Covid-19 has thrown the world into unchartered territory leading to a crisis of all sorts, and the hospitality sector has been one of the hardest hit. Many hospitality businesses are still trying to get to grips with things, having to balance looking after their staff, with ensuring that business continues and the company remains in a strong position to emerge post-Covid-19.
As businesses go from shock to survival model, we now need to be thinking about revival as we head towards recovery and the CFOs/FDs will play a key role in this. For the purpose of this article the roles (FD – Finance Director, CFO – Chief Financial Officer) are one and the same.
The CFOs really ought to be spending some time to try to figure out how to bounce back from our current situation to a point where you can trade your way towards some kind of normality – granted that it will take a good amount of time to reach most sectors especially hospitality. Because if you are unable to bounce back and trade back to normal any time soon, it will be hard going. That said there could be opportunities that can be taken advantage of and the CFOs should really be thinking about how to turn these opportunities (such as funding, fixing the balance sheet, growth prospects due to availability of some good deals) to the firm’s advantage.
The primary consideration, from the outset of the Covid-19 situation has been cash. Though uncertain in terms of timing, it is clear that there will be life beyond Covid-19 and the lockdowns and/or restrictions will as soon as practical be relaxed. So whilst the cash element is crucial in order for a business to get through this process with or without external help, the process of re-adopting the offer, hygiene systems, overall operations and corresponding business model during that recovery period, given that margins will be tight, is where a lot of thought needs to be put.
The primary focus should really be on cash and cash preservation strategies – we are all familiar with the phrase that ‘music stops when the cash runs out’, the CFO’s should spend time modelling and remodelling cashflow simulations and looking at various scenarios: how can we safely continue to trade, should we close, do we offer different solutions, This is the shock & survival stage I alluded to earlier.
The most interesting thing that the CFO’s and their finance departments need to do is to act as shock absorbers and assist clients with key elements of data and information. There are no ‘dry runs’ for a Global lockdown so when forecasting cashflows given the uncertainty the CFO’s should use a conservative yet prudent approach. They should give attention to maximising cash headroom, by accessing everything that is available, the loans, business rates holidays, Government grants, staff pay schemes, negotiating with tax offices on time to pay arrangements, lending holidays, deferring rents or asking for rent holidays and even attracting equity investments in some cases.
For the Revival stage, I think that the CFOs need to understand the options facing a business right now would be many, their primary concern ought to be: How do we Revive the business and this will require working closely with the rest of the executive team with adaptable yet decisive action plan. The business needs to change or adapt to emerge beyond Covid-19 crisis. You would need to take a holistic and almost an entrepreneurial look at the business – come up with outside the box solutions and help reignite consumer confidence.
I think Charles Darwin’s very fittingly – though in a different context – said:
‘It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change’
The best teams are the ones where the Executive Team in particular the FD & MD (or CEO & CFO) have a close relationship. They complement each other to come up with intervention strategies to take the business forward. They challenge each other to bring the best for the business in creating strategic direction and give clear guidance to their teams by bold decision making and by leading from the front.
We believe that finance professionals not only have the ability to bring positivity and forward thinking, it is their responsibility to do so!
We have also noticed that in some cases firms are looking to hire Experienced FDs as Non-Exec Directors to help navigate through these challenging times, as they pivot their business models. I think this is a very good sign. As a finance professional myself, I highly recommend companies doing this – you need to have a pulse on your numbers as you work towards reviving the business. With the extension of some of the Government schemes and funding options made available, it appears as though the Governments are committed to helping to see the businesses through this nightmare scenario so we remain optimistic in the long term, yet prudent but cautious in the shorter term.
CEO – Main Course Associates