Planning for Volatility: Elements and Strategies CFOs Need to Succeed

Challenges wrought by the pandemic haven’t come with easy or obvious solutions—other than a measure of agility to adapt to new situations.

“The impact of the pandemic was quite dramatic as we literally lost all of our revenue from one week to the other,” said Marcus Tillmann, CFO of online travel site Trivago. “We had no plan for a global pandemic, so the first thing I did was to tell the teams to cut all our marketing investments and other variable costs as quickly as possible.”

For three CFOs who began their new roles amid the crisis, planning for volatility required an understanding of their core business, a focus on key priorities, and experience in tackling the unknown in previous roles, according to a recent Fortune webcast.

Tillman, for instance, drew on lessons he learned during his time as a currency and commodities trader through market-moving events such as the financial crisis and Brexit: “When there’s a big event against you, react quickly and then take time to analyze the situation.”

Edmund Reese, who was named CFO of Broadridge two quarters into the pandemic, said he had a three-fold approach to managing the uncertainty.

• People first. “For me, it was the top priority to make sure they were healthy and we were looking after their wellbeing,” he said. That included sending home workers who could perform their jobs remotely and enacting safety protocols for essential workers. 

• Robust technology. Another component was ensuring the company had the technology to conduct business and continue to support clients. Reese said Broadridge’s platforms showed themselves to be resilient, which allowed them to focus on long-term commitments to clients. 

• Capital strength. Broadridge kept its strong liquidity position and free cash flow while continuing to return capital to shareholders—“but very importantly, still investing in this environment,” Reese said.

For Cynthia Gaylor, CFO at DocuSign, the priorities were twofold. The pandemic accelerated some of the company’s strong growth trends, an element that made her think about existing and prospective clients first. Having been a member of DocuSign’s board of directors and chairing the audit committee prompted Gaylor to prioritize how to continue growing at scale: “How do we continue to delight our customers in an environment where we need to also build on our operations very quickly for the scale that we were growing into?”

Gaylor’s other consideration was ensuring that employees were being given growth opportunities, both personally and professionally, including opportunities to build their skills. “When we really take care of our people and put customers first, a lot of the other pieces take care of themselves.”

The Importance of Digital Transformation

Reese—whose career has spanned wealth management, financial services, payments, and fintech—said he viewed the CFO role as being “the champion of value creation.” Yet for that to happen, “Finance has to move away from people-heavy transactional production activities at a low value-add, like management reporting for journal entries and variance analysis, to insight-driven, technology-enabled decision support functions.”

In practice that means having cross-departmental collaboration to create “a modern data architecture and deploy a technology roadmap that focuses on analytical and visualization tools to be able to extract and model that data and integrate it into the finance decisioning framework,” he said.

“It’s using digital technologies and data to really drive business outcomes,” he said. “And that's something that I lead here and how I think about the role we play in finance and how it is so intersected with data and technology teams.”

Reexamining internal processes at Trivago led to the discovery of potential new revenue sources, Tillman said. Specifically, the company held a unique wealth of data about the global hospitality industry, and it found that other firms were looking for tech solutions that Trivago could help with.

“What we have learned through the pandemic is that we have quite a few assets that we never leveraged in the past. We just used them for our B2C product,” Tillmann said. “We now have a whole new B2B opportunity we never thought about before, to be honest.” 

At DocuSign, the past several months brought with them an unexpected internal opportunity.

“We haven’t been as good about digitizing our own systems and infrastructure,” Gaylor said, adding that the company has since ramped up investments to make sure DocuSign is using its products internally—and reaping the benefits of digitization. “We’re kind of drinking our own champagne, if you will, but also becoming a much more agile company.”

Getting Resource Reallocation Right

It’s important to understand what businesses and products have been driving total shareholder return, and think about how to optimize investments across those items, Reese said.

“You do need to set aside for long-term, next-horizon growth opportunities, but you need to be very clear on measuring the return from your different products in your different business segments and allocating your resources against that,” he said. “And it’s not just for finance; it’s for where you want to put your technology resources, where you want to put your marketing resources—for all of the investment you make, it’s being able to drive those returns and continue to produce the outcomes that we’ve had historically. That’s an ongoing process.”

Three priorities help guide how to reallocate resources at DocuSign: investing for innovation, supporting the capacity needed to best serve customers, and supporting the business from an operational standpoint, Gaylor said. And those priorities require conversations across the leadership team.

Tillmann described a robust, bottom-up planning process at Trivago, which needed more agility during the pandemic than it had normally employed. “We do our annual strategy process and then break that down into quarterly reviews,” he said, adding that reallocation is based in part on those shorter-term targets—an approach that has worked well during the recent volatility, specifically resulting in the creation of deal website Trivago Weekend.

“We thought, ‘We can’t just wait until the pandemic is over and then continue business as usual,’” he said. “But there’s an opportunity to build something that people need after this pandemic, or even in the period where we recover.” 

The ESG Factor

Along with their role of assessing and managing risk, CFOs have an important role to play when it comes to environmental, social, and governance (ESG) efforts. “Understanding how companies are performing against other companies when it comes to ESG metrics is something I think we are uniquely positioned to provide,” Reese said.

Gaylor said DocuSign’s mission is intertwined with helping customers achieve ESG goals, adding that the pandemic had also prompted the company to reimagine its business. “The pandemic has really redefined what risk is in business and in life,” she said, adding that agility was ever-important. “Addressing risk in a changing environment is going to require all companies and individuals to be more agile in their thinking.”

Noting that the travel industry has traditionally had a large carbon footprint, Tillmann said Trivago employees are likely to press the company to follow through on any ESG initiatives it undertakes. “They feel responsible, they look at the risk, they look at what we are doing, and they are changing that and questioning that,” he said. 

With an average age of 31, Trivago employees represent the future, Tillmann added. “And it’s important to listen to that and learn from that and reflect that in what you do, how you set priorities, and what you pursue.”

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