CFO Signals™ 1Q 2024

Key takeaways from the survey

• More than half (59%) of CFOs rate the current North American economy as good or very good, with 54% saying they expect conditions to improve in a year.
• CFOs’ optimism for their companies’ financial prospects spiked to +31 from last quarter’s +11.
• Nearly two-thirds (65%) of CFOs view US equity markets as overvalued.
  
• Debt and equity financing are considered more attractive by CFOs this quarter than they were in 4Q23, at 18% and 37%, respectively, compared to 19% and 10%. This could be due to the Federal Reserve's indications that interest rates might drop this year.
• For 60% of surveyed CFOs, bringing in talent with Generative AI (GenAI) skills into their finance organizations over the next two years ranges from moderately important to very or extremely important.
• Talent rose to the top as the biggest concerns impacting GenAI adoption in the finance function. CFOs identified GenAI technical skills (65%) and GenAI fluency (53%) as two of the top three most significant concerns.

For a more detailed look at this quarter’s results, download the report.

CFOs’ views of regional economies and capital markets

CFOs raised their assessments of current economic conditions in North America, Europe, and South America this quarter compared to 4Q23. CFOs’ assessments of China's economy remained unchanged from 4Q23, and they lowered their assessment of the current economies in the rest of Asia. Looking 12 months out, respondents expect improved economic conditions in all regions tracked by CFO Signals except South America.

In the 1Q24 survey, about two-thirds (65%) of CFOs say they believe that US equity markets are overvalued. That proportion is a notable increase from 35% in 4Q23 and the highest since 1Q22 when 72% of surveyed CFOs considered US equity markets overvalued. This result also might be a bellwether of where CFOs stand on M&A, as high valuations can sometimes temper enthusiasm for deals. A much smaller proportion (5%) of CFOs consider US equity markets undervalued, far below the 23% of CFOs who shared that view in 4Q23 and the smallest proportion of CFOs considering US equity markets undervalued since 1Q22.

Growth expectations and risk appetite

CFOs raised their year-over-year (YOY) growth expectations for four of the six performance and investment metrics CFO Signals tracks: Revenue, earnings, dividends, and domestic hiring each saw increases in CFOs’ YOY growth expectations, with earnings recording the largest increase, compared to the prior quarter.

This quarter, CFOs lowered their YOY growth expectations for capital investment and domestic wages/salaries from 4Q23. Given that surveyed CFOs cite talent as one of their most worrisome internal risks this quarter, the increase in YOY growth expectations for domestic hiring seems to reflect that concern. On the other hand, CFOs indicated lower YOY growth expectations for domestic wages/salaries, even amid concerns over attracting and retaining talent.

Forty percent of surveyed CFOs say now is a good time to be taking greater risks, with the remaining 60% taking a risk-averse stance. The proportion of CFOs considering now a good time to take greater risks is up from the previous quarter’s 38% and above the two-year average of 37%. Still, CFOs continue to appear cautious when it comes to risk-taking, despite increases in their YOY growth expectations for earnings, revenue, dividends, and domestic hiring.

Chief risk concerns

Talent availability and retention land at the top of CFOs’ most worrisome internal risks, followed by execution and efficiency, cost and capital management, innovation and growth technology, and cybersecurity. The 4Q23 CFO Signals survey also found cybersecurity a concern, with 76% of CFOs saying it would be a top priority for their companies’ audit committees this year.

Geopolitics stood out as CFOs' most worrisome external risk in the 1Q24 survey, as it did in the previous two CFO Signals surveys. CFOs rank geopolitics and macroeconomics as their most worrisome external risks, amid a wide range of other uncertainties.

Special topic: GenAI in the finance organization and enterprise

Given the transformation around Generative AI, we asked CFOs how the technology is affecting their finance functions and organizations as a whole. What we found was revealing. Despite the promise of artificial intelligence—and pressure from some boards to deploy it—the technology has yet to have a measurable impact on many finance departments. While CFOs appear to be preparing to adopt GenAI, our survey shows some aren’t there yet. Consider this: 60% of surveyed CFOs said bringing in talent with GenAI skills over the next two years is either extremely important or very important. But when asked what degree of impact GenAI is having on their current finance talent model, 61% of CFOs indicated either minimal impact or no impact at all. Time will tell. Deloitte’s State of Generative AI in the Enterprise found that 72% of some 2,800 business and technology leaders surveyed expect generative AI to drive changes in their talent strategies sometime within the next two years.

While the gradual start could be due to several reasons—concerns over trust and security, for example—talent appears to be another significant challenge. Indeed, in identifying their three biggest concerns about enabling GenAI in finance, CFOs most often cited GenAI technical skills (65%), GenAI fluency (53%), and risk of adoption (30%). Acquiring such expertise may prove challenging for finance and the enterprise as well. Upskilling may be the likeliest route, with half of the respondents saying they anticipate developing existing talent to incorporate GenAI in their enterprises. Another 37% indicated they anticipate hiring external talent. This too could prove difficult, given the demand for GenAI talent. Perhaps as an alternative or in addition to hiring talent, 37% of CFOs also said they would purchase GenAI vendor solutions or services to fill the need.

Wherever GenAI takes business and the finance function specifically, adoption will likely require carefully balancing opportunity with risk and much consideration and planning to optimize its impact. As both stewards and strategists, CFOs have a critical role to play to help their companies determine how best to use AI, whether for competitive advantage, greater productivity, or some other goal—and with the appropriate guardrails in place. By taking a cautious approach to GenAI, CFOs may be waiting to see what the technology can do for their business before they commit precious time and money.