Corporate optimism surges as CFOs ‘adapt to economic uncertainty’

The survey of CFOs has revealed a surge in optimism concerning the financial prospects of their respective companies to 56 per cent since the beginning of this year – an increase of 29 percentage points.

The increase is the first notable rise in sentiment since the end of 2021 as the number of CFOs feeling pessimistic or highly pessimistic about the economy fell from 43 per cent to 29 per cent in just six months.

Deloitte says the rebound is a clear signal that CFOs believe the economy is nearing a turning point through expectations of revenue and profit growth for their businesses.

Deloitte partner Stephen Gustafson sees the latest results as a sign that CFOs are adapting to economic uncertainty with an upwards adjustment to their risk tolerance.

“After two years of talent shortages, inflation, interest rate rises and difficult business decisions, the tide is starting to turn,” says Gustafson.

“More familiar than ever with tougher economic conditions, our CFOs are more resilient as a result.

“This familiarity with the economic environment has seen CFO optimism grow, with almost two-thirds optimistic about the financial prospects for their companies compared to less than half six months ago. Similarly, only 10 per cent are pessimistic now compared to 20 per cent six months ago.

“This corresponds to rising business performance expectations, with 73 per cent of CFOs expecting revenue to increase in the next year, compared to 60 per cent six months ago.”

Among the key findings in the latest Chief Financial Officer (CFO) Sentiment report is that more than half of respondents have begun implementing generative artificial intelligence (GenAI) as a cost-control measure, with about 50 per cent already using AI to improve productivity and another 34 per cent planning to do so.

Gustafson says that while CFOs strongly believe in the promise of GenAI, they understand that it has some way to go before delivering full benefits.

“Businesses still need to get the foundational elements right to make the most of innovative tools like GenAI, such as establishing governance measures to manage risks and by improving data quality across their organisations,” he says.

“The number of CFOs with no plans to implement AI has halved in the last six months, indicating a growing acceptance of the technology and a willingness to explore its potential benefits.”

Productivity is a key focus for CFOs with 43 per cent saying it’s one of their top three priorities, ranking well above core business issues (29 per cent), increasing cashflow (29 per cent) and expanding through acquisition (13 per cent).

Some 67 per cent of respondents see controlling costs as a top priority in the year ahead, which sits ahead of revenue growth.

The number looking to decrease or maintain capital expenditure at current levels is 69 per cent, with a reduction in third-party spend the biggest sole cost control measure. Only 33 per cent of CFOs plan to shed staff or have already done so in the last year.

Almost three quarters of CFOs, or 70 per cent, see economic downturn in the next year as their top risk, while talent attraction and retention (52 per cent) and inflation (51 per cent) also rate highly.

Despite these concerns, 41 per cent of CFOs expect profit margins to increase in the year ahead, up from 29 per cent six months ago.

“Key upcoming economic data releases like the CPI and labour force data may influence the decisions of policymakers, as well as the sentiment of business leaders on the economy’s performance,” says Deloitte Access Economics partner David Rumbens.

“As the broader economic landscape becomes clearer, it is crucial for CFOs to be strategically positioned to make the most of the recovery.

“This involves taking on greater risks and investing in productivity improvements, a strategy many CFOs are already adopting.

“While the immediate environment remains challenging, the outlook for the coming year is looking increasingly optimistic.”