are facing more unique challenges than ever before. Research shows that 30% of CFOs are currently facing funding issues, while 70% of finance leaders are bracing for a global recession.
Moving forward, organizations will need to walk a fine line between cutting costs and making investments for the future. This balancing act takes real-time access to both financial and operational data, as well as the analytics capabilities to turn this data into practical insights.
Business needs have changed dramatically during this crisis. Companies must now be nimbler, faster, and quicker at making decisions in order to respond to the quickchanging nature of the pandemic.
Responding to change means knowing the changes that are coming, a situation that makes effective FP&A programs of critical importance. These programs rely on data to make their predictions. In order to feed FP&A initiatives with the information they require, businesses should look at the quality and accessibility of their data. Check data sources to ensure information is being entered into the system accurately, look for data silos that can be broken down to make information more accessible, and try to identify whether the current technology infrastructure is up to the task of turning this data into insights.
Most organizations have adopted some elements of a work-from-home business model into their operations. While this has allowed businesses to function in the face of lockdown orders and social distancing mandates, it’s also opened up new risks that must be accommodated. Supply chains are at greater risk of being disrupted than ever before. Remote work opens up new avenues of cyber risk. Data and analytics will help effective CFOs identify these new areas of exposure and course correct to limit negative impacts.
The volatility inherent in the market today also makes scenario forecasting and stress testing a key priority for CFOs. Scenario building is the lifeblood of a business. It enables companies to analyze how their balance sheets and capital structures would perform in different circumstances. By using new data sources and analytical tools, companies can adapt their scenario strategies for the present conditions.
However, it’s important to note that scenario building is not a goal in itself – it’s essential that businesses have a clear objective in mind when they’re constructing these various scenarios. Successful CFOs will identify what they want to test, such as how to best drive sustainability or cash conservation, before creating a scenario.
Adapting to the New Normal
Studies have shown that outside of a crisis, CFOs spend more than two thirds of their time on financial housekeeping tasks, and less than 20% of their time on strategy. COVID-19 has caused CFOs to invert this schedule, shifting almost exclusively to high-level strategic tasks.
CFOs cannot expect to make these important strategic decisions based on their instincts alone. Adapting to this new normal will require data, analytics, and the skills and technology required to turn information into insight. By incorporating all of these elements into their organization, CFOs will be well-positioned to weather the current crisis and capitalize on opportunities during the recovery.