CFOs concerned about economy ahead of election

CFOs remain divided on the prospects for the economy and continue to see risks from inflation, cybersecurity, generative artificial intelligence and talent shortages, according to a new survey from Deloitte.

The Big Four firm’s quarterly CFO Signals survey, found no clear majority expressing optimism or pessimism regarding their own companies’ financial prospects. The Q2 survey, released Wednesday, found 38% of the respondents said they currently feel greater optimism about the financial prospects for their companies. However, an almost identical proportion, 39%, feel less optimism. In assessing U.S. equity markets, 38% consider them undervalued, and 34% believe they’re overvalued. 

A large proportion of the finance leaders who responded to the survey may be waiting for more tangible, quantifiable, evidence that the economy is on the right track. The CFOs polled rank the economy as the top external risk, while 61% of CFOs cite the economy (growth, consumer demand, etc.) as their leading external risk. However, only 22% ranked interest rates as a leading risk, while 49% cited inflation. Of slightly greater concern were geopolitics and cybersecurity, which each were cited by 50% of respondents.

In terms of internal risks, generative AI adoption topped CFOs’ lists of internal risks, with nearly half of CFOs citing lack of GenAI talent and execution risks. Nearly half also named talent (hiring/retention) as a major threat, consistent with trends from previous surveys.  Only a tiny fraction of the CFOs polled said now is a good time to be taking greater risks. 

Less than one out of five of the finance leaders polled said they find debt financing attractive, probably due to high borrowing costs and uncertainty about future interest rate cuts. Even fewer of the respondents find equity financing appealing.

To help overworked accounting departments, Deloitte has been offering cosourcing services to bring external finance and accounting professionals together to work side-by-side with a company’s internal resources. The cosource service allows CFOs to delegate technical accounting issues and challenges to outside finance professionals, so they can dedicate more time to pursue higher-value strategic initiatives as organizations continue to grapple with a shortage of accounting talent.

Cosourcing

“I really started to appreciate that there were some needs that our clients are seeing, particularly as they were starting to have some resource constraints, turnover in different functions in accounting and finance, difficulty in finding resources, the existing resources being asked to do more, and developed our cosource offering to really help address those needs in a very curated, tailored type of an approach,” said Chris Chiriatti, managing director in Deloitte’s national office’s accounting and reporting services group. “We’re able to team with our clients and address their resource needs, not by providing loaned staff or in an operate-type model, but really focus on results. What are the workstreams and outputs that might be missing that our clients are really needing? Where are they finding resource gaps, and then using our cosource service offering to fill those gaps with the right resources at the right time, rather than a dedicated individual, but rather accessing the depth and breadth of all the talent we have across Deloitte — the competencies, the skill sets to deploy the right individuals and the right skill set at the right time to drive the best outcomes for our clients.”

Skill sets for succession

Around one quarter of the CFOs surveyed admitted their companies lack a formal CFO succession plan. Traditional finance skills fell to the bottom of the top three skills identified by the CFOs as crucial for their designated successor. 

A plurality of CFOs (37%) view operational experience as one of the three most important factors in identifying potential replacements. That was followed by familiarity with new technologies (30%) and network leadership (30%). More traditional financial skills, like accounting (28%) and FP&A (24%), did not make the top three.

The top three actions CFOs plan to take to prepare their successor include: placing them in managerial training programs (43%), working with successors to create a developmental/transition plan (39%), and mentoring/coaching them on how to do the job (39%).

Surveyed finance chiefs believe their ability to explain results to board members in clear simple terms is among the most valued skills by boards when considering a CFO for board membership. The majority of CFOs on corporate boards cite having a larger say in shaping a company’s strategy (22%) as the main reason for their interest — another sign of the evolving role of the CFO.

“Modern CFOs are required to stretch across multiple priorities that fall well beyond their traditional reporting and analysis scope,” said Steve Gallucci, national managing partner of the U.S. CFO Program at Deloitte LLP, and global leader of Deloitte Touche Tohmatsu Limited, in a statement. “As the business world evolves, CFOs must expand their skill sets to include tech fluency akin to that of a digital native and robust familiarity with the trends shaping their businesses industry. More and more, we are seeing organizations look to folks with operational experience to fill vacancies in the chief finance role.”