(L to R) Jaguar Mining Inc., CFO Hashim Ahmed; William Pepall, Partner, Lerners LLP
Rapidly plunging bullion prices greeted Hashim Ahmed, CPA, CA, when he joined gold producer Jaguar Mining Inc. as vice-president and controller in August 2014. Toronto-based Jaguar, an exploration and development company, has mining operations in Brazil. With prices, the lifeblood of the gold mining business, poised for a perilous descent over much of the following year, Mr. Ahmed saw the need for a different financial approach to sustain the business through tough economic times.
"The mining industry is still going through a very volatile time period," he says. "Commodity prices, whether base metals or gold, are extremely volatile.
"Just imagine the final product that you sell fluctuates up to 15 to 20 per cent within a year," adds Mr. Ahmed, who is now Jaguar's chief financial officer after being promoted in February 2016. "How do you make long-term capital commitments?"
A serious business crisis may call for an independent investigation, says William Pepall, a partner at law firm Lerners LLP.
Striking the right balance
For Mr. Ahmed, a key adaptive measure was to thread the needle between balancing long-term decision-making in a capital-intensive business with the reality of rapidly fluctuating commodity prices. The mining industry and world markets, including a slowing economy in China, had signaled that prices would be unpredictable over the short term.
"We have introduced a very flexible capital planning approach whereby we can quickly respond to gold and foreign exchange prices and assess how much capital investment we can turn on and off, depending on the health of our operational cash flow," Mr. Ahmed explains.
One way Jaguar did that was by creating a capital management framework that split long-term spending into various buckets. These can be spent if the company meets certain key performance indicators each quarter.
"At the same time, we are also addressing cost-cutting across all operations, but our approach is very different," Mr. Ahmed notes. "We analyze each area and process with the aim to improve the way we execute. Cost-cutting becomes an eventual outcome. Otherwise cost-cutting for the sake of just doing that can be more harmful in the long run."
Mr. Ahmed says this action defined his leadership at Jaguar, especially when he became a first-time CFO at age 39, by demonstrating his ability to strategize and execute, and to communicate with operational leaders at the company's mines. "We've adapted our business to become more proactive than reactive, constantly improving on our weaknesses," he says.
Mr. Ahmed's adaptation to adversity shows how a CFO's mettle can be tested, sometimes very early. He or she must respond decisively to quickly changing circumstances, a task the CFO performs particularly well, thanks to their training, experience and judgment.
At Jaguar Mining Inc., CFO Hashim Ahmed introduced a flexible approach to capital planning that helped the gold producer deal with volatile prices.
When to call for outside help
But sometimes a full-blown business crisis erupts that is beyond the technical skills of the CFO, or even the executive team as a whole, to handle internally.
What's the best course of action when a company faces an emergency that draws widespread attention, such as a financial or public relations crisis? "It is prudent for management to retain outside independent advisers like a law firm and/or an accounting firm to conduct a thorough and independent investigation into the circumstances," says William Pepall, a partner with law firm Lerners LLP in Toronto, who is not connected to Mr. Ahmed, and is offering generic advice.
"For the outcome of the investigation to be credible and reliable, it has to be thorough, and it has to be independent of management," Mr. Pepall stresses.
For example, he observes, a public comment alleging errors in a company's financial statements, misappropriation or self-dealing with related parties can create serious problems in the market. So can accusations of sexual harassment. Any of these situations has the potential to damage or threaten the organization's brand."
"Regulatory oversight and brand maintenance may require that troublesome incidents be investigated in a highly credible and reliable manner," Mr. Pepall says.
This content was produced by The Globe and Mail's advertising department in consultation with Canada's CFO of the Year. The Globe's editorial department was not involved in its creation.