Posted: 25 Aug. 2020 5 min. read

CFOs up for the COVID challenge

Weekly economic briefing

Deloitte’s latest CFO Sentiment survey shows that Australia’s Chief Financial Officers are under no illusions about the challenging business environment they face. Optimism is down, uncertainty is high, and revenues are under enormous pressure.

Yet, despite the clear challenges, more than half of CFOs also remain optimistic about the future of their companies, and only 20% are pessimistic.

Reality has bitten, but CFOs are up for the fight.

The key points from the Half 1 2020 survey include:

  • Net optimism[1] amongst CFOs is down 30% compared to six months ago
  • Net uncertainty about economic conditions has reached a record high of 92% (up from 75%)
  • 76% of CFOs expect to see some level of revenue decrease in the second half of 2020

At the end of 2019, net uncertainty among CFOs was almost as high as it had ever been, amidst fears of an economic decline in China and rising global trade tensions. But 2020 has blown that out of the water, with net uncertainty hitting 92%. That leaves just 8% of Australian CFOs rating the current level of economic and financial at around normal levels.

[1] Net optimism is the sum of optimistic responses minus the sum of pessimistic responses.

Chart: CFO optimism and uncertainty ratings

Note: Net optimism compared to 6 months ago is the sum of optimistic responses minus the sum of pessimistic responses. Net uncertainty is the sum of responses stating uncertainty is above normal, minus those stating it is below normal.

Extreme uncertainty about the future, combined with the already tangible impacts of COVID-19, has driven optimism into significantly negative territory. This pessimism isn’t particularly surprising given the revenue hits many businesses have already taken, and are expecting to continue. 76% of CFOs surveyed expect additional falls in revenue through the second half of 2020, and 57% expect further falls in 2021.

Fortunately, CFOs have been taking quick action to help deal with current conditions. These are the top five actions that were prioritised in CFOs’ strategies for recovery from the impacts of COVID-19:

  1. Enacting new work arrangements e.g. remote and flexible arrangements
  2. Reductions in spending
  3. Reviewing communications plan for both internal and external stakeholders
  4. Establishing new lines of credit
  5. Developing new products or services

Along with short-term solutions to cope in the current environment, many CFOs are seeing the long-term opportunities that exist in their current actions.

More than half of those surveyed are expecting to let their employees continue to work from home to some degree in the post-COVID-19 future. Because of this,
many are also expecting to reduce their workplace footprint or repurpose their workplace spaces.

There are also opportunities being embraced through technology, with several CFOs planning to increasing their organisations’ use of technology and AI, and others planning to increase their online presence.

Encouragingly, they are focusing on survival through COVID-19, and then thriving on the other side.

More about the authors

David Rumbens

David Rumbens

Partner, Deloitte Access Economics

David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis.  David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.

Emma Grey

Emma Grey

Manager, Deloitte Access Economics

Emma is a Manager with an econometric background, working in Deloitte Access Economics’ Macroeconomic Policy & Forecasting team. Since joining Deloitte Access Economics in early 2016, Emma has applied macroeconomic analysis and econometric techniques to a range of subject matter including social policy, labour markets, the construction sector, international trade and tax policy. She has developed multiple forecast models and currently runs Deloitte’s national macroeconomic forecast modelling. Emma also frequently conducts distributional modelling and inequality analyses.