CFO Signals™ 4Q 2022

As 2022 wound down, CFOs provide a preview into what they are expecting and planning in 2023. By and large, CFOs expect substantially higher costs, particularly in talent/labor (74% of CFOs) and energy prices even beyond 2022 levels (41% of CFOs). They also say their organizations will make greater use of automation and digital technologies for operations (79%) and to replace certain jobs previously performed by humans (61%). And with 2022 noted for record levels of inflation, interest rate hikes, and the threat of recession, more than half of CFOs are making cost management and financial performance their top two priorities in 2023, with more than one-third adding growth as their third top priority.   

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

CFOs’ views of regional economies and capital markets

For the most part, CFOs lowered their assessments of future economic conditions from 3Q22 across the five regions tracked by CFO Signals. One exception is North America. CFOs’ views for this region stayed flat from 3Q22, at 29%. This region is the only one where CFOs’ assessments of the future economic status lagged their assessments of current conditions. 

With regard to capital markets, the proportion of CFOs saying U.S. equities are overvalued in this quarter’s survey remained unchanged from the prior quarter, at 30%, a significant decline from 88% in 4Q21. The proportion of CFOs considering U.S. equities undervalued declined to 20% from 24% in the prior quarter. 

Growth expectations and risk appetite

Compared to the prior quarter, CFOs lowered their year-over-year (YOY) expectations for growth across all six metrics tracked by CFO Signals. The greatest drop-offs were in revenue and earnings at 4.2% and 2.9%, respectively, down from 6.2% and 6.4% in 3Q22. Results varied by industry, with Energy/Resources having the highest YOY growth expectations for revenue and earnings, and Healthcare/Pharma indicating the lowest level of growth for those two metrics. Technology and Energy/Resources CFOs reported the highest growth expectations for capital spending at 11.1% and 9.4%, respectively.   

The survey also reveals a decrease in the risk appetite of CFOs, after seeing a slight shift toward risk-taking in 3Q22. This quarter, 29% of CFOs say now is a good time to be taking greater risks. That finding lags behind the 38% of CFOs who favored risk-taking in 3Q22 and the two-year average of approximately 50%. Still, it’s slightly higher than CFOs’ appetite for risk-taking in 2Q20, which, at 27%, was the lowest level since we began tracking this metric in 2015.

Chief risk concerns

Despite general news reports of layoffs across many industries, talent retention led CFOs’ list of internal worries this quarter, followed by prioritization and execution. Talent attraction/hiring and cost management followed as the next most-often cited areas of internal risks. Skill sets, productivity, change management, and technology/innovation are other internal worries on the minds of CFOs. Another concern that stood out is financial performance, which CFOs also named as one of their top three priorities in 2023. Interestingly, CFOs seem not as concerned over recession planning and post-pandemic work arrangements. 

Geopolitics and instability stood out—even more so than inflation or recession—as the external risk worrying CFOs most. Some CFOs cited concerns over war. Other external risks that CFOs mentioned frequently were policies and regulations, macroeconomics, labor scarcity and cost, and interest rates and their impact. Prices and supplies of commodities, particularly with respect to energy, also were noted. In addition, CFOs mentioned government spending, capital, consumer spending, and supply issues among their most worrisome external risks, but with less frequency.

Special topic: 2023 priorities, plans, and hopes for policy

In addition to the priorities CFOs set for 2023, they revealed what could constrain their organizations' ability to achieve their performance goals for the new year. The economy, depending on where it lands, and a recession/rising costs were mentioned most frequently, followed by consumer demand. That said, CFOs aren't standing still. More than half of CFOs said their organizations expect to pursue M&A and joint ventures in the year ahead, and 49% said they intend to increase investments in ESG. CFOs also plan to expand their products and services, with more planning to do so inside North America than in other regions. With the mid-term elections behind us, CFOs named energy policy as the number one area their companies would like the U.S. Administration and Congress to provide clarity or make changes to in the year ahead. Corporate taxes and immigration policy were ranked second and third, respectively, on CFOs’ wish list.