CFOs Share Perspectives, Priorities, and Plans for 2023

Pessimism appears to be the prevailing sentiment among CFOs regarding their companies’ finance prospects for 2023, according to Deloitte’s fourth-quarter 2022 North American CFO Signals™ survey. Amid high levels of inflation, rising interest rates, fears of a possible recession, and geopolitical tensions on several fronts, CFOs project a gloomy picture.

“When comparing the most recent results against third-quarter 2022, CFOs lowered their year-over-year growth expectations across the board for key metrics, including revenue, earnings, dividends, capital spending, domestic hiring, and domestic wages,” says Steve Gallucci, national managing partner for the U.S. Chief Financial Officer Program at Deloitte LLP, and global leader for the CFO Program of Deloitte Touche Tohmatsu Limited. The greatest drop-offs were in revenue and earnings growth at 4.2% and 2.9%, respectively, down from 6.2% and 6.4% in third-quarter 2022. Looking to 2023, one in three CFOs point to economic challenges and a possible recession as the major constraint to achieving their companies’ financial performance goals. CFOs also indicate—although to a lesser extent—inflation and rising costs, shrinking consumer purchasing power, and inability to attract and retain talent/labor as constraints to meeting their financial performance goals this year. Amid such concerns, only 29% say now is a good time to be taking greater risk, the lowest level since the second-quarter 2020 CFO Signals survey.

More than half of surveyed CFOs are making cost management and financial performance their top two priorities in 2023, followed by growth, cited by 38% of CFOs. “Going further into 2023 with the continued uncertainty, cost management is going to be critical,” Gallucci says. “For example, CFOs are spending more and more time with their supply chain leaders to understand the drivers of costs and explore ways to stabilize them,” he adds, “and there will likely be some continued passing of costs in prices to customers.” In fact, 57% of CFOs in the most recent CFO Signals survey indicate their companies plan to raise prices for a substantial portion of their products/services to offset inflation.

When asked about their outlook on talent, most CFOs (74%) agree that their companies are likely to see talent/labor costs increase substantially in 2023. Interestingly, 41% say their organizations intend to hire more people than they let go. “We are in the midst of a very tight labor market with a labor shortage,” said Ira Kalish, chief global economist at Deloitte Touche Tohmatsu Limited, when speaking during Deloitte’s CFO 4Sight webcast on January 19. “Attracting people is therefore a very important issue, and so is retaining them,” he added.

While 84% of CFOs say their organizations expect to use automation and digital technologies to free people to use their talents for higher-value activities, 61% of CFOs say their organizations will implement automation and digital technologies to replace certain jobs previously performed by humans. In addition, 79% of CFOs expect their organizations to embed more automation/digital technologies into operations. More than one-third (37%) also report their organizations plan to reduce their real estate footprint. Less than one-quarter of surveyed CFOs (22%) indicate they will increase outsourcing of operations.

In addition, 40% of CFOs say they will repurchase shares in 2023, and 29% expect to reduce or pay down a significant proportion of their bonds/debt. Thirty-six percent say they will seek to reduce their cost of capital, and 26% expect their organizations to hold more cash in 2023.

Views on regional economies

For the year ahead, nearly all signs point downward as CFOs hold dimmer views of the future status of the economies in Europe, China, Asia excluding China, and South America, with North America as the exception. For North America, 29% of CFOs project the economy to be better in 12 months, the same proportion as in the prior quarter. Looking at Asia, excluding China, just 18% expect improvement a year out, compared to 25% in the third-quarter of 2022. In assessing South America’s economy, only 8% of surveyed CFOs expect an improvement in 12 months, down from 10% in the prior quarter.

CFOs are particularly pessimistic about the future states of the European and Chinese economies. Only 9% expect improvement in Europe’s economy one year from now, a decline from 11% in the prior quarter. In assessing China’s economy, 19% of CFOs anticipate better conditions 12 months ahead, a decline from 27% in the prior quarter. 

Geopolitics and instability—the external risks CFOs cited as most worrisome, even more so than inflation or recession—are likely factors in their outlooks for the regional economies. CFOs also cite policies and regulations, macroeconomics, labor scarcity and cost, and interest rates and their impact among their most concerning external risks. Other external risks are prices and supplies of commodities, particularly with respect to energy.

—by Patricia Brown, managing director and CFO Signals leader, Deloitte LLP, and Jennifer Malin, manager, CFO Program.