CFOs expect even more layoffs and furloughs as coronavirus outbreak stretches on

A PwC survey finds finance leaders at tech companies are most likely to start cutting costs and cancelling investments due to COVID-19.

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Chief financial officers at technology, media, and telecommunications companies are planning to cut investments at a higher rate than finance leaders in all other industries, according to a new survey from PwC.

Thirty-six percent of CFOs in those industries will cut R&D due to the coronavirus compared to 27% of CFOs overall, based on the third edition of the CFO Pulse Survey. These CFOs are also more likely to implement general cost containment tactics than CFOs in other industries, 93% as compared to 82%. The Pulse Survey found that tech, media, and telecom (TMT) companies may be in a better position than other industries in the short term as their companies are powering the shelter-in-place economy. At the same time, TMT leaders think a global recession could depress demand in the future.

"Tech companies may be more likely to look at immediate cost containment, but still see upside in terms of the very products they produce," said Amity Millhiser, chief clients officer at PwC.

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These findings are only one grim component of the generally negative state CFOs are in, according to the survey. Twenty-six percent of CFOs expect additional layoffs, on top of record unemployment levels in the US; 41% expect furloughs.

Millhiser said CFOs are much less optimistic than they were two weeks ago.

"CFOs believe this will have a lasting impact, it will take longer to return to business as usual, and business as usual will look very different going forward," she said.

According to the survey, just over 80% of respondents expect COVID-19 will decrease revenues and profit for 2020. Also, only 20% of CFOs think companies will be back to business as usual within a month of the end of the outbreak.

PwC Chair Tim Ryan said CFOs have shifted from debating the chances of a recession to trying to figure out how deep and how long the contraction will be. 

"The survey reflects a growing understanding that it will take awhile to contain the virus and a better understanding of many companies of just how connected everything is--the knock on effect is significant," Ryan said.

Digital transformation work continues

Although CFOs are cutting costs across the board, digital transformation projects will keep going, according to the PwC analysts. Steve Barr, consumer markets leader at PwC, said that industries in the process of digital transformation will stay on that path.  
"Some companies in industries such as insurance, retail, banking, and higher ed were already factoring that into their strategic plans--there has been a clear shift over the last two years," he said. "Without a doubt, the coronavirus has accelerated that transition."

Bhushan Sethi, workforce of the future leader at PwC, said CFOs were less likely to cut these projects than others. 

"Companies are still thinking about how to push automation or the digitization of the front office," he said. "They are driving the business case for robotic process automation or cloud-based technology but new spend is harder to get approval for."

 Millhiser said companies are most likely to defer or cancel investments in facilities and general capital expenditures. 

"The survey showed that 53% of CFOs are planning to cut IT, but with digital transformation efforts it's only 25%," she said. "This reflects an understanding that transforming the customer experience and workforce experience is still really important."

What the return to work looks like

Another important theme of the survey was planning for the return to work--whenever that time may come. Sethi said companies are thinking about having testing onsite as well as reconfiguring workplaces to allow for social distancing. 

"A lot of firms are putting together different models and scenario plans and these change every few days," he said, adding that there is a general expectation that the outbreak will last up to 18 months and there will be different return to work sequences for different organizations depending on geography and business needs.

Ryan said US companies are looking to China and Korea for lessons learned about how to return to work. These tactics could include wearing masks at work, conducting temperature checks at building entrances, and bringing back small groups of employees on a rolling basis.  

"There will be multiple ways of coming back to work and large companies are factoring in a multi-pronged approach depending on the business locations," he said.

PwC started this CFO survey in March to understand how finance leaders are dealing with the COVID-19 pandemic. Researchers are conducting the survey every two weeks to understand changing concerns and strategies in response to the global economic slowdown.

PwC surveyed more than 300 CFOs in the US between April 6 and April 8, 2020. Eighty-four percent were from public and private companies in these top four sectors: Financial services (27%), technology, media, and telecommunications (19%), industrial products (22%), and consumer markets (15%).

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CFOs at technology, media, and telecommunications companies are more likely than finance leaders in other industries to implement budget cuts due to the coronavirus, according to a PwC survey.

Source: PwC CFO Pulse Survey

By Veronica Combs

Veronica Combs is a senior writer at TechRepublic. For more than 10 years, she has covered technology, healthcare, and business strategy. In addition to her writing and editing expertise, she has managed small and large teams at startups and establis...