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As recession fears fade, CFOs plan for transformation
Facing continued revenue headwinds and elevated costs, CFOs walk a precarious tightrope: protecting near-term financial health with purposeful — even self-funding — growth investments.
The good news is that CFO confidence is on the rise. PwC’s August 2023 Pulse Survey finds that only 8% of CFOs strongly agree there will be a recession in the next six months, down from 36% in 2022. But they also recognize the need for continued caution, with 67% citing near-term margin pressures as a top business risk. Others plan to revisit pricing models as falling prices and rising inventories still present near-term margin risks.
It’s no surprise that strategic cost reduction remains a key focus. Six in 10 (59%) CFOs say cost cutting is a top priority for the finance function in the next 12 months. In 2022, 38% listed cost cutting as a top-3 priority. But with the need for business reinvention accelerating, they’re shifting from protection to investment mode, prioritizing investments like new technology to support evolving business models and aligning environmental and social proposals with long-term company goals. They also expect these to pay for themselves, and 25% plan to fund these advancements by investing the returns from previous growth initiatives.
Strategic cost reduction tops the CFO agenda
59%
are prioritizing reducing cost as a percentage of total revenue for the next 12 months
As CFOs scrutinize expenditures, interest in tech-driven productivity is surging. Finance is looking to new tools to help predict where to cut costs without risking profitable growth. More than half (52%) are prioritizing the use of technologies such as generative AI (GenAI) and advanced analytics to build predictive models and strengthen scenario analysis capabilities.
Extracting the full value of these tech investments is a top concern, and many see having the right talent as the key to unlocking it. In the next year, 51% plan to hire in specific areas to drive growth. Others are accelerating M&A investments (38%) and exploring managed services models (26%) — in part to gain access to knowledge and technology that can help drive growth. Finding and developing the right AI and GenAI talent in particular is a challenge, especially for non-tech companies that may not be a traditional destination for these candidates.
While finance leaders may be feeling more confident about the economy, they’re still closely monitoring other risk areas. Seven in 10 (74%) CFOs say cyber attacks continue to be a top risk to their businesses, with 37% planning to revise enterprise risk management practices. And with OECD Pillar Two ramping up compliance pressure for the finance and tax teams, 33% are improving tech and processes to meet expanded requirements.
What you can do
Develop a multidimensional approach to cost management to offer more credible insights, better enterprise engagement and increased effectiveness when making course corrections.
Invest in the necessary talent to realize the full value of your technology investments, including training for your existing employees.
Get more on this topic
- Executives are increasingly optimistic about the business environment and their companies’ ability to mitigate risk. Find out more.
- What are the top strategic priorities for sector executives?
- What else is important to CFOs right now?
Powering change with tech-driven savings
45%
of CFOs plan to invest in GenAI in the next 12 to 18 months
Top-performing CFOs know that to accelerate enterprise transformation, they’ll need a self-funding budget to power it. They also understand the importance of assessing potential risks at all levels — transformation, business, program, technology and data, and security and controls — in order to increase value from investments.
As a result, CFOs aren’t shying away from smart investments that can drive out-sized performance despite keeping a tight rein on spending. Their top two strategic priorities? Nearly 30% say they’ll introduce new revenue streams and enter new markets, and an additional 26% plan to embed new technologies such as GenAI into their business models.
To pay for these investments, they’re turning to technology to boost productivity and cut costs. Fifty-two percent say it’s one of their top-3 transformation priorities. They’re also working with their C-suite colleagues to adjust budget priorities (43%), integrate strategic planning decisions and more nimbly respond to changing market conditions. Others are leaning heavily on efficiencies like supply chain optimization and refocusing on core business activities through divestitures to protect — or even grow — margins.
What you can do
- Have a clear business plan for any transformation program and build in a process to track quantifiable ROI and assess whether the program is creating value.
- Work with risk and technology peers and other business leaders as well as relevant stakeholders at the outset of transformation initiatives to help identify and mitigate potential issues.
- Assess whether you and your team have the necessary knowledge of what GenAI can do for your company. Build a training plan to get more out of these new tools and ways of working.
Rethink the potential of environmental sustainability
30%
are analyzing how climate change scenarios will impact financial performance
New ESG data reporting regulations are igniting a sense of urgency for many executives, including finance leaders: 41% cite not meeting sustainability commitments as a moderate or serious risk for their companies.
While compliance with these requirements may mean a complex transition to investor-grade reporting, CFOs’ traditional experience overseeing accounting and controls is a critical asset to accelerating preparedness. In fact, 39% of finance leaders report that they’ve already established policies and controls for climate data collection.
Delivering ESG reporting that stakeholders can trust is key, but it’s only the beginning. There’s a larger opportunity that extends naturally from finance leaders’ focus on long-term performance, and that’s shifting the enterprise focus from sustainability compliance to value creation. CFOs have useful tools — like those for forecasting and budgeting — that can help integrate sustainability into business strategy, and they can also help the business capitalize on opportunities like opening new revenue streams that include more sustainable products.
What you can do
When it comes to sustainability, think beyond compliance and focus on long-term value. CFOs can help lead the company in building greater resilience and stakeholder trust.
Work closely with your sustainability team to look beyond regulations and create an integrated plan to help deliver on climate commitments and fuel business growth.
Consider how leading on environmental issues can help you differentiate your company and help you attract and retain key employees.
About the survey
Our latest PwC Pulse Survey, fielded August 1 to August 8, 2023, surveyed 609 executives and board members from Fortune 1000 and private companies about the current business environment, the risks executives are facing and their company’s strategic plans and priorities. Of the respondent pool, 87 were CFOs.
Focused on reinvention
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