Set up a Crisis Management Team (CMT) as soon as possible to oversee major issues, formulate contingency plans, coordinate and align implementation of different departments, and ensure speedy responses and decision-making.
If you already have a CMT, review and revise the representatives. Are the right people on the team as this situation rapidly develops?
Managing different stakeholders’ expectations and priorities during an epidemic is particularly important. Enterprises should pay attention to public opinions, proactively engage with internal and external parties, issue useful communications, and provide professional, appropriate guidance.
Think about the bigger picture: Enterprises, especially large ones, should fulfil their social responsibilities, through stabilising employment, supporting the supply chain, playing important roles during the difficult times, paying attention to the public image, and incorporating sustainable development into the long-term strategy.
When addressing top priorities for business continuity and resumption, enterprises should also re-examine their company policies and business models at a strategic level, exploring new products / channels, new approach to customer services, and opportunities of expanding to new markets with existing resources.
Think and be digital
The epidemic further confirms the importance of digital transformation and exposes the weaknesses of the existing operation. Enterprises should use this opportunity to upgrade and improve the agility of their business models.
Review financial policies that may be a benefit
Finance professionals should monitor the relief measures and policies introduced by the government and get the enterprises prepared to fully utilise the benefits.
Plan for the best, most likely and worst case scenarios: Finance departments should estimate the needs of working capital based on the assumptions of the best, most likely and worst case scenarios, plan ahead and prepare for cash flow requirements, including but not limited to:
- Consider utilising new loan offerings, extension of repayment, refinancing with preferential terms introduced by the banks;
- Cooperate with other departments, proactively communicate with customers on the collection of accounts receivable and accelerate the return of funds;
- Strictly control procurement and payment requests, actively communicate with suppliers and explore possibility of deferring payments;
- Reduce unnecessary traveling and minimise losses resulting from cancellation of business trips;
- Arrange short-term intercompany borrowings for multi-national companies and shareholders’ loans for start-ups.
Finance team are flexible
While satisfying internal control requirements, enterprises should take advantage of flexible working arrangements by deploying technologies to serve as many internal and external customers as possible.
Enterprises should pay attention to the physical and mental health of employees and develop appropriate plans for the resumption of work.
- Arrange home-based office through utilising technologies;
- Provide a clean and safe working environment;
- Deploy multi-shift work schedules in the work resumption plans to minimise human contacts and avoid cross-infection;
- Provide employees with online training opportunities.
Enterprises should actively communicate and work closely with auditors to ensure that audit quality is not compromised, given the circumstances and explore the possibility of conducting audit through online or non-contact models.
Understand the financial impact
Both auditors and management should evaluate the impact of the epidemic on production, investment, operation, potential disputes and litigation, and make proper disclosures of information that allow users of financial statements to have full understanding of the financial impact.
Think of alternative ways of doing things
Auditors need reasonable assurance to form an audit opinion. Such ‘comfort level’ does not change. When face-to-face audits become difficult or impossible, auditors will have to seek alternative ways to achieve this comfort level. With the advent of new technology tools, remote audits are becoming more and more likely, although many companies are still in the early stages of using technology in audits. The virus is likely to accelerate the adoption of some of these new technologies.
The auditor needs to obtain sufficient, appropriate evidence to support their audit opinion and the assurance that they are providing on financial statements. However, the current circumstances mean that auditors will need to think carefully, and innovatively, about where that assurance might come from.
If circumstances are such that the auditor does feel that it is feasible to obtain the evidence necessary to provide assurance over a material element of the financial statements, then they should not issue a clear audit opinion regardless, they should instead consider whether they would need to issue a “limitation of scope” qualification. We’re aware that in practice, auditors will be very reluctant to take this course of action, but they do need to be thinking carefully about what constitutes sufficient and appropriate evidence in these very unusual and challenging circumstances.
Courtesy: ACCA Global