Much for the Executives to Learn from such Pandemic

Pandemic has taught many new things to the corporate executives – starting from evaluating long and short term expenses in R&D and even CAPEX, from cost cutting in the form of salary cut, workforce shredding and many more. But many executives still have to learn and prepare themselves for the economic downturn if any in the future. But according to Gartner’s survey reveals that 55 percent of Tech CEOs were not prepared for an economic downturn prior to the COVID19 pandemic. The survey also highlights that measuring cash burn rate can help tech CEOs assess ability to survive the recession.

The senior research director of Gartner Patrick Stakenas said, “While the survey found that 43 percent of tech CEOs were worried about an economic recession impacting their revenue growth in the next 12 months, many delayed taking action to prepare for this eventually”. “As funding and available capital becomes scarcer in the weeks and months ahead, even after the COVID19 outbreak slows down, tech companies will have to survive off existing customers and cash in the bank while the current market persists”.

Though CEOs have been tracking revenue growth & profitability, not all known to measure cash burn rate, which results in severe cash flow problems for companies during such pandemic times and thus resulting in economic downturn. On the other hand, another report by Gartner says that COVID19 related cost cuts could damage long-term growth prospects for CFOs. “The pressure facing CFOs to contain costs during this crisis are intense. With 62 percent of CFOs reporting that they are planning to make significant SG&A cuts this year as a result of the coronavirus crisis, it’s important to first achieve clarity on which costs protect the long-term investments that will derive future profitability,” explains Dennis Gannon, Vice President, Advisory for the Gartner Finance Practice.

The repot further states that leading CFOs are using this period of uncertainty to reevaluate their business portfolios and reduce complexity that waters down long-term profitability. By reducing the number of industry battle-fronts that they compete on, these CFOs will naturally find good costs to cut, while simultaneously freeing up more resources to channel into the winning growth bets. But together these executives need to eliminate such business departments which are not profitable, and even look at outsourcing the non-core business functions to experts. This will surely reduce the cost and will add strength to their financial backbone.

Such pandemics are here to teach us new business methods and financial tricks. Let’s wait and watch.