The impact of COVID-19 exposed vulnerabilities and illuminated inefficient and oftentimes, manual, processes. However, the pandemic also naturally accelerated digitization and technology enhancements as staff were driven to remote working environments. It forced companies to look inward at all manual treasury management, risk mitigation, and business continuity planning (BCP) processes.

Recent survey data lends credence to what we see and hear. The Boston Consulting Group’s (BCG) recent COVID-19 CFO Pulse Survey found that nearly all Chief Financial Officers (CFOs) surveyed in October 2020 had temporarily paused exploring proactive ways to protect their business.[1] However, 85% of those surveyed expressed optimism that they would be able to take advantage of new opportunities in risk mitigation, BCP, and treasury management over the coming months as business environments and the macroclimate improve.

It is our hope too that finance and treasury departments can emerge stronger with more agility and resiliency by proactively reviewing lessons learned, while anticipating potential disruptions to their ‘business-as-usual’ processes in the future. Preparing for this rapidly approaching post-COVID business environment will be crucial as the pandemic retreats, and investment and economic activity pick-up.

Preparing for a post-COVID world

The question on the minds of all CFOs and Finance Managers is: What steps can my staff and I take to ensure we are prepared for the days, weeks, and months ahead?

• Protect and upskill your people: Safety should come first, ensuring employees are not put at undue risk and business reputation is protected. Drive a focused agenda for active employee engagement and return to work via training using digital tools.
• Hybrid / remote work: Some form of this model is inevitable post-COVID so companies should pro-actively prepare and develop a communication plan and policy. In addition, organizations should continue to ensure remote employees remain highly engaged, safe, and securely connected.
• Articulate a clear vision based on solid milestones: Develop a clear communication plan that articulates expectations. Establish near-term and mid-term milestones that are realistic while emphasizing speed in go-to-market and operational efforts. The abrupt change to remote working, especially for a lengthy duration, may have caused some employees to become disconnected or distracted. Communicating the vision broadly and establishing a schedule of frequent updates on progress will keep the engagement and commitment level strong.
• Conduct dynamic scenario planning: Pay close attention to your marketplace to evaluate how customers, channel partners, stakeholders and competitors are ramping up. Scenario plan with an eye toward compliance with regulatory mandates and be prepared to fine-tune plans on the fly.
• Accelerate digital enablement: Leverage digital transformation efforts to exploit new methods of market outreach and lead generation.
• Challenge conventional cost assumptions: Take this opportunity to reexamine organizational capabilities and reset cost structures.
• Engage in active liquidity management: Treasury organizations should examine cash flows and conduct more frequent stress tests. They may also want to consider maintaining a larger than usual cash-reserve, which may necessitate securing additional financing. Keep an eye on contracts, as well move forward with investments aimed at improving critical functions.

Implications for cash and liquidity management

Treasury organizations will also need visibility into cash, contracts and facilities across the organization. Sufficient transparency is key to identifying all cashflows, interfaces, risks, and contingencies as it will allow the team and broader committee to take actions that deliver quick wins that immediately improve the liquidity position of the organization. Launching revenue generating campaigns, improving core working capital management processes, and delaying capital expenditures and other investments may prove highly effective at achieving these goals. It is vital for the organization to develop upside and downside liquidity scenarios that match top-down probabilities over the coming months with bottom-up liquidity planning.

It goes without saying that many supply chains have been adversely impacted by the pandemic and treasury organizations may need to manage additional risk associated with suppliers, FX and commodities. Organizations will need to take into consideration how suppliers are being directly affected. Those that are struggling to fulfill orders may benefit from supply chain finance. At the same time, treasury teams may also need to monitor the management of currency and risk associated with the volatility.

Best practices for a successful treasury organization

In summary, with the right planning and reasoned actions, treasury organizations have an opportunity to help the business thrive. Below are a few key best practices that treasury professionals should keep in mind:

• Finance and treasury technology: Evaluate enhanced technologies and improvements to your Enterprise Resource Planning (ERP). This will create agility in your business and allow it to successfully manage through future shocks and crises.
• Liquidity management: Manage short-term cash, foreign exchange (FX) and credit risks through a centralized cash management office. Start implementing short-term cash generation measures, and/or review your credit lines. Treasury organizations should also use a rolling forecast as part of a regular cadence of meetings over the next few quarters.
• Actions for the short-term: It’s important to put some wins on the board quickly, which is why scenario planning, setting up cross-functional crisis response teams and facilitating quick decision making is critical. Also, adapt resource and talent allocation to emerging opportunities and risks. Cutting expenses or discretionary spend in targeted areas, while doubling down on things like digital enablement and market outreach through omnichannel, can really pay off.
• Finance operations: Treasury organizations should consider adapting their working model to better accommodate remote team members and access to vital infrastructure. It’s also critical to assess and manage shared service center (SSC) risks to ensure business continuity, particularly when they are outsourced.
• Effective banking partnerships: In a previous article we suggested topics to discuss at your Relationship Review and how your banking partner can help you achieve your objectives. In these extraordinary times, we believe a crisis can also open the door to attractive opportunities. An effective banking partnership can be instrumental in leveraging banking resources to help finance and treasury organizations achieve strategic initiatives.

To further discuss your treasury management needs and the themes highlighted in this article, please do not hesitate to contact us.