What challenges will this year bring? Is a recession on the horizon? Bryan Jones, CFO at Intradiem, an Atlanta-based provider of intelligent automation solutions for contact-center and back-office teams, urges finance chiefs to use stress-test scenarios to prepare for whatever 2023 will bring.
Jones spoke with StrategicCFO360 about leaning on past experiences, supporting your employees and, most of all, remaining flexible.
What proactive measures can CFOs take in preparation for a possible economic recession?
In both good times and bad, I think the CFO’s primary responsibility is twofold: to have a clear understanding of the company’s strategic priorities, and to have an equally clear view of its overall financial condition. At Intradiem our top priority is our employees, and we will never sacrifice them just to get over a short-term rough patch. And having a precise awareness of your financial condition is critical because you can’t prepare an effective course of action if you don’t know what your starting point is.
In anticipation of a possible recession, the CFO should run stress-test scenarios to game out how the business could be expected to perform under various conditions. That means testing an “upside” scenario, where the recession turns out to be mild, as well as a “downside” scenario, where a more severe dip requires more austere measures. Things can move fast, so the goal is to have pre-tested adjustment options at the ready for whatever path the recession takes.
How can CFOs work with their CEOs, CHROs and fellow C-Suite members to ensure that their company can remain profitable and provide support and peace of mind to their employees?
Lots of companies have a reflex to simply cut expenditures across the board, to a more or less targeted extent. I think it’s more strategically sound to plan response options within the context of your company’s values and long-term objectives.
Safeguarding profitability and supporting employees has always been two sides of the same coin at Intradiem, because we believe that if we take care of our employees, they will take care of our customers. We refused to lay off any employees when the pandemic hit in 2020, and we’ve made it clear to our teams that the same applies today, no matter what 2023 may bring.
Transparency is also important. I make sure the entire executive team understands our financial situation so no one will be caught off guard if belt-tightening turns out to be necessary. Even if it does, there is a potential upside: Scarcity sometimes breeds innovation. That’s why part of my financial team’s recession planning involves working with each department to find creative ways to achieve their objectives with fewer resources.
What advice do you have for other CFOs and financial decision-makers in the midst of 2023 budget planning?
CFOs who have been in business for a while, like I have, should definitely lean on their experiences with financial challenges they faced in 2008 or 2020, or any other relevant instances where they’ve had to steer their companies’ finances through narrow channels. Like I said before, CFOs need to know their companies’ priorities and try to avoid sacrificing long-term objectives for short-term performance. I understand that public companies answer to shareholders who have little tolerance for short-term underperformance, but it’s always best to avoid straying too far from long-term objectives.
I would say to CFOs: Stay true to your company’s vision, which was deliberately conceived and codified to provide guidance, especially in difficult times like now. All companies will benefit in the long run from that approach—even publicly traded companies. And secondly, remain flexible in your budget planning. Revisions may be necessary, maybe even several revisions. As long as you know your financial situation and equip yourself with options for responding to all possible scenarios, your company should be in a good position.
What should CFOs and C-Suites avoid in terms of budget planning and recession-proofing their businesses? How could these potential mistakes hurt their company?
I’m not sure it’s possible to “recession-proof” your business. What you can do, though, is avoid getting caught flat-footed by planning ahead and being proactive rather than waiting for things to evolve and trying to catch up. Decisions made in haste aren’t always the best, and the delay between policy implementation and results means you might suffer damage before knowing if your choice was a good one or a bad one.
Also, don’t make the mistake of thinking there’s an advantage in keeping your options secret—at least internally. In an information vacuum, employees will often fill in the void with scenarios that are more frightening or harmful than what you have in mind, which can spread unnecessary fear or panic.
Overall, good CFOs get ahead of challenges rather than allowing themselves to become engulfed by them. It’s always easier to fight downhill than uphill.