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CFO Signals™: Q2 2020
Reopening for business, but near-normal operating levels not expected until next year
What North America’s top finance executives are thinking—and doing.
CFO Signals™: Q2 2020
CFOs’ assessments of the economy in Q2
Each CFO Signals quarterly report over the last decade has highlighted the number and importance of factors that have changed in the time between surveys. To say the least, this quarter’s events make the time between all prior surveys seem positively tranquil.
Since the release of the last report, the global COVID-19 outbreak has dominated economic, social, and political life, and the pandemic’s fallout has been both severe and widespread. Accordingly, governments, businesses, and individuals worldwide have taken wide-ranging steps to adjust to drastically different economic and social conditions than existed just a quarter ago.
In last quarter’s survey, conducted just prior to the news of major spreading outside China and before equity markets suffered historic losses, COVID-19 concerns were already topping CFOs’ list of most worrisome risks, and expectations for company performance over the next year were relatively poor. Still, their economic outlook was actually beginning to improve on the heels of a then-new US-China trade deal.
Conditions have obviously changed dramatically since then, and the world has had to cope with the impacts of extensive global disruption. In response, governments and central banks have implemented extensive efforts to limit the virus’s spread, mobilize health and safety efforts, and bolster the liquidity of businesses and households.
While those efforts have brought some welcome relief, this quarter’s findings indicate that many management teams remain focused more on ensuring viability and adapting for near-term performance than on evolving their company for success post-crisis. Still, teams’ focus varies greatly by industry, and many appear to be putting in substantial work on survival, adaptation, and evolution at the same time.
While the world’s collective action may have helped slow the spread of the virus and aided the treatment of affected people, it has also produced sharp declines in economic activity and growing pressure to reopen business operations. Now, as governments begin to loosen restrictions, CFOs and their teams are making difficult choices about what actions to take and when.
To help CFOs check their teams’ thinking against that of their large company peers, this quarter’s survey examines companies’ go-forward plans and the assumptions and beliefs underlying them. Nearly half of CFOs say they will start allowing on-site work as soon as governments allow it, but about 45 percent say their efforts to work on-site will be limited by the expectation of a fall resurgence of the virus.
Three-fourths say they believe their company can sufficiently manage the risks of on-site work for substantial parts of their business, and they mostly do not expect to provide hazard pay to make it happen. Still, about 70 percent say those who can continue to work remotely will have the option of doing so.
When it comes to achieving near-normal levels of on-site work, 52 percent say effective on-site testing is necessary, with effective treatments and vaccines less so at 35 percent each. Thirty-six percent cite dependence on the reopening of school and daycare facilities.
Overall, however, 60 percent of CFOs do not expect to return to a pre-crisis level of operations in 2020. Instead, 21 percent expect to reach this milestone in 1Q21, with 39 percent saying 2Q21 or later. Accordingly, growth expectations for revenue, earnings, capital spending, and hiring have fallen to by far their lowest levels in the survey’s 10-year history.
As CFOs look to a post-crisis future, many say they expect substantially higher levels of automation and cloud computing, and they overwhelmingly expect more remote work (including within their finance teams). Accordingly, many also expect a smaller real estate footprint. What they mostly do not expect is less cross-border sourcing (many do expect more diversified supply chains), and they express mixed concern about credit and currency markets.
About Deloitte LLP's CFO Signals™ survey
CFO Signals™ is about CFO issues. This quarterly survey tracks the thinking and actions of leading CFOs—representing North America’s largest and most influential companies—across four predominant areas: business environment, company priorities and expectations, finance priorities, and personal priorities.
Learn more about Deloitte's CFO Signals™ survey.