The number of geopolitical risks is rising, but Danish CFOs remain positive

When asked about the financial prospects for their company, 33 per cent of Danish CFOs said that they were more optimistic than they had been three months previously. This indicates that optimism remains high, down just 4 percentage points from the level in Spring 2023, even though a large number of geopolitical risks around the world are impacting companies.

One explanation for continuing optimism could be that interest rates are more stable, and the expected rate of inflation over the next 12 months is much lower compared to Spring 2023 (Figure 2).

Figure 1. Financial prospects
_{Compared to three months ago, how do you feel about the financial prospects for your business?}

Figure 2. Expectations about the inflation rate
_{What do you think will be the inflation rate (for the Consumer Price Index) in both your country and the Euro area over the next 12 months?}

_{Note: The base sizes for this graph are smaller than the other graphs due to a “Do not know”-option. Base sizes: Spring 2022 DK (n=115), Euro area (n=109), Autumn 2022 DK (N=75), Euro Area (n=69), Spring 2023 DK (n=110), Euro area (n=102), Autumn 2023 DK (n=88), Euro area (n=82), Spring 2024 DK (n=98), Euro area (n=92).}

Looking at the expectations for key metrics over the next 12 months, 61 per cent of CFOs are expecting an increase in revenue, and expectations are back to the same level as two years ago – just before the invasion of Ukraine. The percentage of CFOs expecting their revenue to decrease is now lower. This suggests that Danish CFOs are confident about navigating the geopolitical uncertainties and that the challenges they face have started to normalise.

Figure 3. Expectations for key metrics
_{In your view, how are the following key metrics for your business likely to change over the next 12 months?}

Compared to a year ago, less Danish CFOs report a high level of financial and economic uncertainty facing their business (Figure 4). However, upcoming elections around the world could influence the uncertainty going forward.

Figure 4. External financial and economic uncertainty
_{How would you rate the overall level of external financial and economic uncertainty facing your business?}

The risk appetite of CFOs is rising

When exploring the willingness to take on greater risk, 41 per cent of respondents think that now is a good time to do so − back to the same level as in 2021, just coming out of COVID-19 and before the invasion of Ukraine. This indicates optimism about the future.

Figure 5. Taking risk onto the balance sheet
_{Is this a good time to be taking greater risk onto the balance sheet of your company? (Share of respondents who answered “Yes”)}

In the views of respondents, the number one perceived risk over the next 12 months is economic outlook/growth (66 per cent of respondents), followed by geopolitical risks (56 per cent), cyber risk (55 per cent) and falling demand (51 per cent).

An interesting development in the perception of risk is that the number of CFOs identifying a shortage of skilled professionals as a risk is nine percentage points lower than 2023 and 33 percentage points lower than in 2022. An explanation could be that the international workforce is increasing in size, and companies are less dependent on the local workforce. Another explanation could be that technology and generative AI (GenAI) is reducing the need for talent in specific positions.

Figure 6. Risks in the next 12 months
_{Which of the following factors are likely to pose a significant risk to your business over the next 12 months? (Multiple choice question)}

Prioritise smarter working and greater efficiency

Asked about their priorities for the upcoming year, many CFOs identified digitalisation, an increase of 17 percentage points compared to one year ago. This may be connected to the prioritisation of decrease in operating expenditure (OPEX) and other costs. Companies are trying to work smarter and increase their efficiency. GenAI is, for example, important in this context as many companies aim to put the technology into practical solutions. There is also a general focus on growth, as growth in existing markets and organic growth are rated as second and third priorities.

With the increase in risk appetite, it might be considered that priority is also being given to a willingness to change the business and develop the business portfolio more broadly. If the companies want to invest in new technologies, be more effective and launch new products, they also need additional capital. Capital allocation is the theme we cover in the next section.

Figure 7. Priorities over the next 12 months
_{To what extent are the following strategies likely to be a priority for your business over the next 12 months? (Multiple choice question)}