Finance
2020 hindsight: 4 lessons to remember this year
W
hile Kern County’s unemployment rate has dropped to its lowest level since March 2020, many companies are still dealing with the acute impacts of the economic and social disruptions of the last year. Innovative companies can apply what they’ve learned to excel in 2021. Here are four ways that Mark Riley companies can build resilience, and weather future challenges, while being better positioned to capitalize on emerging opportunities.
Kern Business Journal
Monday, February 15, 2021
FINANCIAL DISCIPLINE ISN’T JUST FOR HARD TIMES
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A thorough, proactive review of internal processes and key relationships can help protect your company. For example, cash flow issues are a common source of business failure, so it’s important to examine your supply chain and customer base for vulnerabilities that could impact your business and review customer payments to identify issues before they become larger problems. Cutting expenses in a defensive and reactive posture can have unintended consequences. Instead, create “what if” scenarios now and plan allocations for each. If the time comes, you can respond with a thoroughly vetted plan.
DON’T LET UNCERTAINTY DETER YOU FROM GROWTH The M&A market shifted in 2020 due to the impact of the coronavirus and widespread digital transformation. Companies with strong working capital and cash reserves could have a significant opportunity to put that to work through a merger or acquisition, especially if they have limited debt. If your company is not in a position to pursue M&A activity, develop a strategic plan for future growth. Start by identifying the top oppor-
Guidelines on governance and wealth management for nonprofits
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tunities facing your company right now, whether it’s market expansion, reaching a new customer segment or digitizing more of your business model. Consider potential hurdles you’ll face in pursuing these opportunities as it will help you formulate an actionable, prioritized plan specific to your situation.
MAKE CYBERSECURITY A BUSINESSCRITICAL PRIORITY Cybercrime is more of a risk in today’s remote work environment, so companies must prepare themselves. Criminals realize that workers are less protected when working remotely and are launching malware campaigns targeting people with insufficiently secured devices. To reduce vulnerable attack surfaces in your company, look to strengthen mobile device management, ensuring security tools and protocols are in place. Companies should also update and enforce a security policy for remote connectivity. Policies should provide guidelines on the safe use of public Wi-Fi, prohibit workers from transmitting sensitive information and require the use of VPNs and well-protected home routers. Finally, cybersecurity training can teach employees how to put essential safeguards in place while keeping cybersecurity top of mind across the company.
INVEST IN YOUR EMPLOYEES Just as you’re taking steps to safeguard cash flow and business operations, it’s essential to protect the wellbeing of your employees. Management should support employees even more holistically and proactively than before. Leaders can schedule more frequent communications with staff and play an active role in broader wellness areas like financial stability and mental health. Comprehensive wellness programs that support employees’ physical, mental and financial health are more important than ever today. The percentage of employees who rate their financial wellness as good or excellent declined from 61 percent in 2018 to 49 percent in 2020, and as many as 57 percent of employees feel their well-being has a great impact on their productivity, which could have major ripple effects on a company’s health. Financial wellness tools and education should cover a range of needs including saving for retirement, planning for healthcare costs, budgeting, saving for college and managing debt. While no one can predict what’s to come in 2021, these lessons from 2020 can help companies reignite growth and plan for financial success in the months ahead.
Mark Riley is the business banking regional executive for Bank of America.
n December 2019, when you could still gather in a classroom sans mask, I was invited to give a lecture as the presenter for the Dean’s Executive and Research Seminar series at Cal State Bakersfield. I had a packed house and the presentation was well received (though I have on occasion cleared out bigger rooms than that). Little did we all know how much the world would change in just three short months. The subject matter of the presentation was governance and wealth management, now more timely than ever with the impact of the pandemic on the economy and markets. Warren Buffet is fond of saying, “You don’t know who is wearing a bathing suit until the tide goes out.” With local foundations and endowments, the tide went out starting in February 2020 with the reaction of securities markets worldwide to the COVID-19 pandemic, and the implosion of oil prices when the Russians and Saudis were unable to agree on Frank J. Colatruglio production limits. As fundraising for nonprofits has slammed to a halt, many organizations have been forced to rely on their accumulated reserves and endowments, shining a spotlight on how well they have managed the fiduciary responsibility to preserve the real value of the resources they have been entrusted with. Real value means the value after inflation, distributions to beneficiaries and the associated costs to manage the assets. UCLA, for example, uses a required return target of 5 percent plus CPI net of asset management costs. The CSUB Foundation uses 5.25 percent plus CPI net of investment expenses pertaining to their endowment and reserves. CALPERS uses a 7 percent target, and it should be noted its chief investment officer was recently terminated after underperforming this return requirement for two years in a row. One of the entertaining (sad I know) activities I have engaged in as a result of having my work desktop at home has been the review of quite a few of the 990 tax returns required to be filed by local nonprofits, as well as their audited financial statements and Investment Policy Statements (IPS). These documents are Please see NONPROFITS | 9
