Company chief financial officers need to become nimbler in assessing major events like the coronavirus pandemic, according to an industry report and executives.
China's biggest online travel company, the Nasdaq-listed Trip.com Group, also known as Ctrip, said it learned the hard way on managing company funds after it made a hard but correct decision to refund as much as 30 billion yuan ($4.64 billion) for hotel and airline cancellations.
"I spent most of the first half of 2020 just talking with all kinds of banks to seek funding," said Ctrip's chief financial officer Wang Xiaofan at the accounting industry's ACCA annual CFO summit Tuesday. "Not only did we have to refund 30 billion yuan for our customers, we had to meanwhile retain enough cash flow to assure the recovery of the company's business."
Global tourism revenues were estimated to have dropped by up to $3.3 trillion due to COVID-19 restrictions, according to a U.N. study. Ctrip saw a loss of 4.251 billion yuan in the first three fiscal quarters of 2020, according to the company's report.
Xiaofan added that for most CFOs it was impossible to predict unstable scenarios such as COVID-19 but it's important to assure certain elements even amid rapid changes.
"In the long term, we want to provide reliable travel service to customers, so our brand image became even more critical during the decision-making for the 30 billion refund," said Xiaofan.
Need for accountants to handle crises
The coronavirus pandemic created the need for CFOs to take on more critical roles, according to a report released by the Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA).
The survey included 1,152 ACCA and IMA members across the world with 72% stating that CFO roles will "increase or increase significantly" in importance in the next three to five years. Most respondents said the trend of CFO's career progression towards CEO roles would increase.
"CFOs are no longer viewed solely as finance leaders," said Raef Lawson, IMA vice president of research and policy. "They are being looked to for governance and risk management, business change, business resilience, and technology advancement."
Ctrip responds to events
Ctrip was in talks with potential investors about funding its delisting from Nasdaq last July, owing to the impact of COVID-19 as well as the more stringent audit requirements and increased scrutiny from U.S. regulators, Reuters reported.
The company hasn't made a public announcement about its delisting plan to date nor did CFO Xiaofan comment on this matter Tuesday while Ctrip was trading at $33.67 per share.
With reduced marketing budgets, Ctrip has shifted its focus towards how it spends money during the pandemic. Starting from last March, the company utilized live-streaming events to revive its domestic business. During one live show, its chair and co-founder James Liang appeared aptly dressed as a traveler, the Tang Monk from Chinese classic novel, Journey to The West.
As of last October, Ctrip generated a total of $360 million in sales with receiving 150 million global viewers. Xiaofan told the Business Times that the most challenging mission as a CFO is providing the vision for new development for the company and to help navigate the team through the challenges.
"Even though I am only in charge of the company's accounting, accountants' vision cannot be 'trapped' to their position." said Xiaofan. "It has to go beyond."
It was not the first time for Ctrip to survive a global pandemic. Back in 2003, when severe acute respiratory syndrome (SARS), a viral respiratory illness, crashed the tourism sector, Ctrip's business performance suffered. After seeing its revenue plunge by 42%, it adopted a rotation system to deal with a 70% decrease in workload. Employees got 60% of their original salary by working for half a day.
Ctrip capitalized on the expected business after the SARS epidemic, and saw its turnover reach 66 million yuan during its third quarter performance. In the following rebound, it was listed on Nasdaq in December of 2003.