Reopening and Recovery Part 2: Changing Cost Structures due to COVID
Atlantix Partners | June 4, 2020
In our prior post, we referenced a Gartner survey that identified more recent focus areas for senior finance leaders including “Changing Cost Structures due to COVID 19.”
Most finance leaders have already ensured protection of assets and cash flows, allowing them to shift focus on immediate issues to better position for the remainder of 2020 and recovery.
The goal now is to determine how to change cost structures in response to COVID 19; which costs to retain, which to cancel and which to bring back… and when. The top three principles to effective cost structure evaluation are:
- Delay Capital Investments: Evaluate and identify what to delay and shift liquidity preserved to continue funding
- Necessary maintenance
- Strategy-aligned incremental capital investments.
- Determine Costs That Can Be Permanently Eliminated: Evaluate leases to determine how to maintain the remote workforce and reduce the company’s footprint; evaluate the cost impact of new distribution models; pressure test which G&A spend is and is not necessary.
- Bring Back Labor Before Other Costs: Per the Gartner survey, a majority of companies plan to begin re-hiring before reintroducing other costs. After re-instating the workforce, CFOs are most likely to bring back T&E and capex investments.