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Deloitte survey of corporate finance bosses shows they now accept that uncertainty in the business environment is the new status quo

Posted in Business

Content supplied by Deloitte

New Zealand Chief Financial Officers (CFOs) are more confident than they have been for some time, but caution still characterises many business strategies. This is according to Deloitte’s inaugural New Zealand CFO survey released today.

During the period from March to May, Deloitte surveyed close to 100 CFOs from a range of locations, industries and business sizes.  The survey results provide CFO perspective on their own businesses, the current state of the economy and where they see risks and opportunities.

Deloitte’s head of audit, Peter Gulliver says that overall the results of the survey suggest New Zealand CFOs are feeling optimistic, with 37% reporting they were either somewhat more optimistic or significantly more optimistic about their company’s financial prospects compared to three months prior, just over half reporting their company’s financial prospects unchanged and almost three quarters of CFOs expecting revenue to increase over the next 12 months.

“However, while CFOs appear more confident in their optimism, the survey also indicates that there is still a heightened sense of uncertainty which is arguably becoming entrenched across a large section of the economy,” he says.

A significant 64% of CFOs said general levels of economic uncertainty were above normal.

While they are divided on the expected length of current levels of uncertainty, it is clear that a majority see it stretching on well beyond one year.

Almost a third of CFOs believe uncertainty will last between one to two years, a further third believe it will last two to three years and a further 18% see it lasting longer than three years. Challenges in Europe were of most concern to CFOs, followed by a patchy New Zealand economy and potential slowdown in China.

“Despite CFOs feeling more confident in their businesses’ financial prospects, the uncertainty driven by these external economic conditions has CFOs cautious when it comes to increasing investment in their companies,” adds Mr Gulliver.

Sixty-seven percent of CFOs were hesitant to take on greater risk onto their balance sheets and a net 23% of CFOs expected to reduce discretionary spending, including training and marketing, over the next 12 months.  Seventy-five percent preferred to focus on organic expansion, and only a third of CFOs said they expected mergers and acquisitions (M&A) activity to feature in their strategy. 

Other highlights from the New Zealand CFO survey include:

· Low interest rates have had an impact on the financial picture; bank borrowing is cheap and therefore seen as the most attractive source of funding.

· Most CFOs thought their balance sheets were optimally geared. Twenty-seven percent thought that they were under-geared, but 23% still intended to deleverage.

· On average, CFOs reported they allocated 61% of their time to controlling and operating their business compared to 39% spent on implementing strategy and driving change.

· More than half of the CFOs surveyed considered budgeting and financial planning skills as the top capability they would like to improve within their existing finance team, closely followed by strategic planning and improved financial processes and controls.

“While there is growing optimism, CFOs aren’t enjoying the sun just yet. Caution still characterises many business strategies. The outlook for M&A remains overcast, with most CFOs focused on more pressing priorities or not actively seeking out opportunities. While the forecast may be somewhat brighter than it has been for some time, it’s clear that CFOs still think there’s a chance of showers – and are dressing accordingly,” concludes Mr Gulliver.

To read or download the full New Zealand CFO survey, go to http://www.deloitte.com/nz/CFOsurvey.  

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