Essentially the reverse of the management journey of nail it; scale it; sail it – the cruise, fight, hibernate strategy during the COVID-19 focuses the CFO’s effort on maximizing the strategic direction of the company based on financial strength/risk management (order within chaos approach).
CFO’s by now deeply understand the financial health of their company and have enough information to decide which three strategic pivots for 2020: Cruise, Fight, Hibernate. They are uniquely positioned at the moment to steer company; guide business units and help project different scenarios with rolling forecasts.
But also, enable businesses to step back from the chaos and create order by communicating key paths for 2020. Mckinsey’s recommendation for CFO’s to have a “decision cockpit”—a real-time dashboard for business leaders can use to focus on the seven to ten key metrics to guide the organization’s operations through the crises, is valuable regardless of company size, maturity or financial resilience. Similar to the white house situation room, a 24/7 meeting place for sensitive information flowing into and out of the cockpit.
However, lets take a look at the three strategic pivots for businesses this year.
Cruise. A number of organizations have already raised funding; have liquidity reserves or are backed by funds giving CFO’s an ideal advantage of being in a position to deeply diagnose the company’s finances strategically thinking along the lines of resource reallocation, business innovations to create efficiencies/create advantages (think end-to-end digitization) and strengthening the business model through acquisitions, are important, but in the current crisis, reallocating resources for future growth, realigning the portfolio through acquisition, reassessing portfolios all with the customer engagement at the center.
Fight. A financial diagnosis could reveal the business has a fighting chance to get through the uncertainty. In this scenario, CFOs must strengthen financials by seeking relief on any debt; tap lines of credit; think of divesting certain assets/portfolios; review opportunities to raise capital or think about survival through joint ventures. Hibernate. Like a bear in winter, you may decide it’s easier to wind the company down and start back up, if possible when conditions are fundamentally different. Negotiate payables and seek a maximum deferment; help customers get credit/liquidity and prioritize payment to you. Another strategy is to seek buyout from to your employees, customers and suppliers by sacrificing your own shareholding/management control and seeking a future payment or share buy-back.
