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Trump Org And CFO Weisselberg To Be Charged

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Evading multiple accusations of civil and criminal charges during his Presidency, this marks the first criminal charges against Trump’s company since investigations began three years ago

The Manhattan District Attorney’s office is said to charge former US President Donald Trump’s Organization and its Chief Financial Officer (CFO) Allen Weisselberg with tax-related crimes today, on Thursday as per reports by the Wall Street Journal (WSJ).

However, neither Donald Trump nor his sons Donald Trump Jr and Eric Trump who are involved with the organization’s operations are not expected to be indicted. Weisselberg and others charged are expected to appear in court today where the detailed charges will be spelt out.

According to reports, the charges are expected to be about allegedly evading taxes on fringe benefits and perks like cars, apartments, private school tuition received from the Trump organization. This comes after the Manhattan district attorney’s office and the New York state attorney general’s office have been investigating into organization’s employees for illegally avoided paying taxes. The investigation originally looked into the money paid by Trump’s former personal lawyer Michael Cohen to porn star Stormy Daniels and how that was accounted for by the company before the 2016 US Presidential campaign. Then, it has extended to include all allegations made by Cohen about the Trump Organization related to misquoting values of assets to gain from lower tax obligations and receive a favourable loan and insurance terms for the same, leading up to employees receiving perks and failing to meet tax obligations for the same.  Cohen pleaded guilty to the charge framed against him in 2018 and is said to be assisting the Manhattan DA’s office.

The Former US President is known to have evaded prior accusations of civil and charges during his Presidency, calling them politically motivated attacks.

 

 

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Enroute To Recovery: CFOs On Changes Here To Stay

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CFOs explain how leadership in the new norm is also about showing your vulnerability, seeking help and not acting as heroes

Reeling out of the second wave and with all hopes of dodging the third wave, CFOs prepare for the next challenge ahead unlocking and resuming operations in a recovering economy. As functions move towards pre-pandemic expectations and levels, it becomes crucial to note the changes which emerged as immediate priorities but are here to stay.  

Pushed into survival mode, the role of a CFO has tended to multiple priorities, chief of which has been value creation. Understanding the risk scenarios, planning liquidity, capital allocation, ensuring that the supply chain isn’t affected while communicating with internal and external stakeholders and doing it all with the latest technology have demanded immediate attention.  

Redefining The CFO Role With Technology

Madhavan Hariharan, Group CFO, CK Birla Group speaking at a BW CFO Roundtable explains, “40% of our revenues in some of our businesses today come from digital interventions. So we had to invest in new business models. We had to accelerate investment in growth and it became more attractive.”

Digitization has also reimagined operations considerably, making certain tasks faster and more efficient. T Srinivasa Rao, CFO, Rain Industries remarks, “Since the onset of Covid, we’re moving away from non-digital payments, such as issuing cheques. Earlier, we could be doing 75-80% of the transactions through cheque payment and the collections too were done in a similar way. But today, close to 100% of our transactions are moving towards digital payments. It improves the realization and cash conversion cycle and also avoids delays and duplicate payments.” He explains how these changes in processes will remain irrespective of subsequent covid-19 waves.

Contrarily, Ramesh Swaminathan, Executive Director, CFO & Head Corporate Affairs, Lupin Limited adds that fundamentally things have not changed but merely differently defined. He believes the role of the CFO has broadly always been one of protecting value, simplifying processes to release value, creating value and communicating value. He observes that technology has been changing, pandemic or not.

“For example, physical verification of stocks was always something a CFO would do during the course of the year. Today, I might not be able to do it physically, but now, I use drones,” he said. He further explains, “The way we promote to doctors has also changed and it is because of technology. Telemedicine seems to be the order of the day. We are used to patients calling on doctors. But now, you have tablets and phones, and you don’t call on doctors physically. It saves on cost as it is a lot more efficient.” 

Workspaces Redefined 

Emerging as a solution to cope with the ripples of disruption caused by covid-19, the changes to the workplace as a concept will be a lasting transformation. Cubicles and office desks are losing relevance as virtual meeting rooms and digital collaboration tools become the norm. With many companies set to explore Work-From-Home (WFH) set-ups until August this year at the minimum, companies have progressed to unlearning older ways of working for the unravelling of the new set-up. 

Many jobs are expected to now have a virtual posting alone. Swaminathan explains, “Even when things normalize, I would expect a huge chunk of salespeople to adopt a hybrid approach. Travel will come down, so will be the need for office space and so on.”  

With digital collaborative tools rendering it easier to connect with colleagues across geographical boundaries the future of meetings, virtual events will be coordinated by employees who are geographically dispersed. Madhavan adds, that the most important aspect was talent management where hiring for the future continued but the talent management will be significantly different.

This could facilitate a sustained reverse migration where employees live away from metro cities and work from their hometowns, casting an impact on the need for office real estate and internet advancements like 5G technology. 

Rao’s comments also show much promise towards the same. “The office space requirement is coming down. We now have about 300 employees working in Hyderabad and we have a goal to take it to 400 people in the next one or two years. But there is a clear direction that we will not take any more office space,” he says. He also conveys that the concept of working from home is not for IT companies alone and manufacturing and brick-and-mortar companies are adopting it. He remarks how the patterns of increased spending on IT and cybersecurity will harbour a more comfortable WFH culture and that those who work for companies in Europe and North America can sit at home in India and alter their work schedule to the client’s local time zones. 

On Team Building 

With the pandemic leaving communication at the mercy of the internet and digital tools, managing employee morale and building agile, resilient teams is a constant test. With no opportunity to share space with fellow colleagues, onboarding new employees virtually and maintaining a friendly and cohesive rapport between colleagues to facilitate business decisions is a managerial and leadership challenge.    

Madhavan responds that it becomes important to support teams to embolden them to make agile business decisions and humanize the process, giving room for mistakes and vulnerabilities. “There is a functional element and a behavioural element. The biggest support is to give confidence to business teams to make those hard choices and that is the functional perspective. On the behavioural side, agility has become imperative, which means empowerment of the people down below within broad guidelines and frameworks. The second part is after people take decisions, don’t judge as far as they are within the overall framework and learn from those decisions. The last one is for all of us as leaders to show our own vulnerable side and not to act as heroes. Showing the vulnerable side makes it much easier for everybody in the organization.” 

Ramit Gupta Partner, Managed Services IBM, India and South Asia, adds, “There are teams which work across geographies, social environment, time zones, and different types of issues. Of course, the critical element is to empower them to take quick decisions and we don’t get stuck in bureaucracy. This is a garage way of working and there are a lot of examples.”  The garage method, he elucidates is where identified cross domain skills are matched and driven towards a common goal. Teams then get common briefs, a definition of the success expected, a specific allocation of funds and a robust system of governance. The idea is to help be a sounding board for teams and create value for clients, he surmises.

The Future Of Outsourcing 

With introspection of existing operations and agility, many job roles have been reimagined. Some responsibilities have been divided among colleagues and others have been outsourced, resulting in lean teams that a crisis ready and capable of multi-tasking.  

“We have heard about creating and preserving value. What we also learned is that there’s a lot of focus on how things have changed and accelerated in the last few quarters. This is what we captured in an IBM study as 60% concurred. Hackett Research issued a report in 2021, which said that around 60% of business executives are likely to outsource more in the next three years as compared to now. Today, we heard about cybersecurity and leveraging the capacity and capability of partners. Interestingly, in that Hackett report, IT outsourcing is already at a peak and we’ve seen that many companies already outsource their application management.” Gupta explains.

Supporting the trend, Rao adds a manufacturing perspective. He states that they are trying to increase the allocation for cybersecurity and looking at outsourcing IT and 24×7 surveillance. He remarks, “There’s no point in expanding the team internally. It is better to outsource it. The issue is not about cutting costs, but about spending wisely.” 

The changes and challenges precipitated by the pandemic have come to question the need for physical infrastructure, the ability to engage with partners and customers virtually while offering lasting lessons in capital and cash allocation. Change is not only constant but also charging ahead, with no room for retrograde.

humane and tech saavy cfo

The Year Of Humane And Tech-Savvy CFOs

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CFOs come together at the BW CFO Roundtable to highlight the growing health consciousness, both as operating and business necessity and the role of technology in facilitating newer business advantages.

The fallout of the pandemic has inspired deep organizational and process level changes. The CFO as custodian of the financials of the organization has always been at the front of many changes. But they have had to gallop to match the pace of the business changes that the coronavirus has brought in tow- which has pushed many companies against the ropes, tested the efficiency of their contingency plans and spotlighted the need for a disciplined approach towards liquidity management. On this journey, the priority to employee wellbeing shown by many CFOs has unearthed the profound humanness in the role that was often missed before.

Increasing Health Consciousness 

Speaking at a CFO Roundtable with BW Businessworld, Sudhir Menon, CFO, Torrent Pharma expressed how health and safety have taken precedence in the decision-making process. Ensuring a smooth transition to Work-From-Home and monitoring health status and virus exposure of employees has become critical.

“The first and the foremost was ensuring the health and safety of all our people. Wherever possible, we adopted a new work-from-home model and were continuously monitoring the health status of employees including their risk of exposure to the virus. Social distancing norms were also implemented across the workplaces and manufacturing facilities,” he added.

He explained that more attention was given to employees immediate needs and no compromises were made as far as employee compensation was concerned. Efforts like providing additional insurance cover for covid for each and every employee; rolling out incentives for people working at the manufacturing facilities etc. as people are very important to ensure business continuity.

Praveen Maheshwari, Director and CFO at Hindalco Industries points out, “Previously, health didn’t figure as a top priority in many of our agendas, but the pandemic has proven that the company’s health is dependent on the employees’ health. We have started asking each other about our families. The softer aspects which actually deal with not only the physical health but also the mental and psychological health have become important.”

Health Consciousness As A Business Necessity

The heightened concern for health and wellbeing was also a business necessity for some sectors. Hospitality in particular among others. Voicing the changes in the sector, Ashish Kumar, VP Corporate Finance and Treasury of InterGlobe Enterprises opines that the concern for healthcare pivoted their marketing strategies. 

“We used to say hotels are a place where one should come to wine and dine but the whole marketing campaign shifted to ‘we are all safe and secure’. So, there was a greater emphasis on contactless operations- the whole check-in check-out process, the food in the room, the takeaway and the delivery business.” Kumar remarks. 

He continues that, “SOPs also changed around sanitisation, manpower rationalisation due to limited availability of people during the lockdown, guest quarantine became a business model, and we developed virtual training with all the employees to make sure that they are duly supported in terms of their training procedures and dealing with the anxiety and uncertainty around the virus.”

While the move to digital was easier for the corporate office, it presented other challenges. Cybersecurity emerged as one of the primary concerns with the number of payments and disbursements that were spread across the country and internationally to remain protected against virus threats and phishing emails.    

Additionally, Kumar notes how new operating procedures fell into place to manage the crisis during the second wave. These were in terms of support measures for employee health, emergency medical teams, doctor consultations, emergency supplies, vaccination coverage, coordinating beds and supplies for both employees and guests among other responsibilities.

Technological Helping Hand

One of the significant observations during the pandemic includes technology embracement. CFOs and companies at large have welcomed technological assistance with gusto.

Ramit Gupta Partner, Managed Services, IBM, India & South Asia, adds that the acceptance towards change has undergone significant improvement during the pandemic and will continue post-pandemic. Finance professionals are now more open to experimenting with new ways of working.

He explains, “When I interact with a lot of clients, they acknowledge that any change is a function of technology plus operations. And the operations could be business of finance or manufacturing or any other. But it’s plugged in seamlessly with a lot of technology and they are now bound together.”

His observations also include how conversations are now steered towards intelligent workflows to transition from a cognitive to a virtual enterprise. He believes that finance teams and financial professionals have always been more inclusive of technology and the pandemic is yet another opportunity to scrutinize how best technology can fit in.

While technological options for daily operations emerged as an alternative to physical working, it has come into its own and has highlighted potential advantages.

Nitin Parekh, CFO of Cadila Healthcare notes how technology has redefined marketing aimed at doctors by medical representatives. CFO of Cadila Healthcare notes how technology has redefined marketing aimed at doctors by medical representatives. He explains, “In terms of technology for marketing in India, we gave tablets to about 6,500 medical reps in the country. Rather than carrying printed literature and talking about various products, features, benefits and specific elements, now there is audio and video material. This also saves time for the doctors and it becomes a very standardized message rather than the printed material, where people are explaining the product in their own language.”

He goes on to add that feedback from doctors is recorded and send to the central database, centralising the process and noting the suggestions that will go towards future product development. “I think this is a very powerful way of marketing. While this digital journey can take 2-3 years’ time, I think the direction is undisputed and clear,” he surmises. 

Industry Benefits 

The benefits however are not limited to amenable ambits like marketing but even manufacturing. Significant advancements in ‘Operating Technology’ has increased equipment reliability. Predictive analysis along with preventive maintenance are interesting developments. Talking in-depth about technology on the manufacturing side, Praveen Maheshwari explains that predictive analysis can signal the failure of machines in advance. With cheap and easily available sensors in the market, the quality of the product from particular operations can be predicted to understand how it will be impacted in advance, saving time, money and keeping quality. Block-chain technology too, can help analyse major cost parameters and keep an eye on the pricing of materials.

“Similarly other examples are AR and VR, which is coming in very handy. Now all the trainings are getting conducted through the AR and VR models. I don’t have to go into a mine physically to see what happens there. I can actually simulate an environment sitting anywhere. And I can also train 20 people together just by having the right simulators and just by using the technology,” Maheshwari elucidates. 

Video analytics also helps in the supervision of safety protocols and can be used to avoid safety mishaps on sites.  He remains hopeful that the next step of advancement is not just predictive analysis but also intelligent machines that prompt the corrective action without any manual intervention.

Leading the FCMG giant Dabur, CFO Ankush Jain explains how automation and analytics offer a greater degree of centralization in terms of financial monitoring and lead financial transformation. Technology provides greater flexibility apart from aiding in the speed of execution. 

“We can virtually see the sales at every brand, area and at zonal sales level on a daily basis. We can see trends and easily catch primary secondary analysis and mismatches. With the real-time information which is available to us in the finance system, where we can highlight exceptions on a weekly basis. It makes the process proactive rather than seeing (the data) at the end of the month or at the end of the quarter,” Jain explains.

He also adds that sales dashboards offer greater ease in management, covering everyone including each sales officer and what they have achieved.  Further automation helps to centralise all transactional processes and releases bandwidth for analytics, business support and partnering. He adds how these analyses can then be paired with incentives to spark motivation. “Incentives which were earlier done on a quarterly basis, are now being done on a more frequent basis to give them (sales executives) that instantaneous reward. And this all has been enabled by digital transmission only,” he concludes.

Thus, as we globally anticipate a recovery and CFOs continue to juggle internal and external crises, it is evident that their strategy is now of immediate safety, liquidity management and stabilization and protracted preparations to ride the recovery curve in real-time.

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CFOs On The Key To Crisis Management

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From liquidity management to the growing concern over digital security, CFOs discuss the roadmap to crisis management and the new priorities that have emerged.

Looking back at the initial reaction to the biggest humanitarian crisis in recent times is a perspective building exercise. And discussing the initial actions of CFOs adds definitive value to the overall approach at looking at a problem and then dealing with it. It was observed that CFOs had to don the role of a change agent and shift gears into rigorous strategy building and contingency planning while keeping an eye on the level of liquidity. Cost control and micro monitoring only via digital screens, however, was new territory for all. 

Securing the Strongbox

The first reaction of CFOs was to avoid and limit the paralysing spread of uncertainty on daily operations. Taking stock of liquidity and adopting a zero-based budgeting approach allowed strict control over finances. The keen eye on liquidity also helped keep net debt low. Research by the SBI research wing notes that Corporate India reduced debt amount to ₹ 1.7 lakh crore of debt reduction in FY 2020-21.

Participating in a CFO Roundtable, Ashish Kumar, VP Corporate Finance and Treasury of InterGlobe Enterprises explains how quickly the tables turned and CFOs had to embrace them in the hospitality sector.

“We adopted a lot of new operating practices. More in phase 1 (of lockdown) than in phase 2. In phase 1, from an industry that used to do 70-90 per cent occupancy, we suddenly dipped to 20-25 per cent. We still had a fixed cost and variable cost as well as have a variety of obligations in terms of the statutory authorities (property taxes, rents etc.), statutory filings and several financial obligations.” Kumar explained. From changing the operating procedures, deferring possible expenses, to reaching out for funding and collaborating with the government to present their case, he explains how the hospitality industry has been all-hands ever since to maintain the liquidity levels.

Sudhir Menon, CFO, Torrent Pharma explains that such liquidity management is here to stay and will be ingrained in the DNA of financial operations. The crisis mode in his opinion inspired a discipline towards liquidity management with expenses categorised and analysed based on their immediacy. 

“Most of the revenue expenses I would say got moderated in an automatic mode because of restrictions and lockdowns which were present across all states, and more particularly for us because of the business model inherent to the Pharma Industry. Additionally, with the new way of working through digital or in virtual mode, we saw a host of general and administrative expenses reduced as well.

Zero-based budgeting led to sharper decisions on whether a particular expense was required, be postponed or dropped altogether.  He further adds that no compromises were made when it came to expenses which were critical for business continuity. These included employee needs, business needs such as compliances, insurance, technology needs including cybersecurity measures.  Talking of new security measures for work-from-home he added, “…these (necessary expenses) included getting in place additional security applications like two-factor authentication or secured VPN lines for working from home.”

Nitin Parekh, CFO of Cadila Healthcare notes that there was an order of importance in terms of management of liquidity. “Employees come first and remain the most important priority. And therefore, meeting employee payments will be the first part, including employee loans, medical loans, etc. Second, was paying for critical input materials, single supply materials, MSME parties, etc. Third, were the essential services such as insurance, freight, clearing & forwarding etc. The fourth was payments for GST, income taxes. Fifth was the payments of interest and repayment of loans,” Parekh elucidated.  Payments were categorized in these five payment buckets on a daily basis across entities around the globe to ensure that everybody maintained a uniform discipline.  He further explained how this facilitated future payments, “We made a commitment of payment for the second week based on the actual receipts of the first week. This way, we had complete control to ensure liquidity. This was the way of conserving cash and ensuring the continuity of business.”

Next Steps

As liquidity management fell into place, the larger realities of Work-From-Home also had effects on how CFOs managed their time. IT expenses to ensure seamless communication between employees and better bandwidth became necessary to bridge the gap between internal and external stakeholders.

Praveen Maheshwari, Director and CFO at Hindalco Industries observes some advantages in the online way of working like the pace of work. He says, “Work is happening on digital channels and there is greater communication. More people can be involved for social events, the level of integration is much deeper.”  He observes how organisational culture and communication can reach more people faster and in a centralized manner. He also notes an observation from pre-pandemic times that has now come in handy. “The simpler way to put it is that you should think like private equity, act like a start-up and work as an NGO. Private equity looks at the benefit and costs in a very surgical manner. And they take hard decisions. Start-ups unlike many of the larger organizations are very quick in terms of decision-making and in terms of implementing those decisions, unlike large organizations that have legacies. The last part which is working as an NGO is important, not just because an NGO cares for its employees. It cares for the customers and for the community at large.”

Cybersecurity- a growing concern

As greater connectivity breeds, new operating procedures too fall in place, opines Ashish Kumar who indicated that there was significant adoption to technological change in terms of communication. With Board meetings happening on virtual platforms he senses that the awareness and responsibility of ensuring cybersecurity rises. 

Phishing emails, ransomware, breaches have become more common and have notified the importance of having strong cyberinfrastructure. A dearth of cybersecurity professionals is also observed globally.  According to the reports of the State of Cybersecurity 2021 Survey (Part 1) that was conducted by ISACA in partnership with HCL Technologies, it was observed that 49 per cent of the organisations surveyed had unfilled positions in their cybersecurity divisions.

Ramit Gupta, Partner, Managed Services, IBM, India & South Asia notes that an attitudinal shift was necessary to understand the magnitude of the change.

He states how the work from home situation requires agile cross-functional squads that have various skillsets to effectively solve problems and coordinate better. “We have moved from a few offices in India to eighty thousand offices in India because they’re all working from home. Intelligent workflows ensure coordination and collaboration in virtual enterprises.” Intelligent workflows as he posits creates a synergy between multiple departments through a common cloud infrastructure with the help of AI and ML tools. He explains, “What we are now beginning to talk about in a lot of companies and clients is what we call as moving from a cognitive enterprise into a virtual enterprise. A lot of us talked about zero-base budgeting. Looking at a costing review of where the cost structures are is exactly what a virtual enterprise does. It will question whether you need and analyse different company-specific parameters.”

Ankush Jain, CFO of Dabur explains that the pandemic was also a unique opportunity to re-engineer the process and relook at the details.

Such change can also foster a priority mismatch between teams, where it becomes important for leaders to appreciate the multiple points of view but prioritise the best for the company.

Explaining a recent re-engineering project that was accelerated by the pandemic he observes, “Suddenly when the pandemic came, teams became sensitive and apprehensive. This was a difficult situation but we decided to reinvent almost all processes…We did some benchmarking with our peers on various parameters; whether it is input cost, supply chain cost, employee cost, and other overheads and tried showing them (teams) the gaps or the opportunities. Once you show opportunities and the larger benefits, people become more enthusiastic.” He explains that to allay fears of changing operations during a pandemic, it is crucial to have employee buy-in. He further adds that bringing in an external consultant helps cement benefits and gets buy-in to implement the project.

The consensus on the crisis management efforts and the evolving realities have become clear. Newer dimensions to financial monitoring and building a more participative culture have been the unexpected advantages that have surfaced. While the uncertainty of the duration of the pandemic might persist, effective strategies to deal with black swan events are now in place as we trudge towards recovery with CFOs consciously paving the way as agents of change and first-respondents to crises.