CFO Signals™ 2Q 2024

Key takeaways from the survey

• CFOs rank the economy as the top external risk. Sixty-one percent of CFOs cite the economy (growth, consumer demand, etc.) as their leading external risk. Yet only 22% ranked interest rates as a leading risk, while 49% cited inflation. As for issues outside the economy, geopolitics and cybersecurity were each cited by half of respondents.
• GenAI is fueling talent concerns. Topping the list of internal risks: Generative AI adoption (lack of GenAI talent, execution risk, etc.), which was selected as a top-three risk by 48% of surveyed CFOs. Also, 47% named talent (hiring/retention) as a leading internal threat. The concern about talent is in line with what we've been seeing in our survey for several quarters.
• This is no time for risk-taking. Only about one out of four (26%) of surveyed CFOs say now is a good time to be taking greater risks.
• Debt or equity financing? Neither, say the vast proportion of surveyed CFOs. Just 18% find debt financing attractive, perhaps because of high borrowing costs and uncertainty about future central bank interest-rate cuts. In terms of equity financing, only 15% find that route appealing—almost identical outcomes, as befits this survey.
• Equal parts optimism, pessimism. The percentage of respondents who feel more optimistic about their company's financial prospects over the next twelve months came in at 38%. The percentage that feel less optimistic? Thirty nine percent.
  

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

CFOs’ assessments of capital markets and risk

CFOs seem to be divided on their assessment of equity valuations. Our survey found that 34% of respondents believe US equity markets are overvalued. Conversely, 38% consider US equity markets undervalued—this despite a substantial run-up in the S&P 500 index in the first half of the year.

Only 26% of surveyed CFOs say now is a good time to be taking greater risks. Based on other results in the survey (see page 9 in the report), this risk-averse stance likely stems from, among other things, concerns about economic conditions and geopolitics.

Overall, respondents expressed little interest in either debt or equity financing. Indeed, only 15% of CFOs in our North America survey say equity financing is attractive; only 18% find debt financing attractive.

Chief risk concerns

Talent has long been a worry among participants in our CFO Signals surveys. This quarter, talent (hiring/retention) was cited by 47% of respondents as one of their top three internal risks, putting it number two on the list. No. 1? GenAI, including a shortage of GenAI talent. That response lines up with what we found last quarter. In the 1Q survey, we asked CFOs to cite their three biggest worries about enabling their teams to use Generative AI. Lack of GenAI technical skills topped the list.

It’s not overly surprising that the economy was cited by more CFOs as one of their top-three external risks. Geopolitics and cybersecurity were second on the list. The high level of worry about cyber may be fueled, at least in part, by recent high-profile attacks.

Special topic: CFO Succession Planning and Board Roles

One in four respondents say their organizations do not have a formal CFO succession plan—somewhat unexpected considering the survey group consists of businesses with at least a billion dollars in revenues. At companies that do have such blueprints, 29% of finance chiefs indicated their CEO holds primary responsibility for creation and upkeep of the plan. Another 24% attributed the responsibility to the Chief Human Resources Officer or human resources.

The survey revealed 37% of respondents view operational experience as one of the three most important factors in identifying potential replacements. Familiarity with new technologies—including GenAI, machine learning, and cloud computing—was cited by 30% of respondents. The survey also underscored the changing nature of the CFO role. FP&A skills was only cited by 24% of participants. That put it far down the list.

We wanted to know what qualities finance chiefs think will land them a seat on a board. What we found was notable. Financial expertise did not make it into the top three. Instead, the highest percentage (39%) of respondents selected good communications skills—that is, the ability to explain results in clear and simple terms. Last on the list? Leadership.