CFO in the Healthcare Sector: Unique Challenges
We have been living through and experiencing some of the most unprecedented events in history. Amidst all the uncertainty, as we have entered Unlock 5.0, governments and organisations are proactively taking measures towards flattening the curve. Businesses are ramping up and accelerating their operations to regain the lost normalcy.
Unlike most industries, the healthcare sector has been insulated from the business disruptions caused by the pandemic. This sector has been a focal point throughout the pandemic and that can be understood from its growth trajectory in the Q1 and Q2 results. Here, we need to understand that even though the sector has been on a positive growth path, the role of a CFO has become more challenging and unique, especially when it comes to remodeling, quick decision making, partnering with the CEO to execute the organisation’s vision, pre-wiring the board for support on realigned strategies, and managing the influx of funds.
Now let us touch upon the various facets of the role of a finance leader from the healthcare sector.
CFO as a partner to the CEO
No one could have ever imagined that something like the Coronavirus would need to be taken into consideration while formulating business strategy, and that too as a growth enabler. Proper coordination and understanding between the CFO and the CEO has become more important than ever. CEOs from the healthcare sector are currently working on aggressive growth plans and trying to tap into every possible opportunity. CFOs here need to act like a second pair of eyes in order to outline the strategic plans, vet them, review them, and advise the CEO about necessary changes required to achieve the desired outcomes. As we tread on such unchartered territories, a key responsibility of any CFO is to shed light on the financial blind spots of the CEO, which though a daunting task, is extremely essential given the dynamic nature of today’s business environment.
Influx of funds and inorganic growth opportunities
Now let us look at the opportunities that lie in front of the healthcare sector. India is a preferred destination for outsourced research and manufacturing activities, because of its R&D capabilities and lower manufacturing costs. Due to tax incentives and government policies like ‘Make in India’, the sector is booming. CEOs in healthcare are looking for growth opportunities through M&A, strategic partnerships and collaborations. As the sector continues to attract private equity funds, CFOs must quickly asses the company’s current financial position, market trends and implement the best strategies to get funds to improve cash flow and liquidity. They need to reassess capex spends vis-a-vis inorganic growth, and also keep an eye on competitor developments, government programmes, etc. to leverage such opportunities. We need to remember that the right partnerships and collaborations can help fast track growth. If we focus on the optimum utilisation of resources and cost savings, we can work towards maximising shareholders wealth.
Data security and compliance
Thirdly, lets come to the issue of data security and compliance. Recently we witnessed a data breach incident in one of the biggest pharma companies, which led to it shutting down operations and plants globally. These challenges will be prevalent and inevitable in this digital and virtual world, and can cause serious damage to the goodwill with reputation of an organisation. The healthcare sector is highly regulated with stringent FDA and Indian norms that need to be complied with along with research privacy contracts with customers. CFOs, therefore, need to work closely with CIOs to conduct frequent vulnerability assessments in order to evaluate the level of risk and at the same time be mindful of the spends.
Virtualization of finance
Lastly, let us talk about one of the most important aspects of modern-day finance. As we have shifted into the virtual work environment, keeping the morale of the employees high is a huge priority for CFOs. They need to strike the perfect balance between clients and employees. As healthcare is considered under essential commodities, research scientists and production teams have been working onsite in shifts during the lockdown. Therefore, keeping up with the needs and requirements of front-line teams will be unique and challenging and will require additional focus to ensure teams are connected and motivated. Digitization of processes need to be implemented on a fast track basis and CFOs need to be mindful of the budgets associated with it.