Finance speaks up in the COVID-19 crisis

The start of the COVID-19 pandemic was chaotic, and the situation seemed to change in scope and scale frequently.

For Ted Delgado, CPA, CGMA, the director of financial planning and analysis (FP&A) at Hershey’s better-for-you business unit, Amplify Snack Brands, the pandemic presented a particularly whipsaw challenge: consumers stocked up on the organisation’s healthy snacks as the crisis began, initially leading to a significant sales boost, but then sales were impacted when consumers followed stay-at-home orders.

Delgado has been with the Hershey Company since 2001, first in internal audit, then FP&A and has held several international controllership positions within the company. He is also an executive committee member of the Association of International Certified Professional Accountants Americas Regional Advisory Panel.

FM recently spoke about how COVID-19 changed the role of finance within his organisation, how scenario planning factored into the early days of the crisis, and the importance of communication in the future of finance.

(This interview has been lightly edited and resequenced for clarity.)

As the pandemic began unfolding in the first two weeks of March, what did you think at the time it was going to do to the business?

Ted Delgado: At the beginning of the situation, I don’t think we, or others, thought that it would take as long as it has. We’re still in the middle of it, and we definitely don’t know the extent of time that the situation will take to unfold.

At the start of the pandemic, we benefited from consumers stocking up in preparation for stay-at-home orders

After that, we obviously expected that the stock-up and stay-home orders would have an impact in the following couple months, April and May. The impact that we saw in how people behaved and how they were not frequenting retail went deeper than we expected.

We obviously understood that we needed to track what is happening in the market every week, and we did. We were basically trying to get a pulse of things. It was very interesting how in June, we’re seeing that as businesses start opening up, people are behaving differently again, which requires us to quickly adapt to effectively serve our customers.

For consumer products, it’s all about how people behave and how they are spending time with their families. We have been very keen on understanding that, and that’s what has allowed us to manage the business properly and quickly adapt to meet the needs of our consumers.

How did those dramatic shifts in consumer behaviour, particularly the stocking up and resulting sales boost at the beginning of the pandemic, change your role and what the organisation expected out of you and your department, particularly the FP&A part of it?

Delgado: We needed to understand the implications of the market conditions in our financials to provide a sound point of view to the business.

First, we needed to estimate how the March stock-up would have an impact further down in Q2 and provide clarity on what are the key drivers that would allow us to succeed in this changing environment.

So, we properly planned for it and clearly communicated the potential implications of multiple scenarios, which helped the business to converge on a most likely financial point of view. That helped us to focus because we were speaking the same language and understood what we needed to overcome to achieve our goals.

Practically, how did you approach scenario planning when it was so hard to understand the shifting scale and scope of the pandemic? And how did that experience change how you see scenario planning now?

Delgado: Number one, we listened to all our partners to understand what they were seeing from the consumer perspective and what the sales team was hearing from customers. We were trying to get a good sense of what was happening from different perspectives.

That helped us to synthesise a point of view and clearly communicate financial scenarios with multiple degrees of likelihood. Perfection is not what you look for in this type of analysis — rather, clarity on the assumptions used at a given point in time because this provides the foundation for adjusting expectations as more information becomes available and assumptions become valid or no longer valid.

How did this change your role as a business partner now that you’re having to communicate in a much more effective way while also working remotely?

Delgado: The role itself did not change. What changed is the need for more communication and more alignment within our group, with Hershey, and with everybody else. We needed to adapt to new ways of communicating and working together to build common points of view.

That’s really the main impact. Right now, while we are apart, we need to be more surgical with our communications. We need to make sure to reach out to others and be present at key forums where we can understand different points of view before forming our own. Then, it is very important to be very clear on what we are writing within any presentations and make sure that we are very intentional regarding the purpose of any meeting.

From my point of view, we have been more focused and productive as a result of effectively coordinating our communications.

I would say that I’m surprised how fast we adapted, which is very positive. We have been able to do everything that we used to do, just in a remote way.

How are you looking at the summer with potentially disruptive things like the recent social unrest, a potentially potent hurricane season, and the US presidential election coming up? How are you adjusting your views and your planning based on this feeling of increased uncertainty?

Delgado: We are all clear that the only constant is change, which we especially saw very quickly happen during the past few months. It’s not possible to predict exactly what will happen next, but for sure every action has a reaction.

So, at any given point in time, we must clearly communicate what is our current point of view and why we believe that this is the most likely scenario. We need to have full clarity regarding the assumptions behind any scenario and then explain what could happen, what could be the impact of different circumstances, and what are the truly relevant circumstances that impact our financials. That is where a solid process for understanding risks and opportunities is very helpful.

We are careful to focus on the things that are most impactful on the total business and are not temporary blips to make sure that we don’t get confused by the many things that could potentially change.

For example, economic conditions are really significant for any business. So, we need to have a point of view on the impact of a recession on our business. At the same time, we have to be careful not to put every single thing that could possibly happen in our scenarios because that can only confuse our business partners.

How are you seeing the next three to six months for your role?

Delgado: Most likely the same as it has been since the beginning of the pandemic, where we will need to constantly adapt our financial scenarios and effectively coordinate our communications throughout the business in a virtual setting.

It seems that we are now in a new normal, which requires more vigilance, more understanding of different impacts, more scenarios, and more communication. We have created new ways of working, and the expectations is that we keep it up going forward. These conditions have increased the workload and the required level of communication to make sure that everybody is on the same page.

How do you see the impact of this new reality on the profession as a whole?

Delgado: My point of view is that the level of investment in technology — currently and in the months [and] years to come — will increase. People will try to find ways to do more with less. And obviously with technology, the first thing that gets impacted is transactional work. Without a doubt, technological advancements have implications on how transactional work is being done and how many people should be involved in those processes.

It also elevates where we in finance should be spending our time, which is obviously more analysis. This is not something new; the current conditions are creating an environment where technology investments become more critical and therefore will likely accelerate. Now, the changes that come with technology will have an impact on many professions for years to come. Obviously, this also has implications on the economy and people.

Without a doubt, as a society, we still have a lot to figure out to adapt our current economic frameworks to enable sustainability.

— Drew Adamek (Andrew.Adamek@aicpa-cima.com) is an FM magazine senior editor.