CFOs take centre-stage in the times of COVID-19

In these cash-strapped times, we find out how CFOs in the media and advertising industry have risen to this challenge

e4m by Misbaah Mansuri
Updated: May 27, 2020 4:07 PM
CFO

From Steve Jobs to Jeff Bezos, we have witnessed decades of chief executive officers in the bright spotlight. But not so much the humble chief finance officers (CFOs) - risk-averse and traditionally conservative, the CFO has stayed out of the limelight, until now. As the COVID-19 crisis leaves businesses across sectors in a constant seismic flux, leading to massive financial fallouts, company CFOs are increasingly stepping into the spotlight as balance sheets are under immense scrutiny. As a member of the executive who is both a financial expert and a strategic thinker, the moves of CFOs within companies, and outside as well, will signal the road ahead. The CFOs of the new world are expected to de-risk business and adapt to the changing environment. Their roles have extended to manage not just the fiscal aspects but also the business/operational aspects of the company in the face of the pandemic. 

Several companies understand the importance of the CFO role and have made various leadership changes. Some recent appointments and transitions say a thing or two about the significance of the role of CFO in an attempt to weather this storm. 

As the CFO role takes centre-stage, we speak to the power players from the media and advertising agency space to find out how organisations are implementing an immediate crisis response mechanism while exploring long term sustainability solutions to build resilience against this black swan event. 

Shining through the storms

The humanitarian and economic crisis might have resulted in high volatility in financial markets, dried up liquidity and economic slowdown around the world; however, CFOs across sectors are not letting these challenges dampen their spirits as they use this as a time to come up with innovative solutions to the constraints. 

Inigo Franco, Country Finance Director, WPP India reveals that the group’s Q1RF has been revised downwards with double-digit decrease in revenue, net sales and OP owing to the economic crisis caused by the COVID-19 pandemic. However, he adds that the company is keeping people at the centre of decisions and using the situation to accelerate transformation. “For instance, we are focusing our energies towards new ways of working, new propositions, agile organizations and right-sizing. It is definitely a challenging time but one that has forced us to move and transform faster.  Our campus strategy is paying off – in Mumbai we are able to materialize savings and as the Gurgaon campus is in the making, it has provided us with the opportunity to rethink our office space from the ‘traditional’ into a ‘meet, greet and collaborate’  - increased agility across our people + brands,” Franco remarks. 

Balkishan Sahni, Finance Director, MediaCom, says that the COVID-19 crisis has very strongly impacted the agency’s financial plan by putting a brutal halt to advertising spends across all mediums. Sahni indicates that one full quarter is almost wiped out from the year. “Except a few advertisers who are offering essential products, the entire advertising ecosystem has been put under pressure. The focus is to keep working closely with clients to help them optimize their ad spends and look for maximum value for their spends,” he says. Sahni, however, stresses that the company is working towards returning to normal as soon as the lockdown ends. “Certain practices developed and adopted during this period will become the new normal. Use of technology will increase and ability to stay connected remotely remains important as travel is unlikely to resume soon,” he explains. 

While finance professionals are used to accuracy, consistency and relatively predictable planning cycles, how do they plan in an environment of unclear economic conditions and time horizons of a global pandemic of this stature? Well, as the going gets tough, the tough get going, evidently. 

C Suresh, Group CFO, FCB India shares that the agency is reimagining the business by eliminating or fixing broken processes. “When the oceans are choppy and dangerous for fishing, fishermen repair their nets. We are taking a look at all our processes with a view to eliminating wastage and optimising productivity,” he points out. 

Meanwhile, Asha Suvarna, CFO, Dentsu Aegis Network India reveals that the agency group has created specialized teams to assess the dynamic situation and plan accordingly. “Due to well tested BCP and technology in place at DAN and excellent team connectivity, our work standard remains uncompromised. Though this is a difficult time, we are prepared and confident to manage the crisis in a well-organized manner by efficient forecasting, close tracking and liquidity management,” she asserts. 

The Cash Room war

Challenges around liquidity and credit continue to remain an area that agencies are forced to grapple with as the situation evolves. As Bhautik Mithani, Chief Financial Officer, Wunderman Thompson, South Asia signals, in these unprecedented times, the most important function that the CFO has to perform is to keep a hawk’s eye on cash flows. “It’s imperative to ensure that there is adequate cash flow in the form of working capital to keep the company running. Focus needs to be on collections from clients, tax refunds, old overdue outstandings from clients, etc. We have been continuously in touch with our clients to work out a win-win situation for both in terms of cash flows,” he reveals. 

Recently, the president of the Advertising Agencies Association of India, Ashish Bhasin sent a detailed set of recommendations on behalf of the members of the organisation, to the Union Minister of Information and Broadcasting, Prakash Javadekar, highlighting how cash flows are under stress and how many businesses in the advertising industry will either file for bankruptcy or will have to undersize considerably, if nothing is done about it. In the letter, he requested that the money that is owed to the advertising industry by way of IT and GST refunds, and dues from Government and PSUs for advertising bills, be settled immediately. Moreover, he urged that any payment made to agencies should not suffer any TDS deduction going forward, since there is unlikely to be any significant profit for the year. Bhasin also spoke about seeking a direction to banks and debtors to provide the much-needed cash flow to pay salaries and meet other essential expenses. 

Anurag Bansal, CFO, DDB Mudra Group observes that agencies are staring at rapid deterioration in revenue, something that calls for costs to be curtailed pre-emptively and adequately. “Liquidity and credit are big challenges. Companies are working hard to salvage business, reinvent, improvise their offerings and control costs to stay profitable, and in some cases even survive. The most important task is to preserve cash and manage working capital. The cliché ‘cash is king’ has never been truer. Sustainability and viability of the company must be the guiding principle for any decisions taken today,” he opines. 

DAN’s Suvarna shares that the agency has undertaken relatively short term financial planning for better implementation and tracking perspective. "As of now, India’s economy growth is estimated to be at an all time low in last six years at 5.3- 5.7% in anticipation of quick recovery and may further decline to 1.9% subject to the success of containment measures taken by the Government and extent of proliferation of the virus.. In this situation, cash flow management has taken centre-stage as liquidity gives confidence and stability in business. We are taking all possible cash conservation measures and have also temporarily implemented a cost reduction plan. All the measures are being taken keeping in mind the larger interest of our people,” she contends. 

Meanwhile, in the media, players in the Print and TV space are slightly less affected than the rest due to their subscription-based business models and some advertising revenue. Add to this the fact that the captive audience has been gravitating to these mediums as their sources of news, information and entertainment. However, drying up of advertising spends remains a big concern. “We are tackling the situation by cutting the requirement of liquidity and augmenting liquidity,” says RK Agarwal, CFO, Jagran Prakashan. 

Pushan Chakravarty, Chief Financial Officer, ABP News Network has this to share: "COVID-19 has brought a lot of uncertainty, which has disrupted planned activities for almost all industries and news is no exception. As our revenues take a hit, the organisational focus has shifted from promotion to revival of operations. We have shifted our strategy more towards sustenance and continuity. Moreover, we have shortened our planning horizons, and are currently operating on month to month basis. Nonetheless, we continue to deliver and keep up with the vigour of our outstanding news editorial. As our partners resume business activity, we are looking at specific targets for restructuring our business avenues." 

 Of investments & innovations 

When a CFO wants his company to thrive in in the aftermath of a debilitating economic crisis, he or she has to prepare for a transformation mindset while allocating the company resources - something that most companies seem to be gravitating towards. How are they strengthening their ability to survive through ‘the next normal’? 

Interestingly, in these uncertain times, Kamal Mandal, CFO, Famous Innovations is guiding his agency towards an investor mindset, deciding how much the agency can put behind acquiring the right partners and the right people – be it technology, more diverse creative talent or new geographies. “Everyone will tell you that this is the time for conservation. Reduce all possible frill expenditures and create contingencies. But, there are also smaller companies out there who may need backing at this time. This is not the time to let talented entrepreneurs and people with great potential die down, and if there’s anything we can do to help that, we will. We are perhaps the only agency of our size that has hired a dozen people during the crisis,” Mandal asserts. 

Most companies seem to be leveraging this time to re-energize their core capabilities to enable their organizations to make bold moves in the recovery phase. “I believe an organisation cannot shrink to greatness. If companies come back strongly after a crisis, they need to have protected and strengthened their core. I have made funds available to the agency to invest in consumer behaviour tracking research in these financially challenging times. An investment that, I believe, will empower us to bounce back quickly when this lockdown eases,” FCB India’s Suresh remarks. 

Meanwhile Rishit Mehta, Finance Director, BBH India shares that the agency is leveraging a real-time P&L model to plan better. “The novel coronavirus has hit all organizations across sectors like a tsunami leading to a severe unprecedented existential crisis. We have moved to a Real-Time P&L model which enables live tracking of client revenue and overall profitability, short term revenue forecasting (STF) and analysis with overall target.  It helps us to do weekly P&L monitoring vs a monthly one,” he shares. 

Cutbacks, cost optimisation 

Several agencies have implemented a series of cost optimization/ cost-cutting measures to sail through uncertain times. “We are partnering with clients by finding the right balance between scope revisions and fee reductions in a mutually acceptable manner. Other measures we have implemented at BBH India include office lease rental waiver, securing a rent holiday of at least another two months for both offices, no new recruits, replacements, and freelancers for the next three months, curbing all other discretionary spendings, as well as client collections with extensive focus on collecting overdues led by business directors, daily follow-ups and routine reminders to the client by the collections team and re-negotiating payment and credit terms with vendor partners from 60 days to 90 days, no production advances until receipt of funds from the client, etc,” Mehta states.  

WPP-owned media agency MediaCom, too, is focusing on curtailing cost from all possible avenues with all discretionary expenses being put on hold. According to him, costs like travel, award entries, training, research, and use of freelancers have been frozen for the balance year. “There is a hiring freeze across the board and efforts are to optimize with the available staff. We are also analyzing avenues to rationalize cost on real estate and IT spends to the optimum levels,” Sahni says. 

To add to this, agencies are constantly building prediction models and forecasts to evaluate the potential impact of the pandemic on business in a bid to battle the cloud of uncertainty that the scenario has brought in. “To stay ahead of uncertainties, action plans are being developed to position our team for shifting strategic and financial decisions based on varied outcomes. This includes updating revenue estimates and implementing corresponding cost rationalisation measures, balancing short term financial commitments against long-term stability to determine which expenditures can be stopped or deferred. It is a difficult balancing act between the need for short-term cost actions against keeping the business ready to take advantage of likely growth opportunities post COVID-19,” Wunderman Thompson’s Mithani says.  

Further, FCB India’s Group CFO indicates that the uncertainty around the easing of the lockdown phase makes it critical for companies to work towards multi-scenario planning in order to prepare the organisation for every eventuality. “It’s imperative to restore stability by focusing on preserving cash and preparing for every eventuality through multi-scenario planning. Cash is king and maintaining liquidity is critical in this time of crisis,” Suresh remarks. 

According to Chakravarty, "All long-term contracts are being renegotiated. The first priority is the general overheads. Travel and lodging costs will reduce to the minimum and will remain majorly dedicated for reportage. All annual maintenance contracts, cable costs, and rentals are being relooked at and renegotiated. We have cut down on marketing and other discretionary spends. Imports are being avoided in the short term due to uncertainties in deliveries and adverse forex situation."

From ‘Smart’ to ‘Heart’ 

Gone are the days when a CFO’s role was traditionally centred around cost and compliance. It is now expanding to not just strategy and vision, but also to being a team-player that reaches beyond numbers and exhibits empathy, to chart a clear course for his team. 

On such tough days, when employees may be struggling with health issues, anxiety or financial concerns, DDB Mudra Group’s Bansal feels that an empathetic approach in dealing with employees is critical. “This is where the culture at DDB Mudra Group comes forth strongly. Empathy is a fundamental part of our workplace social awareness and acts as a safeguard for ethical decision-making in these trying times without undermining organizational effectiveness,” he remarks.  

Mandal, too, pronounces that it all boils down to honest and transparent communication. “While everyone across the organization has fear and speculation, only the CFO has accurate answers. Only the CFO knows the real water levels. So CFOs should look at the books carefully and give an honest assessment to the leadership, and then to the whole company. Being aware and reassured means people are in a better mental state, leading to better results.  Someone recently said to me: in tough times there are smart companies and then there are heart companies. And that stuck with me. The CFO’s role may be the one most devoid of emotion most of the time. But this is the time to make an exception. Care for your people, your partners, your vendors and your clients. Allow the leeway you can afford, be generous where you can and remember that money will come back, people won’t,” he declares. 

"In view of the safety and hygiene guidelines from global and Indian authorities, the events segment has suffered. However, for combating these challenges we have resorted to virtual events as a key alternative. But one must be appraised of the fact that at the moment, alternatives might not offer equivalent dividends as our fixed expenses still remain high.  Apart from that, all the segments linked with hospitality, sports, entertainment, art and culture, and travel and tourism will take longer time to heal," Chakravarty opined.

The message is clear: chief financial officers need to adopt bounded optimism to deal with the rising concerns around cash crunch and financial insecurity at every level in the company.

(With inputs from Dipali Banka and Christina Moniz)

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