Deloitte's CFO Signals Survey: CFOs Wary Over Increased Government Regulation But Optimistic on the Outlook for Their Companies and Sector

Deloitte survey found CFOs are projecting strong growth in sales, earnings, dividends and capital spending, but only modest growth in employment

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Deloitte

Jul 01, 2010, 12:09 ET

NEW YORK, July 1 /PRNewswire/ -- North America's top chief financial officers (CFO) remain predominantly optimistic about their companies' prospects despite governmental actions weighing heavily on their minds. These are some of the key findings of Deloitte's first quarterly CFO Signals survey and report, which tracks the thinking and actions of more than 130 leading CFOs — representing many of North America's largest and most influential companies.

Nearly two-thirds of those surveyed say they are more optimistic about their companies' prospects than they were in the previous quarter and less than one CFO out of five is more pessimistic. CFOs of all eight surveyed industries (which excludes government and public sector entities), project year over year gains in both sales and earnings growth on average, though they expect only modest growth in employment. Reflecting the renewed focus on government regulation, 55 percent of CFOs cited social policy, spending and investment as one of their top three economic concerns, eclipsing concerns like unemployment, cost of capital, capital availability and currency exchange rates.

"CFO optimism shines against a backdrop of ambiguity and uncertainty — especially around business strategies and the selection of new investments. There is a general wariness of the increased role of governments in post-recession economies, with CFOs in most industries already taking steps to influence, plan for, or adapt to government action," said Sanford Cockrell III, national managing partner of Deloitte's U.S. CFO Program, a CFO-centric strategic initiative that harnesses Deloitte's capabilities to address the CFO's unique challenges and demands. "This pro-activity in responding to impending governmental oversight is reflective of the ever expanding role of the modern day CFO as a strategist in their organizations."

The survey found that social and environmental policy, regulation and health reform topped CFO lists of major challenges — not only at company and industry levels, but also at a personal career level, as CFOs are challenged to determine their role in addressing these challenges.

The CFO Signals survey also revealed the following:

All surveyed industries project revenue and earnings growth (the average projection for all companies across all industries is 9 percent and 17 percent year over year, respectively) while keeping both costs and employment in check.
Despite their positive business outlook, CFOs expect only modest increases in employment -- domestic hiring is expected to increase just 3 percent, suggesting that the productivity of current, often-reduced staffing can support growth in at least the near term. Where there is employment growth, it will likely be concentrated in particular industries, and offshore hiring and outsourcing will outpace domestic hiring.
Despite turmoil in credit markets and deleveraging across the global economy, most CFOs are satisfied with their current mix of debt and equity.
Reflecting both increased optimism and stabilization in access to financing, companies are loosening their purse strings with CFOs overall projecting dividends to rise 6.5 percent and capital spending to increase 12 percent.
CFO job stresses and finance organization challenges are primarily related to supporting major change initiatives, changing regulatory requirements and strategy-related decisions.

"CFOs' earnings optimism means they expect revenues to grow substantially faster than costs over the next year — which is consistent with their low hiring expectations," said Greg Dickinson, director of Deloitte's CFO Signals Survey. "Given the substantial staffing reductions many companies have made over the past few years, CFOs appear to believe productivity gains can support substantial growth."

The CFO Signals survey was conducted for the second quarter, 2010. Seventy-five percent of the CFO respondents are from companies with more than $1 billion in annual revenues, and 75 percent are from publicly-traded companies. The findings were collected from a total of 136 CFOs who responded to the survey during the last two weeks in May 2010.

Each forthcoming quarterly report will analyze CFOs' opinions in five areas: CFO career, finance organization, company, industry, and economy. For more information about CFO Signals, or to participate in the survey, please contact [email protected].

Deloitte's CFO Program harnesses the breadth of Deloitte's capabilities to deliver forward-thinking perspectives and fresh insights to help CFOs manage the complexities of their role, drive more value in their organization, and adapt to the changing strategic shifts in the market. For more information about Deloitte's CFO Program, please contact [email protected] or visit www.deloitte.com/us/cfocenter.

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As used in this document, "Deloitte" means Deloitte & Touche LLP and Deloitte Services LP, separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.