Is it too early to call the past few days the beginning of a crisis? According to Fitch Ratings, the historically significant increases in tariffs on imports into the U.S. will result in effective tariff rates (ETR) of about 20% for EU goods and about 64% for those from China, [reportedly increasing to 104%]. Other Asian economies, like Vietnam, will also face significantly higher ETRs.
The results will be “higher consumer prices and lower corporate profits in the U.S.,” according to Fitch. “Higher prices will squeeze real wages, weighing on consumer spending, while lower profits and policy uncertainty will act as a drag on business investment.”
Said famed corporate valuation expert and NYU professor Aswath Damodaran in a blog post: “I don’t believe that it is premature to put the tariff news and reaction into the crisis category. It has the potential to change the global economic order, and a market reaction is merited.”
Even if the U.S. economy and financial markets are not in a “crisis,” they are likely entering a period of high volatility and uncertainty. Many CFOs have prepared for this disruption. Others have not.
You must develop alternatives quickly if the current conditions threaten your 2025 business plan. “Scenario planning is pretty easy these days—the technology makes it so,” says Jack McCullough, president and founder of CFO Leadership Council. “There is no excuse for only having one plan in place and assuming it will all follow the script.”
What else deserves a place at the top of a CFO’s priority list? We asked several experts that question.
1. Be responsive to investors.
Investors are nervous, and CFOs have to be level-headed. “Companies will never have all the answers at a time like this when things are unfolding quickly,” says Moira Conlon, founder and CEO of Financial Profiles and an investor relations expert.
However, “the more information you can share about your [company’s] situation and response, the more favorably investors will view you as a credible management team,” Conlon says. She recommends that CFOs create a bull, bear and base case based on what they know today. Heading into first-quarter earnings season, “Investors and analysts will be looking to management commentary and the Q&A to get a pulse on how to build [their] models and think about investments,” she says. Conlon recommends CFOs be conservative in providing earnings guidance and focus on the assumptions.
2. Analyze supplier relationships.
“Now’s the time to have candid conversations with key suppliers, renegotiate terms or even explore local alternatives to avoid potential disruptions,” says Joseph Esteves, CEO of Maine Pointe, a global supply chain and operations consulting firm. Esteves says it’s also a good idea to reassess financial strategies—”ensure cash flow is strong and consider securing lines of credit or diversifying risks where possible.” That “two-pronged approach—securing the supply chain and fortifying financial flexibility—helps businesses stay agile and be better prepared for what comes next, whether it’s trade shifts, tariffs or other unexpected challenges,” Esteves says.
3. Track cash levels.
As financial flexibility is a high priority, the key question for all companies, with or without treasury functions, is, “How much cash [on hand] is enough?” says Bruce Lynn, managing partner of the Financial Executives Consulting Group. The answer is relative and requires constant comparison to other parts of the company’s financial picture, like its level of current liabilities and long-term debt. Knowing the answer to that cash question only once a month—at the end of the accounting cycle—is unacceptable, says Lynn. “Today’s environment puts a premium on cash forecasting more frequently.”
4. Leverage technology.
Treasurers (and CFOs of SMEs) need powerful analytics in conditions like these. “CFOs are coming to us and asking, ‘What’s my position around working capital? How do I look at my DPO to ensure I’m putting liquidity to work versus letting it sit dormant at the risk of changing volatile currency exchange rates?” says Melissa Di Donato, chair and CEO of Kyriba. In the latest Association for Financial Professionals survey, more than 60 percent of treasury professionals cited cash or liquidity forecasting as the most challenging task they face. Predictive analytics can help inform CFOs on where to deploy capital in the right way at the right time, says Di Donato, and model potential changes in interest rates.
5. Manage long-term risk.
CFOs are, at their core, risk managers, wrote Brian Olson, a CFO coach with Chief Executive Coaching, in a column Monday. “[CFOs’] responsibility extends beyond recognizing current threats; they must analyze underlying business factors that could develop into future disruptions,” says Olson. Understanding probabilities and planning accordingly is essential, he adds.
Opportunity Ahead
Simply managing through adversity shouldn’t be the sole focus—these disruptions can also present avenues for strategic growth, Olson notes. McCullough agrees: “In every crisis, there is an opportunity. As a CFO, you should partner with the CEO and find those silver linings.”
Conlon advises CFOs to stay focused on the factors they can control. “You are not in the business of forecasting tariffs, jobs numbers or interest rates,” she says. However, CFOs need to consider how those factors could affect their businesses in the near, mid and long-term.
With that information, a finance chief can assess the short-term and long-term tradeoffs. “Resist the urge to cut costs today if they will lessen value tomorrow,” cautions McCullough.
