Scenario planning is essential for ensuring business sustainability
Business leaders in finance can offer a lifeline to secure financial stability in these uncertain times
Unpredictability is a key challenge in these uncertain times. Operating a business in this environment presents a challenge to businesses of all sizes as no-one can predict when we will return to normality or what it will look like.
Businesses, and in particular CFOs, need to be equipped with better decision-making processes, insights and information to successfully maintain liquidity while uncovering new avenues for profit. Business leaders in finance can offer an indispensable lifeline to secure financial stability in an unpredictable world.
A recent Business Day Focus 4.0 Live webinar, in partnership with Oracle, focused on the benefits of effective and strategic scenario planning by the finance function to help prepare for the unexpected.
Disruptive events are nothing new, said Wayne Heather, director of EPM product marketing at Oracle. But the pandemic is different to previous crises, given the uncertainty about its duration and lack of historical data and trends to help forecast its impact on industries, businesses and the economy.
While some businesses have prospered, such as those already leveraging online platforms, others in more vulnerable sectors such as travel have not. As organisations have migrated their businesses online, there has been a renewed focus on cloud technologies and digital transformation. Covid-19 has been a tipping point for both.
Oracle implemented its own cloud finance platforms some time back. Many of its clients have not only migrated to the cloud but have moved their businesses online. Flexibility and agility are more important than ever as companies focus on developing key performance areas specific to this period, said Heather.
In Africa, the challenges have been threefold and simultaneous, according to Kartik Jayaram, senior partner at McKinsey & Co. First, the global pandemic disrupted global supply chains, lowered demand and delayed or reduced foreign direct investment. The second challenge was that the pandemic limited the movement of people and disrupted ways of working. Finally, it reduced government and business revenues for oil exporters, and lowered costs for oil importers and consumers.
The net effect for African economies was fiscal instability and increased pressure on monetary policies. Africa’s GDP growth could potentially decline by between 4% and 9%, while one third of all jobs — both formal and informal — could be affected by the pandemic, said Jayaram.
Putting the continent back on the path to growth now requires reimagining society, business and government, he said. While Africa has lagged in terms of digitisation, the pandemic has accelerated digital transformation in certain sectors.
As Covid-19 has disrupted the structure of businesses across Africa, Jayaram said organisations can consider responding to disruption in these ways: shift their business model, shape a whole new business, sustain the business and restore operations or restructure the business.
More resilient businesses typically generated more value in previous crises such as the 2008 financial crash, in both the recovery and growth phrases. They ramped up operating efficiency by reducing costs and improving productivity during the downturn and recovery phases; they innovated their business models; and they moved boldly to divestitures and acquisitions to exit key verticals, build new capabilities or expand their footprint in select markets.
Kimberly Ellison-Taylor, the executive director of finance thought leadership at Oracle, believes that liquidity and cash management have been priorities for all businesses through the pandemic.
However, as they start to recover they have the opportunity to reinvent their businesses, she said, getting rid of non-critical areas and spending widely. Business as usual no longer applies.
View the full webinar below:
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