CFO risk appetite sinks to 10-year low
Amid rising costs and economic uncertainty, a survey by Deloitte shows most finance executives will put growth strategies on the backburner for next year.
The risk appetite of CFOs has reached its lowest ebb in a decade and cost control has emerged as the top priority for next year as they anticipate more economic headwinds, according to Deloitte.
CFOs surveyed by Deloitte viewed external factors as the biggest threat to their business with over 50 per cent wary of interest rate hikes and 67 per cent concerned about inflation.
Meanwhile, the internal challenge of securing and retaining key talent, which had topped the firm’s biannual CFO Sentiment survey since 2020, dropped by 25 per cent.
“The speed and strength of the change is notable,” Deloitte said. “Compared to six months ago, far fewer CFOs consider securing and retaining key talent among their top risks, a sign the labour market is cooling. Instead, inflation and interest rate movements are their biggest concerns with the weak economic environment now top of the risk register.”
Almost 80 per cent of CFOs said external financial and economic uncertainty was more elevated than normal and only 14 per cent of respondents said it was a good time to take on risk – a 10-year low.
Two-thirds named cost control as their top area of focus for 2024 while revenue growth would be their second priority, up from 29 per cent at the beginning of the year to 51 per cent.
Deloitte also predicted growth initiatives to take a back seat for most businesses after 64 per cent of CFOs expected operating expenses to increase.
Net expectations for capital expenditure, the difference between respondents planning to increase spending compared to decreasing it, had also fallen sharply from 42 per cent six months ago to only 4 per cent.
Partner Stephen Gustafson said the focus on cost control was a clear response to inflation and interest rates “biting on business”.
“This points to a continued period of caution and financial discipline,” he said.
But the report said maintaining profitability by either clamping down on costs or increasing sales volumes or prices to offset them would be “easier said than done”. Supply-side shocks, a key driver of inflation, would be difficult to get around while strained household budgets would make increasing sales a challenge, it said.
While optimism was the most dominant sentiment among CFOs when asked about their business’s financial prospects, with 45 per cent optimistic compared to 20 per cent pessimistic, close to 90 per cent were either pessimistic or neutral about the economy.
“Sentiment around economic performance is deeply negative,” the survey said.
“The economic climate remains challenging for CFOs, who are bracing for a difficult period ahead.”
About the author
