For Indian businesses, volatility is no longer an occasional disruption to an otherwise stable plan. A rise in oil prices leads to depreciation of rupee which leads to inflationary cycle. Cycle has two fold impact one on consumer spending (generating demand) and other one on input costs ( like increase in inputs costs and logistics costs) These pressures often arrive together, leaving companies with less time to respond.
The World Bank projected a 16% increase in global commodity prices in 2026, while the IMF’s October outlook highlights continuing risks from geopolitical conflicts, trade tensions and financial vulnerabilities. For CFOs, the concern is how quickly these developments move from global markets into everyday business decisions.
Moving beyond annual budgets to manage currency and commodity risks
Annual budgets still provide direction, but they cannot be the only reference point. Finance teams continues building rolling forecasts tweaking variables on close to real time basis that genuinely influence profitability: exchange rates, commodity costs, consumer demand, borrowing costs and supply chain lead times. More importantly, these forecasts must lead to decisions.
Currency management is a good example. For import-dependent businesses, rupee depreciation can increase landed costs even when suppliers maintain their dollar prices. Hedging provides protection, but it should be guided by commercial exposure rather than an attempt to predict currency movements. Companies need to understand their net foreign currency positions, align hedging decisions with actual payment obligations and assess how much volatility their margins can absorb.
Commodity risk requires more detailed assessment of impact and levers to manage the cost to minimize pricing action as same has direct bearing on consumer demand. An increase in crude oil prices can influence raw material price, packaging costs, logistics, energy and several other industrial inputs. In the footwear industry, for instance, higher petrochemical costs can affect materials such as EVA and polyurethane used in soles, while currency fluctuations leads to increase in the cost of imported components. These pressures can accumulate before businesses have an opportunity to revise prices. CFOs must understand how these costs travel through the organisation and where sourcing flexibility, product mix and operational efficiencies can help absorb the impact.This is where finance needs to work closely with procurement, operations and commercial teams. Supplier diversification, contract structures, product mix and selective pricing decisions all influence how much of a cost shock eventually reaches the consumer. Passing every increase through to prices may protect margins temporarily, but it can also weaken demand. The decision requires an understanding of consumer behaviour alongside cost economics.
Protecting working capital while making disciplined investment decisions
Working capital is another area where vulnerabilities become visible during uncertain periods. Supply disruptions can encourage businesses to hold additional inventory as protection against future shortages. While some buffers are necessary, excessive inventory ties up cash and increases the risk of obsolescence. Businesses need to distinguish between protecting critical supplies and accumulating stock without a clear demand outlook.
Capital allocation becomes critical in such an environment. When uncertainty increases, the immediate instinct is often to reduce expenditure. However, indiscriminate cost reduction can weaken the capabilities that a business needs for future growth. We need to ensure we are cutting bad costs (nice to have) while protecting good costs (demand generation).
Investment in supply chain agility, technology, talent and customer experience may be necessary even during periods of pressure. The CFO’s responsibility is to distinguish between structural investments that strengthen competitiveness and expenditure that adds complexity without sufficient returns.
This requires stress-testing investment decisions against weaker demand, higher input costs and changing financing conditions. Projects should have clear financial milestones, realistic payback expectations and sufficient flexibility to adjust if assumptions change. Preserving capital is important, but so is ensuring that the business continues to invest where long-term returns justify it.
Integrating financial risks to strengthen business resilience
Perhaps the biggest change required is in how financial risks are managed across organisations. Currency exposure may sit with treasury, supplier concentration with procurement, inventory with operations and demand signals with sales. Yet these risks are closely connected. Reviewing them independently can delay the response.
CFOs need to bring these signals together, establish clear thresholds for intervention and help management understand the financial consequences of different choices. Boards increasingly need this clarity, particularly when short-term performance is under pressure.
The ability to navigate volatility will ultimately depend on the quality of decisions made before a disruption becomes a financial problem. A strong balance sheet, disciplined capital allocation and better visibility across operations give businesses the flexibility to respond without compromising their future.
For CFOs, that is where resilience begins.
About the Author: Amit Aggarwal is the Chief Financial Officer of Bata India
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