CFOs have expressed greater optimism for their organizations’ financial prospects, with 67% reporting they are somewhat or significantly more optimistic compared to three months ago, according to a new report.
Deloitte’s CFO Signals Q1 report also finds that YOY growth expectations continued to rebound for revenue (from last quarter’s 7.7% to 8.5%—the highest level in a decade), as well as for dividends and capital spending. Earnings growth expectations dipped from 13.8% in 4Q20 to 12.8%, according to the report.
CFOs’ perceptions of the North American economy are growing more positive, with 29% citing current conditions as good, compared to 18% the previous quarter. The good news is that just 13% of CFOs consider North America’s economy as bad, compared to 26% and 60% in 4Q20 and 3Q20, respectively.
Looking 12 months out, CFOs’ perceptions appear rosier: 73% rate it as better, up from 59% in 4Q20, the report said.
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Perceptions of China’s economy are more positive, with 51% of CFOs saying they consider it good and 6% reporting it to be very good. In a year from now, 53% of CFOs said they anticipate it will be good, while 11% expect it to be better or much better, the report said.
However, CFOs’ perceptions of Europe’s economy are far less positive: Only 7% of respondents consider it good presently, while 48% view it as bad and 1% as very bad, according to the report.
COVID-19 vaccine requirements for return to work and travel predictions
Eighteen percent of CFO respondents expect to require all employees or employees in some functional areas/roles (except those with a medical/religious reason, etc.) to receive a COVID-19 vaccination in order to return to physical premises/operations. Forty-one percent do not expect any vaccination requirements, although some will encourage vaccination, and 35% don’t know or are undecided, the report said.
The report also noted that nearly three-quarters (73%) of CFOs expect travel expenses post-pandemic to be 50% to 80% of pre-pandemic levels.
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The changing CFO function
Respondents were asked about how their scope of responsibility has changed since the start of the pandemic. Fifty-four percent of CFOs reported having higher demands from their executive/leadership teams since the beginning of the pandemic, while 37% indicated having more work/volume within their functional responsibility, and 26% reported broader functional responsibility.
The survey also asked how CFOs expect their finance operations post-pandemic to compare to pre-pandemic. Slightly more than three-quarters (76%) of CFO respondents said they expect more of their finance work will be completed remotely post-pandemic compared to pre-pandemic levels.
Meanwhile, 24% expect to have fewer finance staff internally, and 21% expect more outsourced finance services.
Nearly one-third (31%) of CFOs said they expect their finance team to work on-site four or more days, and 45% indicate three days a week for on-site work.
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In terms of which functions in core finance they would most like to improve, 63% of CFOs said they would most like to target their traditional FP&A processes for improvement, followed by management reporting (46%) and controllership (25%).
CFOs were asked what one particular skill or expertise they would choose if they were able to bolster their finance team. CFOs cited data analytics and forecasting as the skills that would most strengthen their finance teams. Technology, digital and automation were also cited frequently, according to the report.
The internal risks that worry CFOs the most
Both the physical and mental well-being of their talent, as well as concerns over hiring and retention are among CFOs’ chief worries this quarter, the report noted. Keeping employees engaged, finding qualified talent, delaying the return to work on-site and managing the transition to in-office work appear on the list as well.
CFOs mentioned concerns over their teams being resistant to change or not being able to adapt quickly enough. There is also concern that external and technology environments are changing at a faster pace than what their employees can manage.
In addition, CFOs cited risks to strategy execution, including having to execute on multiple initiatives, the report said. Risks to acquisitions and their integration into the business, as well as risks to digital transformation plans and being able to scale quickly enough, are also on CFOs’ minds this quarter.
Accumulation of technical and operational debt to accommodate the high pace of change, and internal capabilities to achieve growth targets are other worries CFOs cite.
Financial leadership beyond the pandemic
The survey found that more than one-third (37%) of CFOs said their company is already at or above pre-crisis operating levels, but for 10% recovery is significantly delayed.
Deloitte said these results are an improvement from the Q4 2020 survey findings, when just 18% of CFOs said they were already at or above their pre-crisis operating levels or would be by the end of 2020.
Looking ahead, 2% and 3% of CFOs expect to return to near-normal operating levels in 1Q21 and 2Q21, respectively, according to the report.