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What Covid-19 lessons can finance professionals take into the future?

By Professor Arif Khurshed, Professor of Finance at the Alliance Manchester Business School

The unprecedented events of the past year have meant that businesses’ finances have come under increasing scrutiny – and so too have the roles of finance professionals.

A carefully considered and well implemented financial strategy has always been a crucial ‘make or break’ factor in any business. But over the past 18 months, these strategies have been less focused on growth, investment or diversification, and more on survival.

A large number of firms are facing unpredictable and in many cases dwindling cash flows that threaten their survival. In the early days of the pandemic, a British Chambers of Commerce (BCC) survey of 600 UK businesses found that almost two-thirds of the companies would run out of cash reserves within three months or less. Data from the ONS highlights the enormity of the task financial management teams have faced, with business closures up 37% in Q4 2020 when compared with a year earlier. While the latest figures point towards signs of recovery, there remains in place a notably more volatile business environment, with 111,145 businesses closing in Q1 of 2021 alone.

Astute financial planning and management could not have saved every business, but it will likely have been a telling factor in any organisation that has handled the pandemic competently. Now, as society prepares for a steady return to something resembling normality, we ought to reflect on the lessons learnt during the Covid-19 crisis, assessing how finance professionals have been tested and, in some instances, been found wanting.

Challenging conditions

A study conducted by Nerdwallet of more than 900 business managers in the UK found that a majority (54%) had felt the previous year to be the most stressful of their careers up to that point. This is no surprise. As soon as the first social distancing measures took hold, business and consumer trends were radically altered overnight.

Accordingly, finance professionals were required to continually assess the ongoing viability of their business product or service. Moreover, they had to identify where practical and cost-efficient alternatives could be adopted to help their business meet consumers or clients in the areas where demand had formed. ‘Pivoting’ became a buzzword, and financial decision-makers played a key part in guiding this process.

The pandemic also posed issues with manufacturing, production, and supply chains. Disruptions to shipping and freight lines have caused tremendous uncertainty among businesses since the onset of the pandemic. The eCommerce boom during lockdowns overwhelmed the UK’s domestic shipping infrastructure with goods usually purchased in person or on the high street – it was commonly observed, for instance, that there were significant delays for home delivery slots from supermarket chains.

At the same time, international shipping was also placed under operational strain, as the price of importing parts needed for manufacturing fluctuated, coupled with delays becoming more commonplace. The pairing of the two resulted in an operational headache where operational costs became near-impossible to predict more so in instances where any element of procurement, production or shipping involved international markets – and that’s without mentioning the complications associated with Brexit.

These were no small challenges, yet barely scratch the surface of what finance professionals have been forced to contend with throughout the pandemic. Assessing the costs and benefits of operating with remote workforces, balancing the furlough scheme and redundancy measures against the need to keep productivity up, evaluating potential options for accessing additional finance, and disruptions to investment flows have all played their part in the uncertainty financial managers have had to tackle.

The fundamentals are key

In a broad sense, there is a palpably bullish mood around business in the UK presently. There is an optimism, aided by the speed and success of the vaccine rollout, that the most challenging consequences of the pandemic are behind us. Business leaders are once again looking to invest in short- and long-term growth, launch new products and explore innovations that can return their competitive edge in domestic and international markets.

Finance professionals are once again going to be put to the test. Many will know all too well that the aftereffects of the pandemic are still being felt from a financial perspective. Debt may have replaced cash reserves, while fears of further Covid-related disruption will make many wary of higher-risk growth strategies

Accordingly, finance professionals must assess how they have managed their response to the pandemic to date. For instance, reviewing whether in the face of often-improvised solutions to constantly evolving circumstances, their skills and experience were implemented in the most productive way.

It is my view that the pandemic has highlighted the importance of fundamental skills in financial management. They are crucial in affording finance professionals the capacity and gravitas to respond ably to future economic upheavals. With this in mind, the University of Manchester’s newly launched MSc in Financial Management concentrates on the core skills needed to be a versatile finance professional. While many academic programmes have required wholesale redesign in the past year on the basis of the extraordinary circumstances we have found ourselves in, the course units included in the MSc Financial Management and their blended mode of delivery have actually become more demonstrably critical.

Strong financial foundation is not the only thing that finance professionals should focus on. They must also ensure their soft skills are adequate for handling future crises. For instance, the ability to communicate long-term strategy clearly will bring alignment behind operational aims, while doing so compassionately will assist in explaining difficult decisions like redundancy where necessary to preserve the viability of the business. Our MSc in Financial Management embeds many of these soft skills within the learning outcomes of the programme.

Post-Covid, the reopening of the economy presents finance professionals with an opportunity. By conducting a considered review of their handling of the pandemic, and identifying areas where they succeeded or failed, they will be well-placed to aid the long recovery ahead. By addressing gaps in skillsets now, they will be more capable to respond to new, positive shifts in the economic landscape. A healthy balance of hard and soft skills provides not only an insurance policy against further unprecedented events, but also in the management of their business should all be well going forward. Afterall, we are just about setting on a long road to recovery.

Professor Arif Khurshed, Professor of Finance at the Alliance Manchester Business School

Professor Arif Khurshed is a Professor of Finance at within the Division of Accounting & Finance at the Alliance Manchester Business School. Prof Khurshed lectures at part of the University of Manchester’s blended learning MSc in Financial Management, which equips its students with a deep understanding of the tasks finance professionals undertake, and the skills required for a successful career in finance.

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