Split in Danish CFOs’ views on the importance of capital allocation

93 per cent of survey respondents are involved in capital allocation, and 7 per cent are not involved. Looking at the difference between the companies with annual revenue above and below DKK 1bn, 100 per cent of the CFOs in the large companies but only 87 per cent from medium-sized and smaller companies are involved.

Figure 8. CFOs’ involvement in capital allocation
_{Are you involved in capital allocation in your company/organisation?}

_{Note: Base sizes are n=67 for “Less than DKK 1bn” and n=68 for “More than DKK 1bn”.}

There is a big difference in how much of the time of Danish CFOs is taken up by capital allocation-related tasks. 45 per cent of respondents say that capital allocation is one of their three most important tasks, 50 per cent consider the task to be one among many others, and 5 per cent say that capital allocation is not an important task in their work.

Again, company size is relevant: 10 per cent of the CFOs from companies with revenue less than DKK 1bn say that capital allocation is not an important task for them.

Figure 9. Importance of capital allocation in the CFO’s role
_{How important do you consider the task of capital allocation in your role?}

_{Note: The base of this question is CFOs who is involved in capital allocation. Base sizes are n=126 for “Total”, n=58 for “Less than DKK 1bn” and n=68 for “More than DKK 1bn”.}

CFOs take on a range of functions related to capital allocation. The primary functions are: 1) reporting/communication regarding capital allocation to internal and external stakeholders, 2) decision-making regarding future allocation of capital, 3) follow-up and evaluation of previous capital allocation decisions, 4) defining capital allocation strategy, goals and principles and 5) programme/project monitoring and management regarding the execution of capital allocation. 43 per cent of respondents are involved in all five functions.

Figure 10. CFO tasks related to capital allocation
_{Which of the following tasks related to capital allocation are you involved in, in your company/organisation? (Multiple choice question)}

_{Note: The base of this question is CFOs who are involved in capital allocation. Base size is n=126.}

The three main considerations affecting companies’ capital allocation are increased focus on digitalisation (e.g. investments in GenAI, cloud, automation), long-term value creation (e.g. investment in R&D or acquisition of companies) and ESG/sustainability (e.g. investment in measures to reduce CO2 emissions). These types of investments are all projects that create value over a long time scale. 40 per cent of the CFOs say that increased focus on all three − digitalisation, long-term value creation and focus on ESG/sustainability − affect their companies’ capital allocation.

Figure 11. Considerations affecting capital allocation
_{Which of the following considerations affect your company/organisation's actual capital allocation this year? (Multiple choice question)}

There are differences in how companies approach their capital allocation strategy: 15 per cent do not make any notable adjustments from year to year, 24 per cent make annual adjustments, and 54 per cent make both annual and ongoing adjustments.

Figure 12. Approach to capital allocation
_{Which of the following statements best describes your company/organisation's approach to capital allocation goals and adjustments?}

27 per cent of respondents commented on the challenge of greater demands from external and internal stakeholders regarding transparency in capital allocation strategies and decisions. This indicates that transparent and consistent communication with stakeholders can be considered a key consideration in capital allocation.

Figure 13. Capital allocation challenges
_{Does your company/organisation face the challenge of greater demands from internal and external stakeholders regarding transparency in capital allocation principles and decisions? (Multiple choice question)}