Risk appetite and a sense of optimism has returned to many finance directors after a couple of years in the doldrums, according to Deloitte’s latest quarterly survey of CFO sentiment – though some still fear the threat of a double-dip recession.
The report highlights that the willingness to take financial
risks is on the rise, with confidence levels in late December 2009 similar to
those seen in early 2008.
Stealing market share from overleveraged competitors and launching new
products and services will be high on the list of priorities for many CFOs in
the year ahead. Around 46% of respondents say launching new products or services
is among their top three aims in 2010, while nearly 40% put expansion into new
markets in their top three.
Thirty-three percent want to expand by way of acquisitions, signalling a
belief that we may be near the bottom of the market.
Liquidity and cashflow are no longer primary concerns for CFOs, with just 13%
of respondents citing this as a concern compared with 55% at the same time last
year.
By focusing on controlling cost, cashflow and increasing communication with
investors during the financial crisis, FDs have set the foundation for
confidence in their ability to manage the challenges and shifting financial
landscape in the year ahead.
The main priorities in 2008 and 2009 were maintaining relations with
shareholders and banks (80% of CFOs say their companies were successful in this
area during 2009), controlling labour costs and managing cashflow. Fifty-one
percent now say that increasing cashflow and reducing costs will be paramount.
Areas of weakness in 2009 include managing inventories and supply chains and
strategic planning and decision making within the business.
While the survey reveals a strong sense of optimism, there is also some
reticence among CFOs who are worried the UK economy is going to experience a
weak recovery or even a double-dip recession, with 48% reporting it was their
top economic concern for 2010.
Prioritisation of cash and cost control will remain paramount while the
potential impact of government policies change – from Chancellor Alistair
Darling’s plans to tackle the fiscal deficit, increased taxation and cuts in
public spending spooking 14% of respondents to the survey.
In terms of investment, CFOs think commercial real estate was undervalued at
the close of 2009, having judged it to be the most overvalued asset in 2007, but
thought government bonds and equities were overvalued.
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