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Deloitte CFO Signals™ Survey
Deloitte CFO Signals™ Survey: CFOs Cite Risks of New Virus Waves and Growing Skepticism About the Pace of Recovery
New York, Aug. 27, 2020
- CFOs express concerns over new virus waves, more shutdowns, and the pandemic triggering a longer-term recession.
- Eighty-four percent of CFOs now say equity markets are overvalued — the second-highest level in survey history. Just 2% say markets are undervalued.
- On average, CFOs expect to achieve 74% of their originally budgeted 2020 revenue; there are substantial industry differences.
- Two-thirds of CFOs say they have raised or accessed additional cash, with most saying they are using it to fund cash reserves.
- Forty-two percent of CFOs say they are already at/above their pre-crisis operating level or will be by the end of 2020, but 25% say first quarter of 2022 or later.
Why it matters to CFOs?
Each quarter, CFO Signals tracks the thinking and actions of leading CFOs representing North America’s largest and most influential companies. Since 2010, the survey has provided key insights into the business environment; company priorities and expectations; finance priorities; and CFOs’ personal priorities. Participating CFOs represent diversified, large companies averaging over 10 billion dollars in annual revenue.
Assessment of markets and risk
This quarter, not surprisingly, the vast majority of CFOs mentioned worries related to COVID-19—especially around new virus waves, further shutdowns, and unstable consumer health/demand. As stock markets continue to climb, 84% of CFOs now say equities are overvalued—the second-highest level in survey history—with just 2% saying markets are undervalued. Furthermore, with ongoing low-interest rates, debt attractiveness rose from 63% to 87%. After dipping to 27% last quarter, the proportion of CFOs saying it is a good time for risk taking rebounded to the pre-pandemic norm of 41% — still low relative to the levels from 2017 and 2018.
Overall, just 37% of CFOs say they expect to achieve 95% or more of their originally-budgeted 2020 revenue, and another 36 % say between 75% and 94%. Healthcare/pharma, energy/resources, and financial services are the most optimistic, expecting an average of 95%, 83%, and 79% of their targeted 2020 revenue, respectively. Retail/wholesale and manufacturing were the least likely to expect 95% or more of their target, with just 21% of their CFOs expecting to achieve this level.
Focus on liquidity
Well over half of CFOs said one of their most important roles has been managing cash and liquidity, with significant mentions of related roles around refinancing the business and managing bank/creditor relationships. In fact, two-thirds of CFOs say they have raised or accessed additional cash, with most saying they are using it to fund cash reserves in the face of uncertainty. The most common other uses are around funding operations, acquisitions and projects planned pre-pandemic. Overall, just over 40% of CFOs report cash levels at least 10% above their pre-pandemic levels, with the average reporting 25% more cash.
CFOs are recognizing that remote work, virtual sales and customer interactions will continue to be the primary operating state for some time. The strategic shifts they’re making as a result—including accelerated investments in digitization and heightened focus on achieving better flexibility in capacity and cost structure can help put their organizations in a better position to navigate the uncertain trajectory of the pandemic.
Overall, nearly one-quarter of CFOs say their company is already at or above its pre-crisis operating level, and another 19% say they expect to be there by the end of 2020—an improvement from our 2Q20 survey in May and our supplemental poll in June.
-Sanford Cockrell III, global leader, global chief financial officer program, Deloitte Touche Tohmatsu Limited