According to more than 100 finance chiefs who responded to a survey by CFO at last week’s CFO Rising conference in Orlando, Florida, the worst of the economic downturn is over, but the economy won’t fully turn around anytime soon. Only 6% expect the economy to decline further in the next year, but just 4% say growth will return in the next several months.
Finance chiefs are concerned about the uncertainty of pending regulatory changes, a worry they also expressed as a top concern in this quarter’s Global Business Outlook survey, released earlier this month. They are especially concerned about potential changes to their personal tax burdens and worry that some regulatory changes may not be effective.
Health-care reform continues to be a hot topic, with nearly 70% of CFOs saying they are very concerned about potential additional corporate taxation to finance new health-care plans. More than half worry about a possible increase in administrative burdens on their companies as a result of health reform, and many also fear an impact on their personal health-care costs.
Finance executives do say there have been some positive effects of the economic downturn, with 80% saying it has increased their companies’ focus on their core business. The same number cites improved productivity as a silver lining. Seventy-three percent say they’ve seen an increase in innovation and new business ideas, and 71% say the downturn has weakened competitors. Relationships with suppliers and customers have also improved for many companies.
Looking ahead, CFOs’ caution about the economy is reflected in their plans for using cash during the next 12 months. Three-quarters of them plan to preserve moderate or substantial amounts of cash as a hedge against economic uncertainty. More than half will use cash to pay down debt, as many companies continue their efforts to shore up their balance sheets. Still, 87% say they’ll be devoting at least a moderate amount of cash to organic growth, and 40% will dedicate some funds to mergers and acquisitions.