A global downturn might appear to give companies with sufficient resources an unprecedented opportunity to buy assets or acquire market share on attractive terms.
Indeed, many non-financial companies seem well positioned to do so, having entered the present crisis with stronger balance sheets than they had in past recessions, when businesses that followed countercyclical patterns of cash utilisation and spending fared much better than those with purely defensive strategies.
Yet this crisis shows signs of being the most dire and unpredictable one since the Great Depression. At the end of 2008, most national economies were experiencing the sharpest fall in consumer and business confidence in 20 years.
Experts expect several quarters of decline and higher unemployment rates. Indeed, for many companies, survival is not a certainty.
What's more, the broader forces at work in the global economy means that the underlying economics of strategies could continue to shift with unprecedented speed and scale. Such uncertainty demands constant attention, frequent changes in priorities and strategies that anticipate and respond to a changing landscape.
Against this backdrop, the role of the chief financial officer takes on critical importance. CFOs must use their deep understanding of financials and liquidity to understand how volatile prices and demand will affect the performance of their companies, both to manage potentially lethal threats and to ensure the availability of the financial resources required for countercyclical investments.
Most CFOs will need to replace traditional approaches to budgeting and planning with a more aggressive one underpinned by a re-examination of earlier assumptions about earnings and growth and about how deep the downturn will be.
Text: Richard Dobbs
Image: The world headquarters for Lehman Brothers. | Photograph: Lucas Jackson/Reuters
Also read: G-20: Out to rescue global economy
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