Is it too early to call the last few days the beginning of a crisis? According to Fitch's assessment, a historically significant increase in tariffs on imports into the US results in an effective tariff rate (ETR) of about 20% for EU goods and about 64% from China. [reportedly increasing to 104%]. Other Asian economies, such as Vietnam, also have significantly higher ETRs.
Fitch said the results would “swell consumer prices and lower US corporate profits.” “Higher prices squeeze consumer spending and narrow down actual wages, whereas lower profit and policy uncertainty serve as a resistance to corporate investment.”
Prof. Aswath Damodaran, a well-known corporate valuation expert and professor of NYU, said in a blog post:
Even if the US economy and financial markets are not in a “crisis,” they may be in a period of high volatility and uncertainty. Many CFOs are preparing for this confusion. Others don't have it.
If current conditions threaten your 2025 business plan, alternatives need to be developed quickly. “Planning scenarios is very easy these days, and technology does,” says Jack McCullough, president and founder of the CFO Leadership Council. “If you have one plan in place and assume that everything follows the script, there's no excuse.”
What else is there at the top of the CFO's priority list? We asked some of the questions.
1. Please respond to investors.
Investors are nervous and CFOs must be level heads. “A company never has all the answers at once like this when things are unfolding right away,” says Moira Conlon, founder and CEO of Financial Profiles and investor relations expert.
However, the more information you can share about you [company’s] The situation and response, the more lucrative investors will see you as a trustworthy management team,” says Conlon. She recommends creating bulls, bears and base cases based on what CFOs know today. [their] Thinking about models and investments,” she says. Conlon recommends that CFOs provide revenue guidance and be conservative when focusing on assumptions.
2. Analyze supplier relationships.
“Now is the time to have candid conversations with key suppliers, renegotiate terms, and explore local alternatives to avoid potential disruption,” said Joseph Estebus, CEO of Maine Point, a global supply chain and operations consulting firm. Esteves says it's a good idea to reassess your financial strategy. “Make sure your cash flow is strong, and consider ensuring that you have a line of credit wherever possible and classifying diversifying risks.” “Two broad approaches to setting up a supply chain and increasing financial flexibility are better suited to what comes next, such as trade changes, tariffs and other unexpected challenges,” Estebus said.
3. Track your cash level.
Economic flexibility is a high priority, so the key question for every company, whether it has financial capabilities or not, is “How much cash is it?” [on hand] Is it enough? “Managing Partners of the Financial Executive Consulting Group require constant comparisons with other parts of the company's financial situation, such as those at that level of responsibility and long-term debt.
4. Use technology.
Treasurers (and small business CFOs) need strong analysis in these conditions. “The CFOs come to us and say, “What is my position on working capital? How can I look up the DPO to look at DPOs? says Melissa di Donato, Chairman and CEO of Kiriba. In the latest financial expert survey, over 60% of Treasury experts cited cash or liquidity forecasts as the most difficult task they face. Predictive analytics can help inform CFOs where to deploy capital in the right time and in the right way, allowing them to model potential changes in interest rates.
5. Manage long-term risks.
The CFO writes Brian Olson, their core risk manager and CFO coach of Chief Executive Coach in column Monday. “[CFOs’] Responsibility goes beyond recognizing current threats. They have to analyze the underlying business factors that could lead to future disruptions,” says Olson. Understanding probability and planning accordingly is essential, he adds.
Future opportunities
Managing simply through adversity should not be the only focus. These disruptions could potentially provide a pathway for strategic growth, Olson points out. McCullough agrees. “There is an opportunity in every crisis. As a CFO, you need to partner with the CEO and find those silver linings.”
Conlon encourages CFOs to focus on factors they can control. “You're not a business that predicts tariffs, employment numbers or interest rates,” she says. However, CFOs should consider how these factors will affect their business in the near future and in the medium and long term.
That information allows the financial manager to assess short-term and long-term trade-offs. “If we reduce our value tomorrow, we resist the urge to cut costs today,” says McCullough.
