Virtual CFO is not just a number cruncher, or analyzer, but in fact is company’s innovator, game-changer, and protector and how well an organization reacts and adapts to a crisis is what is deemed as efficient crisis management.
A virtual CFO acts as a ‘company’s protector’ at the verge of crisis—fiscal or non-fiscal.
A CFO plays a vital role in four different way:
- Prevention:
Monitoring the financial and non-financial avenues of business, a CFO collaborates with CEO and C-suite to prevent impending catastrophes.
To handle different types of crisis such as corporate crisis, economic crisis, or communication crisis, a CFO will:
- Create a rolling budget and forecast to achieve the financial goals that is constantly updated, at least quarterly, according to the realistic situations faced by the company. He understands that budgets turn obsolete within the first 4 to 5 months of the year, hence rolling it regularly to update is key. The major aim is to maintain positive cash flow over profits.
- Update rolling forecast to increase revenue and profitability and gain greater shareholder value.
- Invest in branding and other strategies to increase product value to sell at premium rates. In the long run, this prevents cash flow crisis altogether.
- Focuses on sustainability reporting to maintain company’s credibility for the investors.
- Take steps to prevent cybersecurity breaches that can cause reputational crisis and a damage to brand value.
- Communicate effectively between leaders and employees to prevent employee protests, employee scandals, etc.
- Value customer review to prevent public relation crisis and increase customer trust and loyalty.
Rather, a CFO not only crunches numbers, but utilize them for practically for preventing a whole range of external and internal threats that any company might face.
2. Prepare:
A CFO understands that unforeseen situations can emerge at any step despite the preventive measures taken to counter it. A CFO, along with C-suite and CEO, prepares the company for appropriate response to any incident.
During crisis, a CFO first identifies whether the source is intrinsic and extrinsic. He evaluates the extent of damage done to the company and brainstorms ways to get out of it.
A virtual CFO with his vast experience develops the most effective interventions to minimize loss and recover fast.
Also, the previous national and global disasters such as 9/11, London terrorist attack in 2005, pandemic COVID-19 are exemplary for companies to be prepared to respond correctly and recover from the situation safely.
An expressive CFO prepares the executives, team, and investors to be more cooperative during the times of crisis, to prevent risking key employees and investors.
3. Response:
The response means putting the prepared strategies into action.
In such times, a CFO acts as a mediator to control the inflow and outflow of authentic information. This is important because oftentimes there is a lot of misinformation coming in that can cause internal crisis.
During the phase, a CFO controls all the stakeholders such as shareholders, social media, customers, government bodies, employees, etc. through constant feed of information and communication. Such response prevents greater damage and retains stakeholder’s trusts.
Looking at the situation, the CFO comes up with strategic plans to handle the situation well.
For example: In 1993, Diet Pepsi cans were alleged of putting syringes in cans. The company responded professionally by showing the production process of Pepsi cans where it was impossible to add any foreign objects in them.
4. Recovery:
This is the final stage of crisis management where a CFO works to recover the financial and corporate matters equally.
Any investigations to identify the root cause and repairs to bring back the balance of the company are worked on.
CFO reevaluates the plans to improve budgeting and forecasting and takes all the other necessary steps to gain positive cash flow for the company.
The author of this article is finance professional with 20+ years of experience. If you need to reach out, do write us back at support@growiseadvisors.com