4 Key Questions your CFO Should Ask in the Wake of Economic Pandemic
As we all know, these are anything but normal times, with the COVID-19 crisis directly affecting our economical circumstances. And while the initial wave of shock and disbelief has come and gone, we decided to reflect back and identify questions CFOs should be asking. This unprecedented uncertainty and disruption are in no way an extinction event for companies. The main goal here is to help business owners understand what their CFOs are responsible for.
- How Has Your Business Model Changed?
It is highly likely that over the last few weeks and months, you refined your expense management, and became much more streamlined and disciplined. However, the bigger question is, how has your business model changed. Here is a list of questions that your CFO had to ask in order to brainstorm and compare several variations and ideas to make sure that the company moves/moved to the correct business model and promise continuous growth.
- Key Partners
- Who are your key partners and or suppliers?
- Why is it important to have these relationships?
- Key Activities
- What key activities does your value proposition require?
- What activities are the most important regarding distribution channels, customer relationships, and revenue stream?
- Value Proposition
- What core value do you deliver to the customer?
- What customer needs are you focusing on?
- Customer Relationship –
- Decide what kind of relationship to establish with your target market.
- How can you integrate your relationship with your customers with cost and format?
- Customer Segment
- What market are you creating values for?
- Who is your most important customer market?
- Key Resource
- What key resources does your value proposition require?
- What resources are the most valuable when it comes to distribution channels, customer relationships and revenue streams?
- Distribution Channels
- Through which channels that your customers want to be reached?
- Which channels work the best?
- How much do they cost?
- How can they be implemented within your customers routine?
- Cost structure
- What is the biggest expense in your business?
- Which key resources and or activities are the most expensive?
- Revenue Stream
- For what value are your customers willing to pay?
- What and how do they recently pay and how will they prefer to pay?
- How much does every revenue stream contribute to the overall revenues?
- Key Partners
- What Are Your Competitors doing and why are they doing it?
As a CFO it is very important to peer over the corporate fence to cull specific insights, asking themselves pointed questions as a result. This helps understand your competitive advantages and disadvantages relative to others in the market. It also helps generate understanding of competitors’ current and future plans as well as provide information to develop strategies that could create competitive advantage in the future.
- How are your competitors reacting to current circumstances?
- Have they dramatically shifted gears? For example,
- Maybe a dramatic shift in operations isn’t necessary for your company. But are you still adapting properly to the environment, competition, and marketplace as a whole?
- Are competitors laying off staff?
- From a broad perspective, why are your competitors reacting the way they are? What drove those decisions, and are you missing a critical angle?
- How should your capital structure and allocation look going forward?
How you look at your capital structure and allocation are be deeply ingrained. However, now is an opportune time to look at those old ways and see if it’s time to change them or even put them out to pasture altogether. Ask yourself the following questions:
- Going back to establishing your minimum working capital needs, is that a future baseline for your capital allocation decisions?
- How are you reevaluating treasury-related items?
- Are you maximizing your credit lines and restructuring or refinancing existing debt?
- What role do dividends and share buybacks play in your capital strategy a year from now?
- How Has This Tidal Wave of Risk Impacted Your ERM?
Waist-high fields of risk and uncertainty extend past the horizon, leaving every company vulnerable to some extent. For obvious reasons, your enterprise risk management (ERM) processes are under the microscope – or at least they should be. Now is the time to evaluate whether they’re up to the task or need some work. Here are a few questions:
- Have you updated your ERM to include risks of pandemics or similar business interruptions?
- Is your traditional reporting function responsive enough to address changes in your customers’ behavior or the marketplace in general?
- What role will you and your team play in driving change management across the enterprise?
- What lead indicators should you monitor to determine when uncertainty dissipates?
- Do you have adequate mitigation plans in place to drive down risk?
But these are historically unique times and call for fresh perspectives. Going forward, it’s dangerous to assume that everything old will be new again, especially with so many distressed companies looking for any sort of lifeline. Fortunately, CFOs are in a prime position to provide invaluable, fresh insights to CEOs and business owners.
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