12 minute read
CFOs’ essential lessons from lockdown
CFOs’ ESSENTIAL LESSONS
FROM LOCKDOWN
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Both essential and non-essential services had to quickly adapt to an uncertain operating environment during the Covid-19 pandemic. Through it all, leading CFOs across a range of industries learnt new ways of working, some of which they will continue to practise, writes Ronda Naidu.
“Covid lockdown” entered the South African vocabulary in early March 2020, with alert level 5, better known as the hard lockdown, coming into effect on 26 March 2020 for a period of 35 days.
Food, medicine, healthcare, energy, fuel, municipal services, internet and banking services were deemed essential and for any other type of business, it was mandatory for employees to stay at home. Businesses both in the essential and non-essential categories had to quickly adapt to government requirements.
Douglasdale Dairy CFO Bradley Wentzel recalls the period well. “We were deemed an essential service very early but the rules were changing on an almost daily basis,” he says.
“We had to make quick, smart calls. In the first month, if there was once an incident of Covid-19, then operations had to shut down for two weeks. Everybody was living in fear of what it was and where it was,” Bradley explains.
People focus
In order to manage this, the company, which services 6,000 customers daily across five provinces, focused on communication. “We made sure we were talking to our guys, positive messages around the same thread. We emphasised the longevity of the company, ways to be safe and how to manage finances through the period. We tried to give people as many tools as possible to help them work through it, even offering finance courses,” Bradley says. From a customer perspective, Douglasdale Dairy also made the counterintuitive decision to discount a key mass market product, Amasi, which is often eaten with bread as a meal. “We provide basic food products and people are losing jobs and taking salary decreases. Even though a basic finance metric is to increase EBITDA margin, we took a conscious view on discounting Amasi so people could afford to have a meal,” Bradley adds. “We kept conversations going all the time, from farmers to big businesses,” he says.
Also taking the people-first approach, when retail stores across the country had to close due to the hard lockdown, TFG decided to keep on paying their staff their basic costs, despite the group not making any money from their stores or online for an indefinite period of time.
TFG FD Bongiwe Ntuli also explains that, as lockdown set in, her finance team had to quickly reevaluate the strategic imperatives that they wanted to achieve and, along with cash management, at the top of that list was to look after their more than 30,000 employees.
Opportunity in crises
Nando’s South Africa CFO Simon Adams explains that the popular restaurant was able to leverage learnings from the previous 15 months of Covid-19 to manage during lockdown levels associated with the third wave of infections.
“It’s a bit of a cliché, but there are opportunities that come out of crises. During the first hard lockdown, we weren’t allowed to trade and were forced to relook at our business model. We had put a lot of work into increasing the in-dining space at our restaurants,” he says. As a result of the inability to trade, Nando’s had to also do something that it had never done before – shut down the grills. “The real estate people were phoning and engaging us in turning off the gas supply. This is a big thing and for the first time in over 30 years, we had to shut down the grills,” Simon says. TFG had similar commercial challenges, Bongiwe explains. “Although the borders were open again, there were still significant delays in receiving goods due to Covid-19 protocols.”
Bongiwe Ntuli Bothwell Mazarura Sean CapazorioBrad Wentzel Bryan Groome
However, these delays didn’t affect TFG’s business too much as the company has a strategy of purchasing local goods and uplifting local markets. Because of this, it didn’t take long for the retailer to return to normal.
That one thing
Simon explains that, for the first time in a long time, every single person in the business was focused on one thing – survival. “We were able to empathise with each other and other functions and not drive agendas. This is something we want to maintain in our business, that collaboration and working together focusing on the one big thing,” he adds. In addition, Nando’s SA is also relooking its business model in terms of whether the right space is in residential areas or outlying areas as data shows that people are relocating to suit their lifestyles and with the flexibility of work from anywhere options. “It is a paradigm shift. Before Covid-19 we were building beautiful restaurants at great expense. Now there is a change. Access to disposable income has become a lot less, lifestyles have changed and the economy has created strain. You can’t reject customers because they want to enjoy your product in a different way to what you think is best,” he says. The pandemic has certainly left lasting impacts on the dairy industry too, with Douglasdale Dairy data showing a consumer move from bulk, less frequent purchases to more frequent purchases of smaller pack variants. This is largely driven by consumers having less disposable income. Ironically, smaller pack sizes are generally higher-margin products. Simon sums it up by saying, “All of us are trying to get our heads around how we work in future. We’re learning as we go along, and don’t have the exact answers.” This uncertainty is ongoing, so finance leaders of the future need to be able to strike a balance between the financial bottom line and being purpose-driven, says Kumba Iron Ore CFO Bothwell Mazarura.
He notes that there is a shift in the type of jobs people are doing, and the skills required are quickly changing with finance leaders also needing to communicate the bigger picture to be able to influence the direction of the organisation. Bothwell says Covid-19 has caused businesses to ask CFOs and finance teams questions around value creation, risks and opportunities and embrace working in a community. “We don’t live on an island. Covid-19 showed us that we need to collaborate across functions and even competitors. We are still going through an immensely challenging time.” l
Mireille Levenstein Nopasika Lila Simon Adams Walter Leonhardt
Lessons learnt in the essential and non-essential services sectors
All three of Long4Life’s divisions were affected by the restrictions imposed by lockdown, with retail stores, online platforms and beauty salons being closed. While the beverage business was deemed an essential service, alcohol restrictions and restaurants and hospitality venues being closed meant that consumption was significantly reduced in some areas. CFO Mireille Levenstein said, “Management had to be very agile. Changes were rapidly made in store layouts, costs were analysed even more closely, purchasing budgets were revisited, capex spend was halted, online communication and training expanded, online trading platforms were upscaled and all while keeping the safety and wellbeing of our employees, customers and suppliers top of mind.” She noted that many lessons were learnt, including the reality that the world would not be as it was. “We recognise that spending habits will change, that consumers may have less disposable income. We need to embrace whatever the behavioural shift may bring with it.” Coca-Cola Beverages South Africa was deemed an essential service during the level 5 lockdown and from that period financial director Walter Leonhardt recalls three key lessons learnt. “Everything is about relationships and trust, there is a lot more going on in your colleague’s life than you ever imagined and anybody can manage their own IT, if they just want to.” He points out that the pendulum has swung quite widely since the onset of the pandemic. “In time, that pendulum will settle somewhere in the middle. When that happens, I would like to maintain the positives that working from home has brought about. So, I better be clear on what those are, so that I can be sure to focus on maintaining them when the pendulum normalises,” he said. Barloworld group FD Nopasika Lila noted, “As we go through change, growth is inevitable. As leaders, we are trained and experienced to manage people and situations in tested environments. So, while we have a crisis plan, it may not be tested, ready or appropriate for extraordinary or sudden disruptive situations and emergencies.” In terms of change from a leadership perspective, Nopasika highlighted four key lessons during uncertain times. These were to demonstrate confidence as a leader by decisively taking charge of the situation and making sound and informed decisions, being alert and aware of the business climate and the world, showing empathy towards the situation and that communication and availability are key. She said the last point means that leaders should focus on showing up, being present, communicating with all stakeholders and continuously providing reassurance that things are being managed.
FUTURE-PROOF YOUR BUSINESS’S FINANCIAL HEALTH
HOW TO MAXIMISE BUSINESS VALUE THROUGH VISIBILITY AND CONTROL
Coupa regional VP of sales Africa David Hamilton explains that, after successfully confronting significant hurdles the past year and a half, now is the time to make lasting changes to optimise organisations’ financial health and better prepare them for future disruptions.
The past year and a half has been characterised by uncertainty. During this time, many organisations looked to their finance leaders to navigate a tough environment and ensure their survival. With value chain disruptions, shutdowns and teams operating remotely, having visibility of a company’s finances to make decisions has never been more crucial.
Coupa regional vice president of sales Africa David Hamilton says finance leaders have confronted significant hurdles recently and having successfully done so, have garnered a high level of trust from the business. “Now is the time to make lasting changes to optimise organisations’ financial health and better prepare them to face future disruptions,” he says.
Regaining control over uncertainty and disruption
With the lockdowns and social distancing measures of the last year, a lot of companies had to change the way they run. What has become clear is that organisations with more financial maturity are able to prepare for uncertainty while simultaneously responding to chaos. David notes that at the height of the Covid-19 pandemic, “many organisations put in place a lot of short-term interventions. “There was a quick reactive approach, but many companies still need to set themselves up for the long term. Emergency actions are effective in the short term, but they’re not sustainable, and in the long run they hamper financial recovery and growth,” he says. In turbulent times, finance leaders need visibility of their spend in order to proactively maximise their liquidity and investments, manage debt and maintain the financial health of the organisation. By making some simple but critical changes, finance leaders can optimise their organisations’ financial health in ways that better equip them to navigate any disruptions ahead. Crucially, finance leaders need an end-to-end view of spend across the organisation, as well as top-notch control and governance measures to manage it.
The journey to financial maturity
A comprehensive business spend management (BSM) approach can help finance leaders achieve optimal financial performance to give them more security and predictability, even in uncertain times.
David says BSM is about much more than doing any other business process such as making payments or managing suppliers, it’s about harmonising a broad range of spend and liquidity-related processes together so that overall business value is maximised.
When a company is fully optimised, finance teams have a real-time picture of cash flow across the organisation with a few clicks, making it easy to maximise their liquidity and investments and proactively manage spend and debt. The right technology and a BSM approach delivers more data and greater visibility into the big picture so that finance teams can respond quicker and with more clarity to changing market conditions.
Digital transformation journey
David points out that Covid-19 has highlighted shortcomings in particular industries. For instance, in the healthcare sector where procuring PPE, surgical equipment and various other things required accelerated speed and efficiency as well as prudent management. He says, “If you take the supply chain factor, trying to source items from different locations, get them through ports and customs while managing costs has created a big focus on companies to see if they are effective and efficient in their operations.“ CFOs need to be proactive instead of reactive. By increasingly using data, they can model various scenarios to get a better picture of the future and influence results. “No matter where your organisation is on the financial maturity journey, there are some specific steps you can take to advance. There are a lot of companies still trying to make that transition, and those that haven’t started, need to,” says David.
Towards full financial agility
As companies face novel challenges that come with today’s environment, finance leaders must reinvent themselves, their strategies, and the value they offer. To achieve financial maturity, David says the people, process and technology elements need to be in sync. “Having the right people and organisational structures in place is key. Governance is critical and the process component speaks to the policies in your business; how you manage your processes influences how you spend. Technology is an enabler that allows you to automate processes, automation frees up resources to be able to focus on more strategic activities rather than firefighting on more transactional activities.” Finance leaders are looking for enablement tools such as Coupa to help them achieve their financial maturity aspirations. Coupa gives CFOs more visibility of the spend in an organisation, allowing them to see where cost savings and the potential to gain more control of their spend lies. David says, “Our goal is to enable finance leaders to increase value and find opportunities to be more agile, make decisions and cope with circumstances in their organisation as they evolve.”l
