Read the excerpt below and answer the questions that follow: Thinking like a turnaround CFO When a company is in crisis, turnaround specialists can save the day. Money is everything in business, particularly when it is running out. A liquidity crisis caused by a crimp in cash flow is the beginning of the end for most companies. To turn around the dire situation before it's too late, directors, CEOs, and investors typically turn to the CFO. But the CFO may be part of the problem. And even the most competent CFO may not have the requisite skillsets to assist with a turnaround. Here, a different type of CFO is needed. Such individuals must have the fortitude and grace to make tough decisions regarding layoffs, lenders, and suppliers that the incumbent CFO may be disinclined to make, given the emotional considerations. Sharp negotiating and workforce management skills also are needed to keep cash flowing. In addition to extending accounts payable cycles, shortening accounts receivable cycles, finding new sources of external and internal capital, and reducing the timing of debt obligations, it may be necessary to decrease the size of the workforce. It's a tall order for anyone, particularly an incumbent CFO. "The person whose job it is to keep the train on the tracks does not often have the same skills to get the train back on the tracks," explained Michael Epstein, global managing principal for restructuring services at consultancy Deloitte. Many distressed companies reach out to CFO turnaround specialists. Among those specialists are James O'Connor Jr., founder and president of a turnaround consultancy, The O'Connor Group in Bedford, Massachusetts. "By the time I arrive on the scene, most clients are concerned about hitting the payroll - the precipitator to a bankruptcy," O'Connor said. "They're about a week away from serious trouble and need someone like me with crisis management capabilities to identify the problems and priorities and execute a plan to keep the business afloat." While the incumbent CFO is aware of the perilous circumstances, the person often struggles to react, said Christopher Pizzo, senior vice president of Deloitte's corporate restructuring group. "They freeze, panic, and shut down," said Pizzo, who has served as an interim CFO on multiple occasions. Russ Blain, a Seattle-based turnaround consultant, believes CFOs at companies that get into trouble share some common characteristics: they don't understand the cost structure, they have people issues they haven't dealt with, and aren't properly addressing the difficult situation with management, investors, and suppliers. "They think they will weather the storm, but they're wrong," he said. Even the best CFOs may not be cut out for the thorny tasks ahead. "Basically, there are three types of CFOs - the deal-making CFO who is good at balance sheet restructuring and putting together M&A transactions, the accounting CFO who is good at closing the books and reporting, and the operating CFO, someone who really understands the purpose and mechanics of the business," said Doug Yakola, a senior partner and leader of McKinsey & Company's North American RTS practice, which works with companies on transformations and restructurings. "To regain financial health, a distressed company needs a CFO with all three skillsets." Rather than deal with what lies ahead, some CFOs make a peaceful exit and find a more secure situation. "Typically, the CFO is gone by the time I arrive on the scene or is soon to be shown the door," O'Connor said. "By then, the company has stretched and borrowed and is in late decline. Alternatives are in mind." "We're like an emergency room surgeon looking at a person who has come in after a bad car crash," he added. "To save them requires a rapid assessment of the condition. followed by decisive actions." Source: Bunham, R. (2018). Thinking like a turnaround CFO. FM.

Examine the extent to which corporate governance is crucial during periods of crisis and how it affects the financial manager's responsibilities. Please refer to the significance of interpreting financial statements in order to make informed decisions. 10 marks.

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