The Centre for Accounting, Banking and Finance (CABF) parked under the Faculty of Business and Finance (FBF) organised a webinar titled “Organisational Strategies for Cost Reduction and Cost Control in Current Covid-19 Times” on 8 January 2021 via Microsoft Teams.

The talk was delivered by FBF Department of Commerce and Accountancy lecturers Ching Suet Ling and Ong Oi Voon. Present at the talk were academic staff and students. The objective of the talk was to study how the organisations construct their strategies to reduce and control cost during the Covid-19 pandemic.

During the webinar, Ching introduced a few terminologies, namely cost reduction, cost avoidance and cost control. She also emphasised the concepts under the three “Cs” which were cost, cash flows and capital in order to survive the current pandemic while stating that the management has become more pressing when the world is facing due to the Covid-19 crisis lockdowns which resulted in the shutdown of business and economy.

Ching further explained about the cost reduction, describing some of these strategies including reducing the input costs to lower the operating cost and increase profitability, and controlling the overheads. Ching also emphasised that cost reduction opportunities have minimal negative impacts on employees and daily operations. In addition, she added that cash flow management is vital for business survival, growth and continuation. She also said that cash flow management should not result in overzealous cost-cutting as the company may face a labour shortage in an eventual business turnaround and thus stripping it of its competitive advantages. Furthermore, she also clarified that the capital concept which involves optimising a company’s capital by reducing its borrowing costs and increasing the loan repayment period.

As for cost-cutting measures, Ching suggested a cost-cutting strategy that categorises costs as bad, good, and best. Bad costs can be cut, while the best costs are maximized. Good costs, such as quality raw materials, focus on the company’s growth and are aligned with the needs of customers. Bad costs, such as inefficient machinery, that do not match up with the company’s growth strategy should be cut as they waste resources. Best costs, such as technology, are those that differentiate a company from the competition and provide value. Ching also suggested that revenue management and working capital management to increase profitability. For revenue management, multiple revenue streams can be created. For working capital management, cash, inventory, accounts receivables and payables are monitored and managed.

The webinar continued with another session by Ong. She mentioned in response to the current Covid-19 pandemic, the organisations have to adopt various strategies to survive. As the organisations are constantly exposed to various global changes from costs, markets, government policies, competition to technology, Ong stated that the organisations have to be agile and active. This is especially in the current Covid-19 pandemic where its effects are highly disruptive, threatening the survival of the organisations, and these global changes are also reflected in IR4.0 challenges of technology, market and cost.

Moreover, Ong also clarified that good strategies are needed to adapt to the Covid-19 changes. Driven by technology and increased digitalisation, customers are making more online purchases, which require more personalised, faster products and services. She also added that organisations are forced to rethink their existing business processes and structures, and suggested that they can use the principles of activity-based management or Porter’s Value Chain in their cost reduction and control strategies, where the activity-based management can be used to rank a company’s products or services based on their profitability, thus helping the management to decide which one to produce and sell. She also emphasized that Porter’s value chain categorises an organisation’s activities based on its value-added component to understand the cost behaviour for more effective management.

The webinar ended with an interactive Q&A session followed by a group photo session.