Good morning.
CFOs are known to be risk-averse. But as this macroeconomic environment poses challenge after challenge, determining the greatest risk is putting their skill sets to the test.
Risks to company strategy and transformation now worry CFOs more than recruiting and retaining talent which was the top internal concern for nine consecutive quarters. Meanwhile, CFOs are more pessimistic about their own companies’ financial prospects.
These are some of the findings of Deloitte’s Q2 2023 CFO Signals survey released this morning. "Talent risks fell to a very close second at 80% behind execution risks to strategies and transformations at 81%," says Steve Gallucci, global and U.S. CFO program leader with Deloitte. "So, talent risks have not dropped off CFOs’ list of internal worries. Still, the slight change may reflect the incremental shift of people working more on-site at many companies."
Another finding: 34% of CFOs surveyed expect economic conditions to improve in a year, down 20% from the prior quarter (54%). The data is based on a survey of 122 CFOs in the U.S., Canada, and Mexico conducted May 1-15. Seventy percent are from public companies and 30% from privately held firms. The vast majority at companies with more than $1 billion in annual revenue.
CEOs want cost reduction
When it comes to external risks to the company, 81% of CFOs said economic and financial market risks worry them the most, over geopolitical risks (57%), which was named the top risk in several prior CFO Signals surveys. "Generally, CFOs are keeping a close eye on cash management, liquidity, and cost reduction," Gallucci says. "Also, over the last few years, many organizations have taken steps to pay down debt, and this quarter, we’re seeing more cautiousness with regard to taking greater risks. For example, nearly one-third (33%) of surveyed CFOs say now is a good time to be taking greater risks, a decline from 40% in the previous quarter and below the two-year average of 43%."
Rounding out the top five external risks CFOs worry about the most are cyber and social media risks regulatory risks, and competitor-related risks. This might partially explain the decline in CFO optimism for their companies’ financial prospects, according to the report.
Finance chiefs are under pressure to prioritize cost reduction, citing that as the top area CEOs want them to focus on (54%).
"Companies are most likely doing their due diligence to identify opportunities to take out costs across a host of areas," Gallucci says. "Of course, having to balance costs against investments is not new to CFOs or their organizations." If companies achieve cost savings, those can be used "toward investing in transformations and revenue growth opportunities," he says.
The tech sector’s belt-tightening in response to economic uncertainty has been layoffs, especially at Big Tech companies. So far this year, overall in the sector, over 700 tech companies had layoffs, with more than 206,000 employees losing their jobs, according to Layoffs.fyi. In the financial sector, a slump in IPOs and mergers this year on Wall Street has also led to thousands of job cuts at top firms.
At the same time, CEOs want CFOs to work on cost reductions, they also want them to focus on strategy and transformation, performance management, and revenue growth, to name a few areas, according to the survey. CFOs are faced with navigating many challenges and priorities, for sure.
Sheryl Estrada
sheryl.estrada@fortune.com
Upcoming event: Fortune's Emerging CFO virtual event, “Maintaining a Growth Mindset in Turbulent Economic Waters,” in partnership with Workday (a CFO Daily sponsor), will take place on Wednesday, June 21, from 11 a.m.-12 p.m. ET. Leading the discussion will be four top finance leaders: Adobe CFO Dan Durn, e.l.f. Beauty CFO Mandy Fields, TD Bank CFO Xihao Hu, and McKinsey & Company New York Senior Partner Ishaan Seth. The discussion will include topics such as how to think differently and take bold moves, using data to tell an effective story about past performance and the opportunities ahead, and how to plan for fluctuations in the market and react by innovating to drive profitable growth. You can register here.
