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CFOs’ risk appetite at all-time high, claims Deloitte

RISK APPETITE among the CFOs of the UK’s largest companies has reached a seven year high, according to the Deloitte CFO Survey for Q3 2014.

Deloitte’s survey, which gauged the views of 118 CFOs of FTSE 350 and other large private UK companies, suggests that risk appetite is being supported by a rebound in the US economy, UK growth and easy access to finance.

Around 72% of CFOs felt now is a good time to take risk onto their balance sheets, up from 65% in Q2 2014 and three times the level (23%) seen in Q3 2012.

Perception of risk, too, uncertainty rose in the third quarter for the first time in two years, driven at least in part by Scotland’s independence referendum. Around 56% said the level of financial and economic uncertainty facing their business was above normal, high or very high, up from 49% in Q2 2014.

Sentiment about the eurozone has deteriorated markedly, with a net percentage of -39% seeing improving prospects for the region, down from +54% in Q1 2014. Confidence in emerging markets continued to decline, with a net balance seeing an improvement of -13%. Despite that, CFOs are upbeat on prospects for the UK, a net balance of +85% reported improved growth prospects.

Deloitte chief economist Ian Stewart said: “With a resurgent US economy, good growth in the UK and plentiful liquidity, CFOs have shrugged off the effects of rising uncertainty and weakness in Europe, sending corporate risk appetite to a seven year high. Expectations for corporate revenues and margins remain close to the four year high seen in Q2.

“Large corporates face few obstacles to raising finance, credit is cheaper, and more available, than at any time in the last seven years. In reversal of the situation during the credit crunch, CFOs say that financing conditions are one of the key factors enabling companies to raise investment spending.”

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