April 21, 2020 | 4-minute read (724 words)
Although no one can accurately predict how long the coronavirus emergency will last, some business leaders are tasked with doing just that. Chief financial officers must perform analyses to project what will happen in the future and make financial plans accordingly. Therefore, it can be helpful to see what they foresee happening in the coming months based on their projections.
Check out the results of three recent CFO surveys to get a feel for where these professionals stand on the future of business.
CFO: Half of CFOs Foresee Return to Normal Economic Activity in Q3
When CFO.com surveyed 333 senior finance executives between March 26 and April 2, the responses indicated a general optimism, considering the circumstances. About half of those polled expect to see a return to normal activity in the third quarter of this year, while 40 percent foresee a continuation of slower economic activity into 2021. Just nine percent of respondents said they expect economic activity to remain slow until 2022.
About 53 percent of finance execs said they expect Q1 2020 sales to fall between one and 20 percent, while 22 percent of those polled said they expect to see sales fall between 21 and 50 percent. Just 17 percent of those who responded foresee sales falling by 41 percent or more, the survey noted.
When it came to staffing, about 35 percent of CFOs who responded to the survey said they’re laying off or furloughing employees, and about half of respondents said they are scaling back on investments.
"To address cash flow concerns — a top issue for CFOs — they are taking immediate action, from slowing investments to tapping credit lines to weather the crisis,” said CFO Editor-in-Chief Vincent Ryan. “And although they have a positive outlook, many are making near-term changes in headcount."
Gartner: Majority of CFOs Are Changing Long-Term Investment Plans
Gartner conducted a survey of 145 CFOs and senior finance leaders on April 12, and found that about 51 percent of those who responded expect revenue to contract by up to 30 percent this year due to the effects of COVID-19. Another 28 percent said their organizations may see a sales impact of greater than 30 percent.
In addition, the majority of respondents are using “the most severe downside scenarios” to inform their projections right now, said Alexander Bant, practice vice president of research for the Gartner Finance Practice. These scenarios have led to drastic cost management projections through April and May. “When CFOs were asked how these downside scenarios are impacting their ability to fund long-term growth investments, 70 percent of CFOs said they are now showing caution in this area,” he added.
The majority of CFOs polled (65 percent) said they expect no delay in closing their books at the end of Q1, while just three percent expect a delay lasting more than three days. “These results show that the finance function is generally coping well with remote working and is able to carry out a lot of work as usual,” Bant said.
Duke: CFO Sentiment Matches Bleakness of 2008 Financial Crisis
Duke University’s Fuqua School of Business has conducted its survey of chief financial officers for 96 quarters straight, with insights from CFOs both in the US and across the globe. As part of the survey, the institution releases numbers from its CFO Optimism Index each quarter, which shows how optimistic CFOs are during any given period.
In the most recent survey, which was conducted over six weeks starting Feb. 25, Duke found that the Optimism Index fell to 42 in the second half of March, from 59 in the first half of the month. This indicates that CFO optimism is as bleak as it was during the 2008 financial crisis, the report notes.
“The index has proven to be a good predictor of future GDP and unemployment, anticipating that the economy will perform as poorly in 2020 as it did during the Great Recession,” said finance professor John Graham, director of the survey.
Despite the lingering pessimism, only about 30 percent of the respondents said they are facing large financial risks due to COVID-19, with another 50 percent saying they face medium risk. “Should more companies realize that they in fact face large financial risk due to the virus, hiring and spending numbers will get even worse,” Graham said.