In a Crisis, 3 Essential Financial Steps Support DoD Readiness
For U.S. forces, readiness in a time of crisis — whether military or humanitarian — involves multiple operational areas, all of which are supported by finance. From personnel and vehicles to food and fuel to logistics and medical capabilities, military leaders must ensure that resources are available and that everyone and everything is able to perform at peak capacity.
The rush to get people out the door in response to an emergent situation takes a shift in both focus and finances. Leadership has to reprioritize quickly and communicate those new priorities effectively. But leadership can’t set the tone and reapportion budget without a full, clear understanding of their financial status. That’s where effective financial management comes in.
Prioritization is Part of the Process
Under the DoD’s Planning, Programming, Budgeting & Execution (PPBE) process, commands have the ability to defer expenses on something that is less critical at the moment. As retired Army Lt. Colonels leading financial management and analysis for health-focused commands, we’ve seen this play out many times. Reallocating funding streams to higher priorities is crucial in responding to a crisis, whether it’s to support the movement of tactical forces or preparing hospitals for the evacuation of patients out-of-theater.
In these situations, the financial manager is also the resource manager, who needs to be able to determine how to get people and materials out the door. We’ve learned that when it’s time to roll up your sleeves, there are some practical tips you can apply.
1: Know Your Portfolio
If the situation is ongoing, there will (hopefully) be additional budget allocated. Until then, you’re working with existing money, so you need to know the details about every funding vehicle in your portfolio — and when to use your purchase card.
In a dynamic environment, look for contract vehicles you can put in place as quickly as possible and identify discretionary dollars. And as many of our compatriots in finance know, while financial systems are sophisticated and capable, sometimes you need a spreadsheet to see what you’re really dealing with in the moment — at least until requirements become clearer.
2: Know What You Don’t Know
Financial management isn’t always black and white, especially in times of crisis. Whether a storm has knocked out your comms or resources are limited by sequestration, the command is still relying on the information you provide to make recommendations.
Flawed data often results from the speed of the response (or “the fog of war”), and when you’re trying to answer questions like “What do we need?” and “How fast do we need it?” you base your assumptions on the best-quality information you have. These assumptions get refined over time, but there’s always an implicit risk: when the situation is resolved and you track your costs, you may find you’re off base due to incomplete or outdated information. So what can you do to limit errors?
- Make sure you always operate within regulations to meet the intent of the mission. This often takes the entire team, including finance, legal, and acquisition. Be sure you are 100 percent clear on who is responsible for what under the regulatory guidelines; this can save a significant amount of money.
- Understand the orders of magnitude: how many people are deploying and what is going with them? Begin by shaping requirements and how you plan to execute, then identify the costs.
- Finally, keep in mind the tone from the top. This ensures that command priorities are clear — and fully supported.
In a crisis, leaders’ first priority is the mission, closely followed by how they’re going to get the flexibility they need to achieve that mission. For financial managers, this means you need to know how much budget is available and what leadership’s priorities will cost. Then, you can look at establishing a money pipeline to keep operations running smoothly.
Make sure you alert command to potential trouble spots early on in the process. This helps develop trust between the CFO or comptroller and the commander. This trust is essential because you may have to relay some harsh realities about what can be done. But it’s also your responsibility to come up with potential solutions. Along with your knowledge, the quality of your data is key to figuring out alternatives.
3: Keep a Clean House
How can financial organizations stay ready so that crisis situations don’t derail operations? First and foremost, keep your data clean. Look back year-over-year to spot anomalies and clear up any issues. This is essential so you can respond when the commander asks, “How much decision space do I have?” or “How much risk can I take?” Having clean data and up-to-date knowledge of cash flow lets you respond with confidence.
Also, don’t discount the importance of contingency planning. At MDC, we rehearse various crisis scenarios with our clients at least twice a year in order to find holes in our responses and prepare leadership to look closely at unusual situations. Just like frontline troops train for the unexpected, the business functions need to be prepared for any scenario that comes their way.
A trusted partner is an essential resource in times of crisis. That’s a large part of our roles with MDC. We support leadership with insights built on our years of experience at all levels of command in military healthcare organizations — from boots on the ground up to C-level executives. We and our teams can bring first-hand knowledge of the decision-making process to help enable more effective responses.
Readiness and financial management have always gone hand-in-hand, even more so during periods of crisis. Complete visibility into financial systems and up-to-the-moment reporting can ensure that warfighters have what they need, when and where they need it.