A recent Grant Thornton survey reveals that, despite declining confidence levels, chief financial officers (CFOs) still foresee growth. Engaging over 230 senior finance leaders, the Q3 2024 survey found 79 percent anticipate profit growth over the next 12 months—a survey high for the past 10 quarters. However, the share expecting over 20 percent growth dropped amid economic and political uncertainties.
The survey also revealed challenges in key operational areas, reflecting broader uncertainties in the current business environment. Only about half of CFOs (51 percent) expressed confidence in their ability to meet goals for increased demand—a 12-point drop from the previous quarter and the lowest level in the past year. Confidence in other critical areas showed similar declines: 53 percent of CFOs were optimistic about achieving supply chain objectives, while only 49 percent felt confident about meeting labor needs, 42 percent in cost control, and 45 percent in meeting growth targets. These shifts indicate that while finance leaders remain optimistic about profitability, their confidence in day-to-day operational metrics has waned.
In response to these concerns, CFOs are prioritizing cost management. Cost optimization has risen to the top of their focus areas, with 64 percent of CFOs identifying it as a key priority—another 10-quarter high. The emphasis on cost control and optimization underscores finance leaders' adaptability and their proactive approach to managing expenses as a hedge against economic fluctuations. Paul Melville, from Grant Thornton Advisors LLC, observed that, despite declining confidence in certain fundamentals, CFOs remain dedicated to sustaining profitability.
“Finance leaders’ belief in their ability to drive profits at their organizations remains unshaken, even as their confidence in other key fundamentals tumbled in an unsettled environment,” Melville explained. “CFOs believe they can push the right buttons to help their organizations thrive in the long term.” This resilience reflects a balanced strategy where finance leaders focus on both growth and efficiency, aiming to navigate through the turbulence.
One notable area of focus for CFOs is digital transformation. According to the survey, nearly two-thirds (66 percent) of finance leaders expect to increase spending on IT and digital initiatives, marking a 15-quarter high. This trend signifies a strong commitment to staying technologically competitive and future-proofing their organizations. As Melville pointed out, “CFOs understand that they need these technological capabilities to be competitive.” Many CFOs are particularly interested in generative AI, with 60 percent now using it for customer relationship management and customer experience (up from 45 percent in Q1), and 58 percent incorporating it into product and service development (up from 35 percent).
The survey also highlights the growing role of corporate boards in overseeing AI governance, ensuring responsible use of this technology amid its rapid evolution. Mike Notarangelo, of Grant Thornton LLP, noted the importance of developing agile AI governance frameworks to monitor these investments. “In the era of GenAI investment, management teams will spend resources on the use cases they believe create a competitive advantage in the market,” he said. “Boards of directors need to develop an agile AI governance framework to evaluate those investments and safeguard against AI-related business risks.”
Investment in sales and marketing has also been a major shift, with more CFOs increasing spending in this area than in any of the previous 15 quarters. The survey found that 56 percent of CFOs anticipate raising their sales and marketing budgets, while only 7 percent plan to decrease them. This is a strategic move to capture market share and build product differentiation. “This is how you gain market share,” Melville noted. “CFOs are recognizing the need to have differentiation in their products and services, and they’re investing more in sales and marketing for those products as a proactive move to drive more growth and capture market spend.”
Interestingly, while finance leaders are focusing on expanding their reach, there has been a shift in their approach to workforce management. For the fourth consecutive quarter, CFOs indicated that human capital expenses related to headcount and compensation are the most likely areas for potential cost cuts, with 42 percent identifying them as potential targets. However, the priority placed on workforce rationalization has declined significantly, reaching an all-time low at just 27 percent, a 20-point drop from the previous quarter. This could suggest a greater emphasis on retaining skilled talent in a tight labor market, despite overall cost-control measures.
Politics is yet another factor influencing CFO strategies. According to the survey, 61 percent of CFOs believe the recent U.S. election could lead to changes in business strategies. The top concerns related to the election include potential impacts on the economy, tax policy, regulatory policy, and trade policy.
Consequently, CFOs are taking varied approaches to investment: 31 percent are accelerating certain investments, 23 percent are holding back until after the end of 2024, and 46 percent said the election did not influence their investment plans.
Melville cautioned against allowing political uncertainty to disrupt core business planning. “You’re still going to invest in AI to drive improvements through technology,” he advised. “You’re still going to make sure your cybersecurity protections are strong. The business fundamentals like efficiency in the finance function and the basics for growing your business aren’t going to change regardless of who is in the White House or the government.”
Ultimately, the survey reflects a complex economic landscape where CFOs are balancing growth aspirations with the realities of political, economic, and operational challenges. Despite fluctuating confidence levels, finance leaders remain focused on driving profitability, adapting to emerging trends in technology, and making strategic investments to stay competitive. The results of this survey highlight an industry committed to resilience and long-term success, even as it navigates the headwinds of today’s unpredictable environment.
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