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Last Updated : Jul 09, 2020 05:34 PM IST | Source: Moneycontrol.com

COVID-19 is not Financial Armageddon; can lead to unparalleled success

Veteran finance expert, Pankaj Vasani mulls over the COVID-19 crisis at this point of time, its impact on the Indian economy, the complexities of a revival and the changing definition of success for the corporation

Moneycontrol Contributor @moneycontrolcom

Veteran finance expert, Pankaj Vasani mulls over the COVID-19 crisis at this point of time, its impact on the Indian economy, the complexities of a revival and the changing definition of success for the corporation.

Unusual times require extraordinary responses. Apart from the short-term tactical manoeuvres, CFOs along with other CXOs in these times also need to strategise for the long-term. That requires sharp and dispassionate assessment of the current situation.

Here, Vasani ruminates and reflects on the most commonly posed questions of the unusual times that we live in.

Q: As the world reopens (in phases) and as lockdowns are gradually being lifted, how deep does the crisis look at this point?

A. There are several unknowns and the situation is still an enigma - no one knows how this frantic crisis will play out or end. Many hypotheses and scenarios are being postulated daily. But the fact of the matter is that until there is an approved vaccine, definitive treatment, or herd immunity, it is too early to comprehend the full and ultimate economic impact of this pandemic on any economy or industry or organisation. It is antithetical to anything we’ve ever encountered before.

Q: Globally, lockdown measures have curtailed economic activity. How deep is the damage to the Indian economy?

A. For our economy, the crisis began at a time of augmented susceptibility. There was bona fide disquiet of slowing growth, dwindling new investments, sluggish consumer demand, mounting unemployment, agrarian/NBFC crisis, and a tough global environment which negatively impacted the exports. The Government of India (GoI) was working on proposals to revive the private consumption part of the national economy (ephemerally) and creating a favourable setting for investment and external trade – the three major contributors to the GDP. The advent of COVID-19 has now made the problem worse – be it demand, supply, or liquidity shocks.

After the crisis, to survive and revive, GoI has pronounced a series of structural reforms across several sectors, rolled out sops, and introduced a wide range of financial support. Only time will tell how effective (and immediate) these will be in supporting the economic revival. The good news (at this point in time) is that the course of economic recovery in India (and China) will be plain sailing and nimble than that of many other advanced countries.

Q: Additional complexity has been incorporated in the post-lockdown scenario. What will recovery look like?

A. Different sectors have reacted differently – some have benefited, some haven’t been much impacted, some hit moderately, and many others struggling to sustain, and striving hard to keep themselves afloat. The recovery curve (V-curve, U-curve, or L-curve…or maybe a new curve) for any industry or organisation will vary based on 1) products and/or services being provided; b) competitive position in the market; & c) the geography it operates in. I believe it will take north of 18 months for most industries and organisations to recover.

Q: The COVID-19 pandemic has led the corporates by the nose in 2020 and CXO’s are facing an unprecedented challenge. How should this be handled?

A. CXOs are indeed facing an extraordinary challenge of operating in unchartered territory, answering and preparing for ‘where to from here’. They are expected to understand and articulate the 'big picture' in terms of an organisation's potential strategic directions and developments. Unfortunately, there are no precedents, manuscript, right or off the cuff answers, or standard operating procedures (SOP) that can be followed.

In the current context, what makes it even more complex is the fact that shifts will happen on many fronts – regulations, macroeconomics, geopolitics, industries, technology, human behaviour, etc.

There are a variety of parameters that need deep thought and action. It requires an integrated and comprehensive process of understanding and analysing the external/internal environment, determining the most appropriate method of growth, determining the purpose of the enterprise (even, re-purposing the purpose), developing the chosen growth strategy aligned with the (new) purpose of the organisation, implementing the strategy and understanding the importance of change management (treat chosen actions as putative and conjectural), and having an effective leader to lead this process from beginning to end. But it must be remembered that too much focus on the specifics of the situation faced today can constrain strategic thinking. Also, instead of forecasting the ‘Financial Armageddon’, CXOs need to create an inexpungable success story.

Q: Has the meaning of a company’s success changed - especially in the COVID-19 context?

A. It is to be tied directly with the factual position of each enterprise, its purposes, the specific interests it serves, and, certainly, its current financial health. It’s a choice between short-term shareholder gain and long-term value creation.

Since our ability to predict the future is seriously restricted, the success of any organisation or industry, in the front and centre, is the ability to adapt and be action-focused (by retooling business for the new world order) to strategically stay ahead of the game. It calls for going against conventional conservatism. From a top-line and bottom-line perspective, now is the perfect time to transpose the business for the future.

But, at the same time, we need to balance realism with optimism. Hope for the best, but prepare for the worst. While we confront the most brutal facts of our current reality, we must have the faith to believe that we will prevail in the end. As they say, whatever doesn't kill you makes you stronger.

Pankaj Vasani is a seasoned business leader and finance expert with over two decades of experience in senior executive roles and as a board & audit committee member. Over the years, he has donned various hats – Group CFO, Finance Head, CEO, Tax/Legal/Compliance Head, and member of Board of Directors. He has held finance leadership roles with Vodafone, Publicis, Coca-Cola and Subros. By education, he’s a Chartered Accountant (England & Wales), Certified Public Accountant (Australia), Chartered Accountant (India) and lawyer (Delhi University).
First Published on Jul 9, 2020 05:33 pm