The last few weeks have been anything but normal, both professionally and personally. However, from a business perspective, Covid-19 has presented many unfamiliar challenges, challenges that no one had planned for and challenges that required a different tack.

Although we have endured other uncertain economic times, most recently Brexit, Covid-19 is on an unprecedented level and throws up many interesting and difficult questions. What will our market look like after we come out of lockdown? What will the short, medium and long-term effects be on our organisation and our operating model? When will our Telefónica Techists be able to return to our offices or will remote working become our new norm? Will customers continue to pay us?

In reality, we just cannot answer many of these questions at this time. So instead of planning for and kicking off our new financial year in April with all these questions answered, the priority quickly moved to a focus on cash optimisation, scenario planning, short-term forecasting and shaping internal and external communication plans.

All these actions have been taken to strengthen Telefónica Tech’s financial position so that we can protect our Telefónica Techists and allow us to continue delivering for our customers, while also preparing and positioning the business to succeed post lockdown as conditions improve. Below are some of the steps I have taken to help Telefónica Tech survive, stabilise and prepare for the longer-term, post lockdown strategy.

Optimising cash

As is the same with all of our customers and suppliers, the scale, disruption and length of this crisis is unclear, as is the economic picture post lockdown. As such, my strategic priority has firstly been liquidity; both cash preservation and cash generation.

This required me to list and prioritise the various levers that we had within our gift, with my overriding objective being to ensure that we established and maintained sufficient cash reserves to meet our net salary costs for a rolling quarter ahead. I wanted this safety net to ensure we had the time and space to make the right decisions rather than knee-jerk reactions that may hurt us on the other side of this crisis.

Preserving cash by deferring some of our HMRC liabilities under the Government’s Covid-19 support measures and agreeing on landlord deferrals considerably helped with my safety net objective. But there was more we could do. Additional cash preservation measures, therefore, focused on our people, with a guiding principle of wanting to protect the base salary of all our Telefónica Techists. This meant a pay freeze for all our people, suspending paid overtime and commissions and reducing Board pay by 50% for the quarter ahead. Difficult but necessary decisions during a crisis.

After preservation, the focus shifted to generation and more regular interaction with customers. This was to understand if their liquidity positions were going to impact our ability to collect cash; such open and honest dialogue has been vital in allowing us to forecast more accurately through this situation. We also investigated contingency funding options with the banks in case we needed quick access to additional facilities; these discussions were not fruitful, and therefore our attention turned to the Government’s Job Retention Scheme (JRS). Furloughing a small number of Telefónica Techists is helping generate some additional cash and contributes to the safety net being maintained.

Preserving and continuing to generate cash has allowed us to meet our supplier obligations while maintaining the all-important rolling quarter safety net for Telefónica Techists’ salaries. Our number one priority at the onset of Covid-19 was looking after our people, and our actions to date are helping us achieve that aim.

Short term scenario planning and forecasting

Starting the new financial year with a Budget that was approved pre Covid-19 meant we very quickly had to shift to a reforecasting mindset; unusual to be thinking of reforecasting your annual budget in the first week of the year, but we are in unusual times! 

While we have always maintained a rolling 13-week cash flow forecast, the uncertainty and unpredictability of the Covid-19 situation forced me to think differently about this process. A complete rebuild of the 13-week model to more fully incorporate trading and cash assumptions was quickly completed and superseded the Budget. This gives us more granular insight into many internal and external variables and allows us to switch different scenarios on and off to assess their individual and combined impact. The rebuilt model is now our new norm and provides a range and improved accuracy that satisfies the requirements of multiple stakeholders and ensures we minimise the uncertainties.

A key difference in the current situation is the breadth of the audience that the 13-week forecast extends to compared to normal. It is no longer just finance but something that the entire leadership team is briefed upon and invested in to ensure the most appropriate decisions are taken. Furthermore, it has been a cornerstone of our investor interactions in recent weeks. In addition to providing reassurance on how we are mitigating the risks, it gives a basis for seeking and obtaining guidance and support from our investors.

One of the many benefits of this focused scenario planning and forecasting has been the visibility and comfort it has provided me on trading and liquidity; to the extent, we have been able to return a number of Telefónica Techists from furlough leave a lot sooner than we had originally expected. Again, being able to make quick, decisive decisions for the well-being of our people has been a major priority during the crisis.

Frequency and transparency in communications

External communications

As a PE-backed business, we operate in an environment where the focus on cash and profitability is often amplified. Effective and transparent communication with our investors has, therefore, always been one of our core competencies. However, with the extraordinary uncertainty and rapidly evolving landscape that surrounds Covid-19, ramping up the frequency of investor communications has been more critical than ever before to demonstrate that we are taking fast and resolute actions to protect our business and prepare for life after coronavirus.

Internal communications

As we continue to navigate our way through this crisis, we recognise that our people have concerns and anxiety about their health, their future, and their loved ones. As such, it is important for me to strike a balance between empathy, realism and optimism on how our business and our people will emerge from the crisis.

We have a clear internal communication strategy that centres around a weekly live stream to all Telefónica Techists that openly walks through five KPIs with everyone and allows any questions to be asked. We do not want our people to feel isolated, especially in the current remote environment, so we have chosen to be very transparent on these weekly KPI positions and how they influence the decisions being taken by myself and the leadership team.

Coming out the other side

Covid-19 will undoubtedly have an impact on business. Just what that impact is and how long the implications last remain to be seen. As CFO, I have a critical role to play in helping our business weather this storm and withstand the financial pressures so that we are in as strong a position as possible when we start to emerge from the crisis. My final thought is one of optimism. I believe that after the crisis passes, the steps we have taken and the lessons we have learned will be instrumental in galvanising our business and preparing us for future successes. I will certainly never take ‘normal’ for granted again!