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Crisis Management

COVID-19 Infects CFO Sentiment


COVID-19 has increasingly shrouded CFOs’ outlook – evidenced by PwC’s most recent COVID-19 CFO Pulse Survey where 87% of CFOs expressed that they were greatly concerned with the potential for significant disruption on business operations.

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Sentiment plummets. As the US economy is placed into a medically induced coma to stymie the spread of SARS-CoV-2, a pall of pessimism has shrouded CFOs’ outlook – evidenced by PwC’s most recent COVID-19 CFO Pulse Survey where 87% of CFOs expressed that they were greatly concerned with the potential for significant disruption on business operations.

It’s easy to see why CFOs are concerned. After all, the collective loci among CFOs has shrunken significantly over just a month’s time. A leadership void has arisen with the shifting landscape. For their organization to survive – and ultimately thrive – CFOs must expand their sphere of influence from finance to people management and congressional bills.

Stopping the Bleeding 

In spite of the survey’s findings that 80% of companies are expecting decreasing revenues or profits, CFOs are more preoccupied with balances on the statement of cash flows than the bottom line on the income statement. Based on his communication with financial leaders PwC US Chair & Senior Partner Tim Ryan comments, “companies are not necessarily cutting expenses for profit; they're cutting expenses first and foremost to protect cash.”

The present concern with preserving cash balances is leaving many facing the tenuous tradeoff of balancing priorities in the short, medium, and long-term time horizons. According to the aforementioned survey, a full 67% of responding CFOs have already taken cost containment measures and an additional 64% are planning to defer or cancel planned investments outright.

People Management

While companies are temporarily hitting pause on employee training, they remain committed to keeping their people as long as practicable according to PwC’s Ryan. Even still, you have to imagine that CFOs in the United States have to be silently grappling with the problem of how long they can retain workers, who – through no fault of their own – are unable to produce, which is evidenced by a non-insignificant number of respondents anticipating that they will have to resort to temporary furloughs (44%) or outright layoffs (16%) in the coming month.

Even with regard to employees who are able to work remotely, 60% of responding CFOs are expecting decreasing employee productivity due to working remotely. To get the most out of their teams, financial leaders must consider both their function’s constraints and the constraints of their people. Bhushan Sethi Joint Global Leader, People & Organization at PwC advises that each individual has their own unique constraints saying, “whether it's children, whether it's taking care of a dependent relative, whether it's bandwidth constraints, so we're seeing that a one-size-fits-all approach to the workforce won't work.” Learning this will necessitate asking questions like how their employees work, whether they require flexibility in hours worked and if there are employees that have health or other well-being challenges preventing them from working.

CARES Act

We need to change the way we think about CARES Act according to Rohit Kumar US Tax Policy Services Leader and Principal at PwC, who remarked, “It's not stimulus. It's really easy to refer to it as stimulus, because that's sort of how we think about Congress reacting to economic downturns… In fact, to the contrary, Congress doesn't want to stimulate a lot of economic activity right now. What it wants is to keep businesses afloat, to keep individuals afloat, to give them the liquidity they need while we sort of put the economy in this medically induced coma, so that we can get our hands around the pandemic crisis that we're facing.”

Knowing that the CARES Act is more about liquidity than stimulus enables CFOs to best lead their organizations to the other side of crisis. To achieve this end Kumar advises, “there is something in there for everybody, for businesses large and small, and it's all geared towards keeping workers connected to their employers by encouraging employers to keep employees on the payroll, even while the doors might be shut, so that when we emerge from this we're able to recover more quickly because employers and employees are connected to each other and we can get back to the growing economy, the strong economy that we had before the crisis arrived.”

Beyond the significant tax reprieves afforded by the CARES Act (e.g., better NOL utilization and deferral of payroll taxes) Kumar points to two significant loan programs.

  • $350 billion in loans for small businesses, which can become tax-free grants to the extent the loan proceeds are used for employee payroll among other approved expenditures.
  • $500 billion in loans for businesses, which is to be administered via the Exchange Stabilization Fund.

Kumar cites that the administration expects that the $500 billion loan program will have a multiplier effect, which could result in the injection of $4 to $5 trillion of liquidity in the economy.

The US economy looks very different now than it did just three months ago when 2020 began. Guiding organizations through one of the most inclement and uncertain periods in economic history is a tremendously trying task, and CFOs must continue to adapt if their organization is to remain as a going concern.