Coronavirus: The biggest challenge right now is business continuity

As the Covid-19 outbreak hits companies hard, CFOs like Vaish are bracing for what many are referring to as the toughest phase in their careers.

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Experts say companies with short payment cycles and high debt levels are facing big challenges.
“Black Swan event. That’s what it is. The suddenness and severity of the Covid-19 slowdown is unprecedented,” said Alok Vaish, CFO, Jubilant Life sciences, referencing finance guru Nicholas Tayeb’s cult book that outlines the extreme impact of rare and unpredictable events.

As the Covid-19 outbreak hits companies hard, CFOs like Vaish are bracing for what many are referring to as the toughest phase in their careers.

Suddenly, there’s war at every front and CFOs find themselves in the middle of every situation: whether it’s collating information from supply chain and manufacturing units or managing March-end compliance pressure or overseeing treasury operations or limiting forex volatility damage to evaluating cash flows hit hard by low collections. They are having lengthy chats with edgy investors, reworking revenue and cost projections and handling implications from falling share price at the same time.


And the biggest problem haunting them is that their business continuity plans (BCPs) are being tested and reworked every day given. “For any organisation, the biggest challenge right now is business continuity. A company like PVR, which garners revenue in the range of Rs 300 crore per month, is staring at a situation where revenue is nil because all theatres are shut. So the question is how to sustain the fixed cost. Nobody knows how long it will last and how soon India will bounce back. So CFOs will have to play a very active role and work with business teams to figure out business continuity plans,” said Nitin Sood, CFO, PVR.

Even well drawn out BCPs are suddenly in deep water. “I have 18 factories across India. The BCP was to shift manufacturing from one zone to another, if there is a problem. But the BCP has gone for a toss now that all 24 factories are under lockdown and staff is sitting at home.” said CFO of a leading FMCG company, who is not allowed to speak to media.

CFOs in sectors that have been heavily hit like travel, tourism and hospitality have been working late hours and are under lot of stress. “I am taking reports of all 61 operational hotels on an hourly basis. The past few weeks have been very stressful. From March 10 onwards, we started reducing our costs. But, they can’t be made zero. We still have to maintain operating hotels and that involves some costs. We don’t know when the situation will improve. We are trying to keep our nose above the water. The biggest challenge is with the hotels that have got loans and debt,” Said Amit Jaiswal, CFO, Royal Orchid Hotels.
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And with multiple situations demanding urgent attention, working from home requires greater efforts at managing time too. “There is a lot of anxiety amongst employees, customers, investors, so I have been on calls with all of them and telling them it’s a phase and that it will pass and hopefully we will all come out stronger, having gone through this adversity. It is hard to manage time. When you are in office, you are able to get things done faster by getting together with all the people. Decision making is faster. Here, we are leveraging mails, calls and videoconferencing. We are still able to take decisions at the right time, but it involves a lot more effort to get everyone together,” said Jubilant Lifesciences’ Vaish. “The foremost priority is the safety of our employees and their well being. We can cope up with business challenges but livelihood and well being of our staff is of utmost importance in the current market,” added Sanjay Agarwal, CFO, Jyothy Labs Given how quickly the slowdown swooped on corporate India, the finance department has had to make quick adaptations. A lot of CFOs have had to digitise processes quickly. “We had to set up an end-to-end process for invoicing and payments almost overnight,” says CFO of a fintech startup.

While the bean counters work the numbers, they are also working closely with CEOs to optimise future planning. “This is the time to sit back and re-think internally about consolidation, geographies and what can be improved. We are also looking inward as a company,” said Venkat K Narayana – CEO, Prestige Group.

Experts say companies with short payment cycles and high debt levels are facing big challenges.

In capital intensive sectors like real estate, the foremost requirement would be of capital. “So, the focus is to ensure that there is less stress on the cash flow cycle and re-initiate raising funds, once things are back to normal. At this juncture, it’s too early to ascertain the impact, but we have kept an eye on the situation and will act according to changing environment,” said Kuldip Chawla, CFO, Puravankara.
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Uncertainty over the lockdowns has made it impossible to predict business impact so multiple business scenarios and models are being prepared. It is time for some tough talk internally as well, and expenses have to be slashed. “As a CFO, you have to be conservative and tell the business teams to defer and suspend capex and do bare minimum essentials to ride through this situation,” said Sood of PVR.
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