What can finance professionals learn from the Covid-19 pandemic?

The Covid-19 pandemic and its various lockdowns and restrictions have naturally applied a tremendous amount of financial pressure on businesses in nearly every sector. The priority for most has been survival, rather than long-term planning, growth, and strategic investment.

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Arif Khurshed | Alliance Manchester Business School
29th June 2021
Arif Khurshed Alliance Manchester Business School
"The skill and experience of finance professionals will be critical in revitalising trading, just as it has been in ensuring businesses’ survival during the worst of the pandemic."

Accordingly, it is natural that financial management teams have felt more strain than most. While always a critical element of any business, their decisions have taken on greater importance in navigating the challenges pandemic.

Recent data from the ONS highlights the size of the task the finance professionals have been tussling with. In Q4 2020, business closures were up 37% when compared with the last pre-pandemic recording in Q4 2019. The damage is steadily settling down, but the latest figures highlight there is still a demonstrably volatile business landscape – 111,145 businesses closed in Q1 2021, 30% higher than the same period in 2019.

It must be noted that even the sharpest financial management might not have been sufficient to protect some businesses from the impact of the pandemic; however, it has been crucial in the survival of many. At the time of writing, the percentage of businesses currently trading has increased to 87%, the highest proportion recorded since the onset of the pandemic – up from 71% in January 2021.

The economy is now reopening in phases, and at increasing pace. Naturally, many are looking again towards rapid growth as a tenet of their recovery. The skill and experience of finance professionals will be critical in revitalising trading, just as it has been in ensuring businesses’ survival during the worst of the pandemic.

Looking forward, we need to consider the lessons financial management teams have learned from the Covid-19 crisis, and where they can implement those in their future decision-making. To do so, we must first establish the particular ways in which their position has taken on additional significance and scrutiny.

Strained finances

The rapid onset of the virus and pace at which much of society was locked behind social distancing restrictions and national lockdowns resulted in a climate of uncertainty. Even short-term planning was made extremely difficult due to the enormity of the disruption to operations, while long-term strategy was, for most, a prohibitively optimistic consideration.

Financial decision-makers were forced to adapt to various unique conditions in granular detail, including stricter regional lockdowns within national lockdowns, the implementation of business and public financial support schemes, which were regularly retooled in response to evolving circumstances, all while keeping in mind the bigger picture of the national economic outlook and ongoing economic policy reviews.

In addition to balancing short-term survival with long-term opportunity, management teams had to contend with numerous issues surrounding their operations. For instance, with most non-essential retail and workspaces closed, demand trends were altered significantly overnight. Notably, the first lockdown naturally precipitated an eCommerce boom – though given the unprecedented circumstances, it was impossible to say with confidence or credibility how sustainable this would prove once the high street reopened. Accordingly, finance professionals had to find ways to enable they business to adapt, pivot and meet customers’ new demand wherever possible. They had to achieve this while ensuring there was no overextension of resources into a market which may potentially see a sharp downturn in the short- to medium-term.

Supply itself was also significantly disrupted throughout the year. International shipping was constrained by lengthy delays and volatile price mechanisms, which made profit margins and relationships with their traditional customer-base increasingly uncertain. Again, finance professionals had to carefully consider the broad implications of resource allocation and where the best balance could be struck to ensure the ongoing financial viability of the business.

While indicative of the difficult balancing act that was pushed on financial decision-makers, in truth there were countless more spinning plates that risked crashing to the ground at any given moment. Here are a few: the influence of remote working on productivity and costs, redundancy schemes, limited access to credit, contractual obligations, lapses in supply chains, and the broader fluctuations in the market. These were all among the considerations testing the proficiency financial managers.

Back to basics

Due to the emotional toll the pandemic has inflicted, there is a palpable air of optimism around much of society as restrictions lift. For financial professionals, though, there will be an awareness that the pandemic will continue to be felt for the foreseeable future, given the economic damage that must be reversed.

For this reason, it is vital that finance management teams consider how they have managed their pandemic response up to this point. The reopening of society and revitalisation of businesses will afford many an opportunity to make bolder decisions and look for growth opportunities, but the learnings of the past year will naturally ascend in value. For example, reviewing whether skills and experience were utilised or implemented in the most productive way.

In my view, core skills have risen to the fore. They are critical to ensure all finance professionals are well-placed to respond with agility to any future unexpected economic upheaval.

The University of Manchester’s MSc in Financial Management, for instance, centres around these fundamental skills. While many academic courses have required a complete factual and philosophical overhaul in light of the pandemic, the core units that make up this programme have only become more important. Core skills are not limited to simply attaining a substantive understanding of foundational finance concepts and tools – soft skills will also be critical in navigating future crises. The ability to clearly and compassionately communicate both long-term strategy and difficult operational decisions across their business will bring greater alignment behind the execution of any plan, while aiding with the easing of employees’ anxieties regarding the financial health of the business. Development of such skills is an integral part of the learning outcomes of the programme.

Financial professionals should, then, take the period of society reopening as an opportunity to review their successes and shortfalls during the pandemic. With businesses facing a long recovery ahead, decision-makers should recognise and address the gaps in their skillset to better handle the coming months and years. Ensuring a good balance of hard and soft skills will aid not only in the case of further unexpected economic shocks, but also in the management of their business in more certain conditions.

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