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Managing Financial Health in the Covid Era
Ankur Gupta General Manager, CoE, D&A | September 28, 2020
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Quite unexpectedly, we have all been ushered into this COVID-19 world of uncertainty. At an organizational as well as a personal level, this pandemic has impacted all industries, be it manufacturing, financial services, education, travel and hospitality, and others. The sheer magnitude of the pandemic and rate of viral spread have rendered all plans for digital transformation and targets for the near future meaningless.

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As challenges are faced on health, economic, and myriad other fronts, we would be remiss if we do not push ourselves to learn from the experience. The time is ripe for an opportunity to revamp our existing processes and bolster our digital footprint. However unprecedented the situation might be, this cloud too has a silver lining. By addressing specific aspects of our business practices, we can not only minimize the downside but also protect the core ecosystem and proceed with crucial digital transformation initiatives. If this is done right, we can expect a positive turnaround once the tunnel ends.

Current situation an opportunity to revamp our existing processes and bolster our digital footprint

Some key areas which can be focused on are:

  1. Receivables, payables, and cash flow management

    Due to the supply chain disruptions caused by the global and local efforts to safeguard against the spread of COVID-19, the revenue and resultant cash flow has been significantly impacted. Short- and long-term liquidity need to be assessed factoring in the uncertainty in realizing the revenue through respective channels, and measures in cash flow management should be taken to prioritize the cash outflow. From a financial services perspective, this is essential to ensure continuity across the full spectrum of operations, both now and in the foreseeable future.

    Few measures can be considered for optimal cash flow management, which are as follows:

    • Prioritize projects which can be delivered under these restrictive conditions. For example, projects which can be executed in a distributed environment.
    • Prioritize services which assist and enhance life under confinement/lockdown over those which can be used only in external environments. For example, software and apps which support and entertain people working remotely viz. networking, gaming, e-commerce, online security etc.
    • Reduce production/inventory of products and services which cannot be sold online.
    • Delay capital distribution (buyback of dividends and shares, etc.).
    • Reassess investment opportunities Investments in implementing business continuity plans, digital platforms like online B2B, B2C applications, cloud services etc would get more traction and generate better returns vis a vis their offline counterparts. Acquisitions, partnerships and other collaborations should also be planned accordingly
  2. Rationalization of office space expenses

    The way of working has altered quite significantly since the virus hit the world. A large part of the workforce pertaining to information technology, financial services, consultancy sectors, and other similar sectors, has been able to carry out their respective responsibilities from homes. Organizations which adopted remote working polices and scaled up the requisite infrastructure have boosted their digital footprint and managed the economic impact in a better way.

    Going forward, this opportunity should be utilized to rationalize capital expenditure (CAPEX) and operational expenditure (OPEX) incurred in acquiring, leasing, or renting office spaces in prime locations at high costs. This also includes the associated official premises overheads. The following action plan can be considered:

    • Incorporate evolving guidelines to enable a sizable proportion of the workforce to work from home. Depending upon the nature of work, team members can meet on specific days in pre-designated locations to carry out functions which require physical presence.
    • Offsite meetings, both virtual and otherwise, can be scheduled at regular intervals.
    • Reassess office space requirements and release locations which are not required.
  3. Re-allocation of travel budget

    Travel expenses constituted a significant portion of the sales and marketing budget across industries such as IT, financial services, and other similar sectors in the pre-COVID-19 era. As we come to terms with drastically reduced facetime in favor of increased cyber meetups, the sales and marketing travel budget can be used to further strengthen the telecommunications infrastructure to gain a seamless experience in virtual meetings. A greater focus should also be on developing more personalized marketing campaigns. These can be built leveraging existing business relations, cultural nuances specific to the client, industry requirements etc.

  4. Assess risk related to investments and revenue projections related to travel and hospitality business

    Travel and hospitality businesses are severely impacted due to the ongoing conditions and would likely take the longest to revive. Accordingly, for the foreseeable future, it would be prudent to factor in any revenue from business activities related to these sectors only when there is absolute certainty of realization. Also, all current and future investments in related projects should be reviewed. Short term tactical client projects which were due to generate returns by Q2 2020 will most likely get delayed or worse shelved. Hence these should not be pursued. Strategic initiatives which aim at transformations and still have a potential of providing good return on investment should be prioritized.

  5. Insurance coverage

    Invest in comprehensive pandemic insurance which can provide a buffer and compensate for the loss in revenue to safeguard against such economic downturns.

  6. New opportunities

    As the world has started going back to normal and the legal and self-imposed restrictions are being lifted, some new business opportunities have presented themselves:

    • Digital transformation capabilities to support industries across domains, ranging from traditional touch-and-feel businesses like real estate, to IT-enabled companies which are striving to further enhance their digital footprint
    • Advanced AI/ML-enabled equipment and software for infection tracking, symptoms detection, and more pandemic-related solutions

These are some suggestions which can help us in adjusting to the new scenario. If we incorporate the learnings from this crisis and capitalize on the opportunities, we will not only survive this pandemic, but be all the better for it.

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