44 Percent Of CFOs Expect Investment To Rise Over The Next 12 Months

Growth and Expansion Top of the Agenda for Global CFOs

Chief Financial Officers (CFOs) worldwide are entering 2014 in a much more confident mood than they were 12 months ago.

Deloitte In Switzerland, for example, 44 percent of CFOs expect investment to rise over the next 12 months; 90 percent of Dutch CFOs predict higher M&A activity over that same time; and UK CFOs’ expectations for revenues and profits are at the highest level in three-and-a-half years. This is according to Deloitte Touche Tohmatsu Limited’s (DTTL) Q4 2013 Global CFO Signals report.

The report, which contains CFO surveys from 22 countries and/or regions across the globe shows that CFOs are focused on increased expansion and growth as fears of financial and economic uncertainty in many of the bigger economies have largely been tempered. In North America, for example, optimism rose from a strong +42 percent last quarter to an even stronger +54 percent this time. In the inaugural Southeast Asia survey, 44 percent of CFOs reported a positive outlook despite worries over the Chinese economy and political uncertainty. And in Australia, continuing optimism has led to the highest level of risk appetite in the history of the survey.

“The optimism reported in the North America region throughout 2013 has clearly spread to many of the other countries.  Those sentiments are fueling increased investment, plans for new products and services, and M&A activities,” says Sanford Cockrell III, Global CFO Program Leader, DTTL. “What’s more, given the strength of their balance sheets and improved financing conditions, 2014 may be the year we finally see CFOs accelerate their growth plans.”

Priorities for 2014

  • Seventy-one percent of Ireland’s finance chiefs describe their corporate strategies as expansionary.
  • In the UK, 40 percent of CFOs point to introducing new products or services or expanding into new markets as top priorities for 2014; 88 percent also expect M&A activity to increase over the next 12 months.
  • Three-quarters of Australian CFOs see growth coming from organic expansion in the coming year.
  • Priorities in Central Europe fell into three categories depending on the economic environment: growth-seeking (Poland, Czech Republic); stability-seeking (Albania, Bulgaria, Serbia); and cost-advantage seeking (Latvia, Slovakia).
  • After three quarters of a strong revenue bias, there is now a roughly equal focus on revenue growth and cost reduction in North America.
Emerging risks
  • In Belgium, for the first time in two years, CFOs are more concerned about the competitive position of their companies than they are about economic recovery.
  • Forty two percent of CFOs in Switzerland see rising wage costs as a risk factor, although this may be a by-product of an improving economy.
  • Almost 60 percent of India’s CFOs see a slowdown in the domestic economy as a key economic concern, followed by by rupee depreciation and volatility, inflation, and lack of political direction.
  • In Southeast Asia, regulatory concerns are driving many CFOs to become more involved in risk management. Sixty seven percent of CFOs named external global industry changes in regulations and compliance as the main reason they are involved in risk management; 58 percent said the same about domestic compliance policies
Local barriers and entries
  • In Australia, uncertainty over federal government policy remains a concern for 23 percent of CFOs despite the election held in 2013.
  • CFOs in India consider the country’s backdated bureaucratic structure to be a major roadblock to operations.
  • Concerns over the possibility of rising interest rates are shared by many CFOs in North America and the UK.
  • While most of Ireland’s finance chiefs believe that their country has already returned to growth, they believe that investing in certain industries will stimulate further growth—notably the information and communication technologies (32 percent) and energy (15 percent) industries.
Metrics that matter
  • Some 83 percent of Ireland’s CFOs expect their revenues to increase over the next 12 months, as well as operating cash flows (75 percent).
  • More than half of Belgium’s finance chiefs expect revenue increases of more than 2 percent, and 20 percent aiming for 5 percent.
  • Expectations for revenues and profits among UK CFOs are at their highest level in three-and-a half years.
  • Hiring still is not top of the list in many companies. In North America after a disappointing return to 1.3 percent* last quarter, this quarter’s number for domestic hiring is essentially flat at 1.4 percent*.

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