The playbook (Finance): Ouch

The old saying "Cash is king" means a whole lot more now than ever before.

Bruce Waterman has spent more than 25 years as a financial executive, the last nine of those as CFO at Agrium Inc. in Calgary. The old adage about cash being king has been a fixture throughout that time, “but now it’s the whole court,” Waterman says.

Credit and liquidity are ongoing concerns for Waterman. He’s monitoring the company’s working capital more closely than ever, allowing himself more flexibility than usual to deal with wild swings in commodity prices, and maintaining healthy relationships with business partners. “You have to keep the credit rating agencies, your lenders, and even your suppliers well informed,” he says. “That way, when you come to them and you need credit, they’re right up to date and understand your business.”

Waterman’s also careful about which banks the company deals with. Agrium had lenders that withdrew credit during the last downturn in the agricultural sector, and the company promptly stopped dealing with them. Another step he has taken is to map out a variety of financial scenarios ranging from optimistic to outright disasters and developed ways to respond.

And that is perhaps the best skill a CFO can have right now, says Bryan Tannenbaum, Canadian marketplace deputy, financial advisory, with Deloitte in Toronto. CFOs need to test out various scenarios to be able to react as quickly as possible to changes in the economy. That skill isn’t ingrained, since many CFOs have been complacent in recent years by focusing more on revenue than cost control measures. “In the good times, you get lazy,” Tannenbaum says. “You can’t survive that way.”