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CFO pessimism is on the rise, says Grant Thornton survey

Chicago-based Top 10 firm Grant Thornton found that finance leaders, who were already concerned about inflation, grew even more pessimistic about the road ahead. 

The study revealed that 72% of the 249 CFOs surveyed for the second-quarter edition of the poll expect interest rate hikes will lead to a recession. Further, just 39% of respondents in the latest survey expressed a positive outlook regarding the U.S. economy over the next six months, a number that stood at 69% in September of 2021. According to Burkland Associates CFO Richard Chen, the fault lies with federal agencies that keep increasing interest rates in an effort to slow inflation down. 

“When a company battles inflation, its cost of capital increases and it can result in investors pulling back from its shares,” said Chen. “It can be hard to understand for smaller companies that are not required to follow the same requirements as their bigger peers, but inflation affects things like borrowing costs or dividends, and it makes it more difficult for CFOs to predict what will happen in the long-term.”

The survey found 73% of CFOs indicated the increasing costs of goods and services were their top concern, with increasing energy costs, supply chain challenges, rate hikes and the increased cost of credit and capital following close behind. As for the next six months’ key stressor, 41% of CFOs say it will be cybersecurity, followed by the supply chain and remote workforce. 

Cybersecurity threats have a direct impact on balance sheets and can create a potential loss of funds, which is why Chen says that many companies expect their CFOs to be “tech-heavy.” The New York-based professional explains that cybersecurity presents  both financial and reputational risks, as CFOs need to pay employees and insurance companies on time. 

“The strong prospect of a downturn is clearly guiding CFO behavior,” said Enzo Santilli, national managing partner for transformation at Grant Thornton, in a statement. “In times like this, CFOs would be wise to tighten both their belts and their seatbelts, because the road ahead looks bumpy. The CFOs who remain highly collaborative and focused on what they can control are likely to emerge from this year with a much more positive outlook.”

Despite recession concerns, 66% of respondents still expect their companies to meet their business goals, and 61% expect their net profits to increase over the next year. A majority also believes that COVID-19’s impact on the economy is decreasing, which represents a 15% increase from the previous survey. However, while 71% of respondents think that demand will continue to grow, only 57% are confident about controlling costs.  

“Most CFOs always prepare for the worst while aiming for the best, and if the war in Ukraine or the Chinese lockdown make the supply chain go down, I think that there’s still a growing demand,” said Chen. “I’ve seen clients receiving loans from the Small Business Administration and, while interest rates are higher, Uncle Sam still provides cheap capital fast.”

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