Finance leaders pursue growth while reining in costs
Finance leaders are taking a contrary approach amid economic conditions that have been largely portrayed as gloomy, according to Grant Thornton LLP’s CFO survey for the fourth quarter of 2022.
While the media has been quoting economists who are predicting a recession, the mood of CFOs participating in the survey was largely positive. The survey shows that CFOs ended 2022 with plans to go on offense rather than playing defense, despite the persistent inflation and seven interest rate hikes that punctuated a year of economic pain.
Respondents who were optimistic about the U.S. economy for the next six months outnumbered pessimists by more than two to one. The 54% of CFOs who reported being optimistic marked the highest percentage in the quarterly survey since 57% were optimistic in the fourth quarter of 2021 — months before runaway inflation led to rising interest rates and economic turmoil.
“In the previous quarter, we used the words ‘cautiously optimistic’,” said Sean Denham, Grant Thornton’s National Audit Growth Leader. “Over the past quarter, the stock market has held its own, inflation has decreased and unemployment rates continue to decline, so there have been reasons for optimism. Everyone has been waiting to see what the Fed does on interest rates, but the focus is on the annual and quarterly earnings reports.”
Chris Schenkenberg, Grant Thornton’s National Managing Partner for Regional Tax Business Lines, said wage pressures seem to be softening for some businesses. Meanwhile, energy prices in the U.S. haven’t yet experienced a price spike that many feared would accompany the winter weather while Russia’s war in Ukraine is affecting the energy markets.
“It leads you down a path of, if there is going to be a recession, it might be a softer landing, meaning that interest rates are now high enough to where the Fed can lower interest rates and it will be relatively short-lived,” Schenkenberg said.
CFOs’ optimism extends to their own organizations as well. Sixty-one percent of survey respondents predict that they will experience net profit growth over the next 12 months, year over year, and 40% expect growth of 6% or higher.
Even after precipitous interest rate increases, survey respondents show few signs of cutting investment in future growth or technological efficiencies that could give them an edge.
Four out of five CFOs said they plan to increase investment in digital transformation, confident that technological advancements present opportunities to operate more effectively with greater efficiency. In addition, 76% of finance leaders say they plan to increase investment in their financial planning and analysis functions and systems over the next year.
Chris Unruh, National Managing Principal, Technology Transformation for Grant Thornton, said companies only in a few cases are pausing between phases of an enterprise resource planning project, but most organizations are determined to complete this important work. “They may not start that next phase right away,” he said. “They may delay it a little bit, but in most cases, they’re continuing to move forward in some capacity.”
Contacts:
David Koppy
Principal, Growth Advisory Services
Grant Thornton Advisors LLC
David Koppy is a Principal within the Grant Thornton strategy practice focused on growth strategies.
Bellevue, WA
Industries
- Banking
- Manufacturing, Transportation & Distribution
- Media & entertainment
- Not-for-profit & higher education
- Private equity
- Services
- Retail & consumer brands
- Technology, media & telecommunications
Service Experience
- Advisory
- Operations and performance
- Strategy
- Technology alliances
- Technology modernization
Christopher P. Schenkenberg
National Tax Leader, Corporate Tax Solutions
Grant Thornton Advisors LLC
Chris Schenkenberg has extensive experience working in M&A, conducting tax due diligence reviews for both financial and strategic clients. He also has significant technical knowledge in acquisition structuring, divestiture planning and tax accounting methodologies.
Chicago, Illinois
Industries
- Manufacturing, Transportation & Distribution
- Technology, media & telecommunications
- Retail & consumer brands
Service Experience
- Tax
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