Covid 19 valuation

The only constant in life is Change and the same applies to the role of a CFO. For a while, the CFO’s role has been changing from accounting, reporting and compliance-keeper to a more strategic partner in business. And this has been happening at a very fast pace. This week, we will touch upon a few topics relevant for CFOs. 

 1.            Finance and the future of IT 

A group of experts from Deloitte had mentioned – Finance and IT teams need to collaborate to face the disruptions caused by the technological breakthroughs. (

The Finance function has benefitted significantly with the adoption of technology. All areas of Finance have transformed – be it the usual MIS, Performance Management, Collections, Payroll, Taxation, Compliance or otherwise. These changes will continue as newer technologies will keep supplementing the Finance professionals’ skills by automating repetitive and mundane activities. It’ll augment their capability to do much more value-added work than what they currently achieve. But that’s not it. Chances are that in a few years, the newer technologies like Artificial Intelligence and Machine Learning will start competing for higher cognitive activities which are currently considered possible only by humans. Not only will this reduce the size of teams but also change the expectations from the next-gen finance professionals. A significant part of their time and energy, today, goes in the collection, cleaning and preparing data, leaving less time for analysis and decision-making. 

The CFOs of the future will be working more closely with CIOs. Together, they will need to define the IT landscape for the Finance function for efficiency, agility, accuracy and compliance. 

2.              Important Risk strategies to consider during coronavirus period 

David A Brown, the partner at law firm Alston & Bird LLP with his colleague Luke Trompeter, presented their views in CFO magazine on the risks strategies to consider in the wake of a pandemic. According to the professionals, there are 3 main strategic risks which C-suite must consider while ascertaining a threat. 

First and foremost, finance leaders must keep a constant watch on credit and debt facilities to ensure cash availability. They should thoroughly examine the financial agreements and ascertain the repercussions of late or non-payments. Companies must initiate the Business Continuity Plan which should be reviewed regularly by the CEO, COO and CFO. For the stability in cash, companies must defer the share repurchase or dividend declaration. Explore all possibilities of cost optimization by deferring discretionary spends, making the best possible utilization of the existing resources and limiting hiring only to unavoidable reasons. 

Additionally, leaders must evaluate the impact of the pandemic on the supply chain process. The delay in receiving the goods from the suppliers may lead to late deliveries to the customers which in turn can spoil the goodwill of the organization. CFOs must review the insurance policies and identify the coverage to be provided by the insurance companies due to breach of contract under COVID- 19 circumstances. 

Lastly, shareholders rely on the earnings of the company while making investment decisions. Therefore, it is imperative that companies recognize the risks coronavirus may impose, in public disclosures via MD&A (Management Discussion and Analysis) section of their public filings. 

In essence, these are unprecedented times of crisis in our professional lives. The leadership teams must remain vigilant, decisive and apply great execution skills to pull their organizations out of this. 

3.              Financial Contingency Planning 

 As stated by Financial leaders of Deloitte, Jason Dess and Nnamdi Lowrie in The Wall Street Journal, there are difficult times for business. A robust financial contingency plan can help sustain in uncertainties.  

The recent pandemic (COVID 19) has affected the global economy. Under the current circumstances, financial forecasting is not a normal pattern. Financial forecasting under COVID 19 situation requires a different approach and decision making to understand the inconsistent business environment. A forecast is different from prediction. It is an estimation based on the analysis of data combined with recent trends to decide on the possibility of a future event and its consequences on business whereas prediction simply explains that something will happen. With the help of forecasting, companies can successfully mitigate the risks and explore opportunities. 

For successful financial forecasting to deal with the widespread disease, it is a good idea to establish a COVID-19 forecast advisory team made up of key leaders from the different domains of the organization (viz, sales, marketing, finance, IT, supply chain and HR). The team must brainstorm to identify the inputs that will help in assessing the scenarios and reforecasting the processes. 

Furthermore, for the effective forecasting, key core business drivers should be identified that will help keep an eye on the most relevant variables to the entity during the first recovery phase. The drivers could be based on customers, pricing, regulatory concerns. 

4.            SOX Compliance | Navigating through COVID 19 

These days, auditors are unbelievably busy struggling to adjust the changes stemmed from the COVID-19 pandemic. Sue King, Partner, Advisory, KPMG-US stated in her article in KPMG advisory, there are a number of items to be considered related to the SOX program due to the unprecedented disruptions caused by COVID-19. 

Control experts are considering these chaotic times as opportunities. According to them, SOX function can demonstrate the value by getting involved in redesigning the control activities and providing insights on the particular risks. They further mentioned that out of several impacts on the SOX program, materiality needs to reassess as it may change significantly due to COVID-19. Also, walkthroughs and test of design activities may be more detailed to ensure full understanding of the processing, particularly during the time when the businesses were interrupted or employees were working remotely.   

Audit teams are under discussion with audit leaders to redefine the approaches while reassessing the materiality and reperforming the SOX risk assessment. Some organizations are working on 100% remote audit model while few have started implementing the model.  Organizations are figuring out on the ways to teach SOX over video conferencing and perform walkthrough remotely. 

The audit teams need to be trained around IT general controls as the chances of cybersecurity frauds are increased since many people have started working remotely.  

This year is the pilot phase of remote model and leaders are excited to see what’s going to happen. Whether this will be the new normal going forward or require significant changes in the model.    



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