PETALING JAYA: Five imperatives that CFOs should look at in the new normal are to reimagine and adapt business models, invest in digital transformation, rethink the future of work, increase risk and cyber resilience as well as restructure to stay relevant and seize merger and acquisition (M&A) opportunities, according to Deloitte Malaysia.
Its consulting executive directors Timothy Ho and Cheng Yen Chu, and audit & assurance partner Joshua Yan said, first, with consumers forced to use web or mobile banking alternatives, there is no better time to shift focus to digital banking. CFOs recognise that the ability to respond quickly to market needs with new business models is key to enabling them to gain a competitive edge.
“Consumer buying patterns have radically shifted as a result of social distancing measures. The most nimble financial institutions have innovated and scaled alternative digital models to stay engaged with their customers during this period. However, the real challenge is to analyse customer behaviour and find the right offerings, as well as marketing and promotion channels to fulfil customer needs,“ the trio said in a statement.
Second, Covid-19 has accelerated the focus on digital. CFOs also recognise the importance of having digital finance systems in place to make informed decisions as they look to unlock value and growth in the new normal.
“Reporting activities have increased, as C-suites, boards, and even regulators demand more frequent updates and projections. To provide more informed forward-looking estimates, CFOs will need to take into account the impact of the stimulus package and the uncertainty associated with the pandemic trajectory, especially in areas such as capital, liquidity, and asset quality.”
Third, while banking services are regarded as essential service, more than 70% of banking staffs worked from home during the MCO. This arrangement was deemed impossible only few months back but is now being considered as a permanent option for certain staffs or function.
“The marked shift towards digitalisation is an opportunity for CFOs to rethink the ways their finance team and the rest of the organisation pair humans and emerging technologies, such as artificial intelligence, and approach them not as a substitute for human skills, but as a means to augment them. This view can enable organisations to streamline costs while enhancing value creation by the workforce.”
Fourth, with Covid-19, certain key accounting and disclosure considerations may arise both in the short and long-term. Impairment testing for financial assets using the expected credit loss model, in particular, emerged as one particular area of concern among CFOs.
Liquidity and credit risks are perennial top-of mind issues for CFOs especially when taking into consideration the impact of BNM’s loan moratorium.
“CFOs also need to consider optimisation of risk-weighted assets, setting up early warning systems as well as reviewing the current capital and liquidity contingency menu of options and refining the available recovery indicators,” they said.
With most CFO’s recognition that cyber security risks are magnified during a crisis and its aftermath, they will need to review their business continuity programmes, pandemic scenarios, and management practices and ensure that they are defensible and aligned with the applicable cyber security and privacy requirements, fiduciary duties, and industry expectations – even in a remote setting.
Lastly, on restructuring and grabbing M&A opportunities, given the emergence of new consumer behaviours and increased e-commerce uptake during the pandemic, the consumer sector is one industry that is expected to witness increased M&A activity. This, in turn, could also have spill-over effects on other financial service players such as payment platforms and other fintech players.
“CFOs should consider strategies to collaborate or acquire nimble fintech players to safeguard existing markets, accelerate recovery, and position themselves as market leaders.”
Covid-19 has accelerated the focus on digital and CFOs recognise the importance of having digital finance systems in place to make informed decisions. – REUTERSPIX
