- Author: Nina Hendy
- Posted: September 13, 2021
CFOs have morphed into crystal ball gazers and disaster planners: Jonathan Mason
CFOs have had to step right outside their comfort zone in the past couple of years.
Regardless of the industry they work in, CFOs have been forced into disaster scenario planning requiring deep think-tanks analysing the science for Covid-19 and the history around pandemics. It’s been no mean feat.
Sitting at the (sometimes virtual) table for these deep think-tanks has been highly experienced New Zealand independent director Jonathan Mason.
During the global health crisis, board meetings moved from monthly to sometimes daily, as scenario planning was bumped to the top of the agenda. “I went from being in Board meetings monthly, to weekly, and in some cases, I was meeting every other day,” Mason says.
Who is Mason?
Mason has been in high demand amid the pandemic. In a past life, he was the CFO of Fonterra Co-operator, CFO of Cabot Corporation (a Boston based chemical company) and CFO of Carter Holt Harvey.
But now, he’s an Adjunct Professor of Accounting and Finance with the University of Auckland.
The American moved to New Zealand 21 years ago with his wife with a Yale School of Management degree under his belt, drawn by the opportunity to enjoy a better quality of life.
Mason is also Chairman of electricity utility company Vector, and independent director for Air New Zealand and Westpac New Zealand,
He admits that forecasting the science around a pandemic in a commercial environment has been tough, but part of the job.
“CFOs and finance teams would need to conjure up multiple scenarios and ensure everyone was comfortable with the worst case scenarios,” he says.
The Covid-19 pandemic hit like a bolt out of the blue, and wasn’t comparable to anything else, forcing Boards into frenzied overdrive as they worked to extrapolate government advice and figure out what it all meant for their financial spreadsheets.
“Of course, in hindsight things seem much more certain than at the time,” he muses.
Air New Zealand, for example experienced an immediate loss of 95 per cent of its revenue at the height of lockdowns. “The questions and forecasting were around when will people start travelling again, influenced by the pandemic, of course.”
In the banking sector, the question centred on loan risk, and how to mitigate those risks. “None of the banks had good data from the 1920s (during the Spanish Flu), so they couldn’t compare it to anything,” he says.
“There was a lot of uncertainty around how much money we loaned that we were ever going to get back,” he says.
A new lens
A big change for many businesses, both big and small, was the change of focus from earnings forecasts to cash flow forecasts.
“At the start of the pandemic, companies were asking questions about how to lower cash burn, lower expenses and lower capital expenditure. Companies also become a lot better at predicting cash flow, which happened very quickly,” he says.
“While companies might not know their expenses, or even what income or deposits have been received because that may take a few days to figure out, they always know the answers they seek by simply looking at the bank account. The balance in the bank doesn’t lie,” he says.
While there’s no substitute for being there, CFOs haven’t been able to travel amid the pandemic, there have been certain activities made easier, Mason says.
Spreadsheet and audit analysis was no problem remotely, while reduced costs have been welcomed onto crumbling balance sheets, he says.
“CFOs have loved the expense control provided from the pandemic. We’ve all got much better at Zoom meetings, embedding presentations in Zoom meetings, accommodating ourselves to different time zones, and having a better work/life balance,” he says.
But scenario planning can only look so far into the future, he says.
While OECD nations will be fully vaccinated by 2022 and travel will open up, there is a lot of uncertainty for next year, he says.
These uncertainties extend to the nation’s fiscal position, the potential re-emergence of inflation and geo-political tensions and risks on the radar for companies. “We shouldn’t assume that everything will get better when the new year ticks over,” he says.
When asked whether CFOs should follow the lead of Air New Zealand CEO Greg Foran, who famously cleaning planes and serving meals during a 100-day review of the business, he paused briefly.
Mason viewed customer facing experience as potentially not as relevant for a CFO. The CEO is the Chief Customer Officer, but CFOs may be more productive analysing the numbers, he explains.
He continues: “When I reflect back on how I added the most value as a CFO, one of the activities that was really valuable was to talk with and experience the key priorities of the value creators in the business.
“These are the people who are generating profit and growth for the business, looking at what’s going well and what isn’t going well in their world. Having that insight as a CFO makes you a better partner to the CEO and makes you a better accountant and a better risk manager.
“Because as the CFO, you know how to create more value and what the risks are that come right back into your accounting stakes,” he says.