The retail/wholesale sectors are particularly pessimistic, followed by manufacturing and services, according to a recent poll by Deloitte.
Nearly 60% of CFOs said they do not expect their operations to return to near-normal levels in 2020, particularly in the retail/wholesale sector, according to a recent poll by Deloitte. The manufacturing and services sectors are also not anticipating a return to near-normal levels this year, Deloitte said.
The forum was conducted earlier this month and Deloitte received responses from 166 companies, of which 70% were private firms with annual revenue of more than $1 billion.
In terms of charting the path to recovery, about half of the respondent CFOs said they plan to open local offices/operations as soon as local and/or state governments permit it. Technology will also play a role in the recovery; 56% of CFOs said their investments in technologies for virtual and automated business operations will increase over the next 12 months, while 35% said it would remain about the same. Only 5% said investments would substantially increase.
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CFOs were also asked what kind of changes, if any, they expect in their workforces. About two-thirds of CFOs said they expect their workforce to be within 10% of its current size a year from now. However, CFOs in the retail/wholesale and services sectors are the most likely to expect substantial reductions, according to Deloitte.
Among CFOs in other sectors that expect their workforce to be within 10% of its current size a year from now: 67% in tech; 83% in financial services; 58% in healthcare/pharma; and 53% in services.
"Organizations are quickly acting to address the impact that COVID-19 is having on talent," said Ajit Kambil, global research director of Deloitte's CFO program, in a statement. "Sixty-one percent of surveyed CFOs expect to increase [or substantially increase] investment in technologies that support virtual and automated work. This could end up accelerating elements of digital transformation not only to improve operations, but also to accelerate digital customer applications."
Managing through COVID-19
Kambil and Sandy Cockrell, global leader of the CFO program, also detailed six imperatives for CFOs on managing through COVID-19 in a recent blog post:
Preparing for digital disruption
"CFOs should consider how the chain of command and authority will shift among their staff,'' they wrote. "From protocols for access to critical files to re-tasking other staff, preparing for business continuity responses at an unprecedented scale is critical."
One of the main priorities a CFO has is ensuring there is enough cash and liquidity on hand for the company to operate. "In the near term, CFOs might consider taking advantage of government loans and grants and central bank purchases of bonds to shore up their access to cash," Kambil and Cockrell wrote. "Even taking into account all of this, the next two quarters for most organizations may be challenging, making it critical for CFOs to manage liquidity and cash in the near term."
Communicating frequently with investors and regulators
Uncertainty is the last thing that investors want, so it's essential to provide them with information—within regulatory guidelines—about what actions your company is taking to deal with the crisis and how they might impact performance, they wrote. "In the wake of the COVID-19 pandemic, many companies have altered their earnings guidance. For some companies, unprecedented volatility may be an opportunity to shift away from quarterly earnings guidance and focus on long-term growth. Furthermore, regulators are another key stakeholder to communicate with at this time."
Driving operational improvements
CFOs must consider what needs to change in how the company operates and what opportunities can be seized upon during this time, Kambil and Cockrell wrote. "The rapid deceleration of business will make forecasting near-term revenues and earnings challenging. Existing forecast models based on normal work and in-person interactions may no longer be valid. This is why it is essential for leaders to focus on shifting forecast models, reducing enterprise costs, and improving their pricing discipline as a few main factors to help them navigate this uncertain time."
In addition to their financial duties, CFOs should be keeping a sharp eye on risk management and stewardship, Kambil and Cockrell wrote. With remote work and layoffs in some cases, "organizations could create more external access points to their systems where they can potentially become more vulnerable to cyber risks. At the same time, companies will face indirect risks in the global economy that can have severe impacts, depending on the duration and depth of the contagion." While it's natural to focus on cost-cutting during economic downturns, they advised CFOs to stay the course on initiatives that support long-term growth to position their companies for recovery.
Plan for post-COVID 19 recovery
CFOs should consider that their company will likely continue to face the long-term talent shortages they have experienced in recent years, especially during and after the recovery. According to Kambil and Cockrell, "A downturn presents an opportunity to hire critical talent from other organizations and universities that may be forced to downsize as they deleverage. Furthermore, this unique circumstance can provide leaders an opportunity to ensure their digital transformation projects are intact, along with ensuring their R&D strategies are in place to tackle any potential future threats that may be on the horizon."
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