The new normal in corporate management: change as usual
CFOs from companies in a wide range of industries have one thing in common: in financial planning, they are confronted with new issues resulting from the changed framework conditions brought about by COVID-19. The questions revolve around issues such as short-time work, operational constraints such as production downtime, and volatile market prices. They reflect how quickly and comprehensively everyday life has changed within just a few weeks: in companies, markets and economies. How do CFOs cope with a new normal in which the framework conditions for corporate management can change massively at any time?
We discussed this question with Gori von Hirschhausen, Matthias Borstell, and Martin Faust in the webinar “The “New Normal” after COVID-19: Corporate Control and Driver-Based Scenario Planning in Times of Uncertainty.“. One key insight: In today’s volatile market environment, CFOs must set the right direction for their company. How does this succeed? We’ve summarized three tips from our webinar.
3 tips for more planning reliability in corporate management
Tip 1: Flexibility – Develop and re-evaluate agile scenarios
Now the major upheavals are evident in all industries. To emerge from the crisis stronger, flexibility is required: CFOs must constantly reassess the situation on the market and reliably derive cause-and-effect relationships from it. In this way, companies remain capable of acting even in times of rapid change.Gori von Hirschhausen (Partner, Finance Consulting Leader Europe bei PwC)
The economic environment in which companies operate today is characterized by dynamism. In his presentation, Gori von Hirschhausen describes current market challenges that affect controlling:
- Changed economic situation influences cash flow and sales
- Increase product margins, optimize cost efficiency and processes
- Business models in transition: Securing a competitive edge
- Meeting changing customer requirements
- Track and reliably map regulatory requirements
In this new normal, CFOs face the task of quickly assessing the impact of changing conditions and deriving recommendations for action. This requires flexibility and a reliable methodology to simulate and develop forecasts and scenarios in an agile manner.
To achieve this, CFOs must shift their focus from controlling to the entire company. In their role as strategic partners to CEOs, they provide direction for differentiated business decisions to ensure liquidity. The difficulty is that changes can hardly be predicted. So how can agile corporate management succeed?
Tip 2: Transparent planning – understanding cause-effect relationships
Companies must be able to react more quickly to the increased dynamics. To take advantage of new opportunities and highlight risks, Finance needs to provide the right numbers at shorter intervals, enabling timely management. This requires adequate reporting and planning processes and appropriate tools to make this possible.Matthias Borstell (Senior Manager, Management Consulting Finance at PwC)
In view of the new normal, controlling processes are changing:
- Forecasts are updated at shorter intervals
- Possible market developments are modeled in various scenarios
- Effects of changing framework conditions are simulated in real time
These changed processes represent a valuable opportunity for companies: If company key figures are evaluated across departments at shorter intervals, better conditions are created for data-based decisions. It is thus conceivable to simulate different scenarios on a regular basis, to show their effects and to use them for differentiated control.
The path to this transparency in planning is supported by a value-driver-based planning approach: This methodology allows cause-effect relationships to be mapped transparently and increases the traceability and acceptance of planning in management. For example, it is possible to simulate which measures can be usefully applied in corporate management in the context of COVID-19.
Tip 3: Look into the future with data from the past
In every company, a large amount of data is created every day, which often remains unused. Accessing this knowledge in the specialist departments is an important step towards effective corporate management. The bridge is formed by a specialized and user-friendly software solution that can be used even without computer science knowledge.Martin Faust (Co-Founder, Head of Customer Success bei Valsight)
Martin Faust describes company data, which is generated on a daily basis, as a “valuable knowledge base”. Although they refer to the past, the data help to gain new knowledge for the future.
Special software solutions developed for modeling, simulation and visualization of agile forecasts and scenarios make this knowledge available. With them, cross-departmental data is collected centrally and prepared for comprehensive evaluations: automated and without costly Excel spreadsheets – ideal prerequisites for agile corporate management in turbulent times.