Quarter 1 2013 survey results
Leading business advisers
The Deloitte CFO Survey The role of the CFO in challenging times
Download our dedicated Deloitte CFO Survey app at www.deloitte.com/ie/cfoapp
Contents
Quarter 1 overview 3
Snapshot of key findings 4
Key events and economic trends 6
Survey findings
Section 1 – The economy and your company – financing, debt and credit
8
Section 2 – The appropriateness of Irish economic policy in areas which are vital to the long term success of business
13
Section 3 – The role of the CFO and finance function
16
Section 4 – Corporate priorities for CFOs in the next 12 months
19
Contacts
About the surveyThis is the fifteenth in a series of quarterly surveys of Chief Financial Officers of major Irish based companies. The survey was conducted in March 2013, and CFOs of listed companies, large private companies and Irish subsidiaries of overseas multi-national companies participated.
The Deloitte CFO Survey is the only survey that seeks to establish the views of CFOs in relation to the financial markets, economic outlook and business trends on a quarterly basis.
Due to rounding, responses to the questions covered in this report may not aggregate to 100.
Shane MohanPartner, Deloitte
The first quarter of 2013 was anything but a slow, gradual start to the year. Reducing the national debt burden was a recurring theme making the headlines in Quarter 1- from the liquidation of Anglo to the promissory note deal, from the publication of the Finance Bill to Croke Park II, the last three months have seen Ireland taking strides towards managing our national debt through both deferred payments and returning to the international bond market.
Sentiment amongst CFOs indicate that they welcome the promissory note deal, with over three-quarters of respondents considering it an effective step on the road to recovery. The creation of jobs is also a crucial step to recovery and remains a central priority for the Government. Yet, CFOs are not wholly convinced that the targets set out by the Government’s ‘Action Plan for Jobs’ strategy are achievable. Our survey findings suggest that CFOs believe this strategy will succeed somewhat in boosting economic growth; however none are convinced that it will have a very significant impact.
To ensure that the Deloitte CFO Survey continues to be effectual and relevant for the finance leaders of today, this quarter we focus on both the internal and external environment. The level of external financial and economic uncertainty remains high and the perception of market risk has also increased. The role of the CFO is evolving to address these difficult times and both the CFO and finance function can play a strategic role in decision making and organisation transformation. 88% of CFO respondents recognise the need to place greater emphasis on managing change to drive business transformation and evaluate and execute strategies. 65% of CFO respondents believe part of their role to be that of a gate keeper of risk and provide a financial perspective to risk management. Company performance, multiplicity of stakeholder relationships and economic or strategic ambiguity are considered to be the top three most challenging aspects of the CFO’s role today.
CFOs are setting corporate priorities for the next 12 months and it is interesting to note that 69% of survey respondents consider their corporate strategy to be expansionary rather than defensive in the current climate. CFOs are looking to both long term growth for their products and services and actual or expected growth in the US and Asia for a positive effect on their companies' investment plans for the next 12 months. Revenue is the financial metric most expected to increase and operating costs and bank borrowing are the financial metrics most expected to decline over the next year. This suggests that organisations are looking to other markets to increase revenues while tightening up their operating model to improve their current cash flow position.
According to our survey findings, talent retention remains a priority despite pressures to engage in cost cutting and downsizing. Since companies can easily match compensation packages, Deloitte believes companies can differentiate themselves in the talent marketplace by going beyond financial incentives and creating customised retention strategies that address issues such as career advancements and greater recognition. The availability of people or skill sets is not considered by CFOs to be a current industry challenge. However, anecdotally, CFOs would say it’s hard to get high calibre people or people with specific skills, for example US GAAP experience.
Quarter 1 overview
3
Snapshot of key findings
16 OPTIMISM%Net optimism increased by 16% in Q1 2013.
56 TARGET OBJECTIVES%of CFO respondents consider the 2016 target objectives for the ‘Action Plan for Jobs’ to be achievable.
78 IRELAND’S DEBT%of respondents believe the recent promissory note deal is an e�ective means of reducing Ireland’s immediate debt burden to the EU.
83 RISK%of respondents cite market risk as the largest threat to their company.
!
4
88 CHANGE%of respondents recognise the need to place greater emphasis on managing change to drive business transformation and evaluate and execute strategies.
59 GROWTH%of respondents believe that actual or expected growth in the US and Asia will have a positive e�ect on their companies’ investment plans for the next 12 months.
94 TALENT%of respondents believe that talent retention remains a priority despite pressures to engage in cost cutting and downsizing.
69 EXPANSIONARY%of respondents believe their corporate strategy to be expansionary rather than defensive.
5
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Febuary
Febuary
March
March
January
January
/$: 0.81 /£: 1.32
Bond Yield to Maturity ISEQ® Overall
3,400.00
3,500.00
3,600.00
3,700.00
3,800.00
3,900.00
4,000.00
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Bond Yield to Maturity ISEQ® Overall
/$: 1.32 /£: 0.81
/$: 1.28 /£: 0.85
Yied
on
Irish
Gov
t.
FTSE 100: 5,897.81 Nasdaq: 3,019.51
FTSE 100: 6,411.70 Nasdaq: 3,267.52
FX
rate
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esti
cec
on
om
yY
ield
on
Iri
sh
Go
vern
men
t b
on
ds
Glo
bal
m
arke
tsG
lob
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eco
no
my The US House of Representative pass a Bill
on the 'Fiscal Cliff', preventing an automatic increase in taxes and spending cuts. In reaction to this, key European markets were up between 2.19% and 3.81%, while in Asia Hong Kong's Hang Seng index shot up 2.9% at the close.
Ireland beginsthe first day of its six month EU Presidency.
The NTMA sells €2.5 billion worth of five year bonds in its first syndicated sovereigndeal since 2010.
Údarás na Gaeltachtarelease their end of year report highlighting how their client companies created 700 new jobs in 2012.
The Dáil passes emergency legislation to liquidate IBRC, asspeculation surrounding the restructuring of the Irish promissory note continues.
The Irish Government reach a deal with the ECB which sees the promissory note replaced by €25 billion worth of long-term bonds.
The Central Bank publish statistics showing mortgage lending was down 1.6% for the year ending December 2012. Deposits were up 1% for thesame period as banks continued to deleverage.
Ebay announce450 new jobs intheir EuropeanOperation Centre in Dundalk.
NTMA raises €5 billion from the sale of new 10 year benchmarkbonds. The funds were raised at a yield of 4.15%.
The CSO release a report highlighting that the CPI for the year ending February 2013 was up 1.1% compared with February 2012.
AIB put a portfolio of loans with par value of £200 million on the market. The portfolio is expected to be sold for approx. 50% of itsoriginal value.
Figures released by the CSO show that total exports in 2012 were at their highestlevel ever after a 5.5%annual increase.
CSO Live Register figures show unemployment rate remains unchanged at 14.1% in February 2013.
Worldwide unemployment rose by four million in 2012 according to a report released by the UN.
World leaders gather in Davos,Switzerland for the World EconomicForum AnnualMeeting.
According to statistics released by the US Department of Commerce, the US economy contracted at an annualised rate of 0.1% in Q4 2012. This is the first time in over three years that the US economy has contracted.
GDP fell by 0.6% in the euro area during Q4 2012 compared with the previous quarter, according to flash estimates published by Eurostat.
Sterling loses its AAA rating as Moody's Rating Agency cuts Britains rating to AA1.
Chinese custom administration release statistics showing exports are up 15.8% for Feb 2013 compared with Feb 2012, while imports are down 15.2% for the same period.
The US CommerceDepartment releasestatistics showing that consumer spending for February increased by 0.7% from January.
Negotiation between Cyprus and the IMF/ECB are finalised as a €10 billion bailout is agreed. €1 billion of this will be funded by the IMF with the remainder being funded by the ECB/eurozone countries.
The Cypriot parliment rejects the proposed €10 billion EU led bailout, which required €5.8 billion to be seized directly from Cypriot bank deposit accounts. The crisis results in increased protest in Cyprus as banks close for 12 consecutive days.
ISEQ in
dex valu
e
Key events and economic trends
6
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Febuary
Febuary
March
March
January
January
/$: 0.81 /£: 1.32
Bond Yield to Maturity ISEQ® Overall
3,400.00
3,500.00
3,600.00
3,700.00
3,800.00
3,900.00
4,000.00
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Bond Yield to Maturity ISEQ® Overall
/$: 1.32 /£: 0.81
/$: 1.28 /£: 0.85
Yied
on
Irish
Gov
t.
FTSE 100: 5,897.81 Nasdaq: 3,019.51
FTSE 100: 6,411.70 Nasdaq: 3,267.52
FX
rate
sD
om
esti
cec
on
om
yY
ield
on
Iri
sh
Go
vern
men
t b
on
ds
Glo
bal
m
arke
tsG
lob
al
eco
no
my The US House of Representative pass a Bill
on the 'Fiscal Cliff', preventing an automatic increase in taxes and spending cuts. In reaction to this, key European markets were up between 2.19% and 3.81%, while in Asia Hong Kong's Hang Seng index shot up 2.9% at the close.
Ireland beginsthe first day of its six month EU Presidency.
The NTMA sells €2.5 billion worth of five year bonds in its first syndicated sovereigndeal since 2010.
Údarás na Gaeltachtarelease their end of year report highlighting how their client companies created 700 new jobs in 2012.
The Dáil passes emergency legislation to liquidate IBRC, asspeculation surrounding the restructuring of the Irish promissory note continues.
The Irish Government reach a deal with the ECB which sees the promissory note replaced by €25 billion worth of long-term bonds.
The Central Bank publish statistics showing mortgage lending was down 1.6% for the year ending December 2012. Deposits were up 1% for thesame period as banks continued to deleverage.
Ebay announce450 new jobs intheir EuropeanOperation Centre in Dundalk.
NTMA raises €5 billion from the sale of new 10 year benchmarkbonds. The funds were raised at a yield of 4.15%.
The CSO release a report highlighting that the CPI for the year ending February 2013 was up 1.1% compared with February 2012.
AIB put a portfolio of loans with par value of £200 million on the market. The portfolio is expected to be sold for approx. 50% of itsoriginal value.
Figures released by the CSO show that total exports in 2012 were at their highestlevel ever after a 5.5%annual increase.
CSO Live Register figures show unemployment rate remains unchanged at 14.1% in February 2013.
Worldwide unemployment rose by four million in 2012 according to a report released by the UN.
World leaders gather in Davos,Switzerland for the World EconomicForum AnnualMeeting.
According to statistics released by the US Department of Commerce, the US economy contracted at an annualised rate of 0.1% in Q4 2012. This is the first time in over three years that the US economy has contracted.
GDP fell by 0.6% in the euro area during Q4 2012 compared with the previous quarter, according to flash estimates published by Eurostat.
Sterling loses its AAA rating as Moody's Rating Agency cuts Britains rating to AA1.
Chinese custom administration release statistics showing exports are up 15.8% for Feb 2013 compared with Feb 2012, while imports are down 15.2% for the same period.
The US CommerceDepartment releasestatistics showing that consumer spending for February increased by 0.7% from January.
Negotiation between Cyprus and the IMF/ECB are finalised as a €10 billion bailout is agreed. €1 billion of this will be funded by the IMF with the remainder being funded by the ECB/eurozone countries.
The Cypriot parliment rejects the proposed €10 billion EU led bailout, which required €5.8 billion to be seized directly from Cypriot bank deposit accounts. The crisis results in increased protest in Cyprus as banks close for 12 consecutive days.
ISEQ in
dex valu
e
7
Survey findingsSection 1: The economy and your company – financing, debt and credit
Domestic banks remain the preferred method of funding in Quarter 1 2013 with an increase of 7% from Quarter 4 2012. The preference for overseas funding and leasing funding grew marginally in the last quarter.
Over the past year, preferences have shifted from overseas bank financing, which remains well below its twelve month high of 30% in Quarter 3 2012.
The net CFO perception of finance cost has improved slightly this quarter, however a net 53% still believe it to be expensive. This is down from 62% in the last two quarters and is a two year low.
A net 31% of CFOs believe that finance is difficult to obtain.
Overall there has been a slight improvement in the perception of cost and availability of finance since the beginning of 2012.
Figure 1: What is your company, or your parent company’s, preferred method of funding?
What is your company, or your parent company’s, preferred method of funding?
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Bank (domestic)
Reduced dividendpayments
Bank(overseas)
Equity Corporatebonds
0
10
20
30
40
50
60
40%
35%
26%
30%
14% 13%
16%17%
18%
12% 13%
0%
6%
3%
46%
53%
16%
12%
18%
4%4%
0%
4%
0%
Leasing
Figure 2: How would you rate the overall cost of new credit for Irish corporates?How would you rate the overall cost of new credit for Irish corporates?
Q2 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
62%68%
62%
76%81%
62%62%53%
-40% -44%-38%
-68%
-50%
-29%-23%
-31%
Availability
Cost
-80
-60
-40
-20
0
20
40
60
80
100
CostlyEasily available
CheapHard to get
Q3 2011
Domestic banks remain the preferred method of funding in Quarter 4 2012 with 46% of respondents citing it as their top choice for external finance.
8
When compared to our UK and Swiss counterparts in relation to the cost and availability of credit, Ireland continues to rank at the bottom.
Availability of credit is perceived as most easily obtained in the UK.
According to 31% of respondents domestic banks are the most difficult source of funding this quarter.
The availability of credit from overseas banks has improved in the past quarter with a net 8% of CFOs rating this as easily available.
Figure 3: European comparison of cost and availability of credit.
Figure 4: How would you rate the overall availability of new credit for Irish corporates compared to six months ago from the following sources?
How would you rate the overall availability of new credit for Irish corporates compared to six months ago from the following sources?
Q2 2012 Q3 2012
-43%
-50%-51%
-33%-31%
-17%-18%
8%
Easily available
Hard to get-60
-50
-40
-30
-20
-10
0
10
-29%
-23%
-16%
6%
-29%
-23%
-16%
-4%
Overseas banks
Corporate bonds
Domestic banks
Equity
Q4 2012 Q1 2013
9
The CFO opinion of Irish Government bond valuations has peaked this quarter, with a net 28% of respondents believing them to be overvalued.
Net optimism has increased by 16% this quarter. When the responses over the past year are considered, there is an uncertain sense of optimism amongst CFOs for their companies’ financial performance as optimism dips and spikes from quarter to quarter.
Figure 5: How do you currently rate Irish Government bond valuations?
How do you currently rate Irish Government bond valuations?
Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
4%
-4%
23%
9%
-5%
0%
28%
2%
High
Government bond valuations
Low-5
0
5
10
15
20
25
30
Figure 6: Compared with three months ago how do you feel about the financial prospects for your company?
Compared with three months ago how do you feel about the �nancial prospects for your company?
Q2 2012 Q3 2012 Q4 2012 Q1 2013
17%
0%
33%31%
Optimistic
Sentiments on your company’s financial prospects
Pessimistic0
5
10
15
20
25
30
35
10
A net 28% of CFOs have indicated that their companies’ gearing has fallen during the last 12 months. This is the most significant drop reported in the last two years (since Quarter 3 2011).
72% of CFOs who responded to the survey rate the level of external financial and economic uncertainty facing their businesses as high or very high.
28% of respondents do not consider this uncertainty facing their business as abnormal.
Figure 7: How has your company’s gearing changed since this time last year?How has your company’s gearing changed since this time last year?
Q2 2011
Q3 2011
Q4 2011
Q1 2012
9%
-12%
-4%,
-6%
-2%
0%
-13%
-28%
Q2 2012
Q3 2012
Q42012
Q1 2013
-30
-25
-20
-15
-10
-5
0
5
10
Figure 8: How would you rate the level of external financial and economic uncertainty facing your business?
How would you rate the level of external financial and economic uncertainty facing your business?
Very High Very LowHigh Normal Low0
10
20
30
40
50
60
70
80
5%
67%
28%
0% 0%
11
Unsurprisingly, the majority of CFOs, at 83%, continue to believe that market risk poses the largest threat to their company. This is the highest percentage reported for market risk in the past year and is up from 59% in Quarter 3 2012.
Figure 9: Which category of risk poses the largest threat to your company?Which category of risk poses the largest threat to
your company?
Strategic
Operational
Market
Financial
11%0%
83%
6%
Deloitte perspective:An increase in CFO optimism was evident this quarter despite the high perception of external financial and economic uncertainty facing their businesses and also, the increasing belief that market risk poses the largest threat.
The preference for domestic funding is growing, however a net 31% consider domestic funding to be difficult to obtain and a net 53% believe it to be costly. Domestic banks continue to show a dampened appetite for lending as they continue to fight to return to stability and achieve the Government’s lending targets.
CFOs may find that tightening their operating model is the best option to improve their cash flow position. This can be achieved in a variety of different ways. Our experience with clients however suggests that the focus should be on sustainable enterprise-wide cost savings which will deliver long-term cost reductions and operating efficiencies while improving short-term cash flow. Depending on the priorities of a company, these enterprise cost reduction measures can include organisational restructuring, supply chain improvements, implementation of shared services, process and technology integration and tax structure arbitrage amongst others.
12
Section 2: The appropriateness of Irish economic policy in areas which are vital to the long term success of business
78% of CFOs are satisfied that the recent promissory note deal is an effective means of reducing Ireland’s immediate debt burden to the EU.
88% of CFOs believe that the promissory note deal will be beneficial to the Irish economy; however of this, only 44% believe that it will also be beneficial to Irish businesses.
Figure 10: Do you believe the recent promissory note deal is an effective means of reducing Ireland’s immediate debt burden to the EU?
Yes
No
Do you believe the recent promissory note deal is an effective means of reducing Ireland's immediate debt burden to the EU?
78%
22%
Figure 11: Do you believe that the promissory note deal will be beneficial to the growth of Irish businesses or is it more beneficial to the Irish economy?
Do you believe that the promissory note deal will be beneficial to the growth of Irish Businesses or is it more beneficial to the Irish economy?
0
10
20
30
40
5044% 44%
12%
0% 0%Beneficial to
Irish businesses and the economy
Beneficial to the Irish economy only
Beneficial to Irish businesses only
No effect on Irish business or
the economy
Beneficial to Irish reputation only
13
50% of CFOs are confident that the Government’s strategy on job creation will have a positive impact on economic and fiscal matters; however, none of the CFOs surveyed believed that the impact will be significantly positive.
Opinion is divided on how achievable the targets set out in the ‘Action Plan for Jobs’ are. Just over half believe that the target to create 100,000 new jobs by 2016 is achievable, with 61% believing that the 2020 target to have two million people in employment is achievable.
Figure 12: The ‘Action Plan for Jobs’ introduced by the Government in February 2012 outlines the Government’s strategy on job creation. The plan targets to create 100,000 new jobs by 2016 and have 2 million people in employment by 2020. How successful do you think the Government have been in implementing this strategy to date? What impact do you believe this action plan will have on boosting fiscal and economic matters?
The ‘Action Plan for Jobs’ introduced by the Government in February 2012 outlines the government’s strategy on job creation. The plan targets to create 100,000 new jobs by 2016 and have 2 million people in employment by 2020. How successful do you think the Government have been in implementing this strategy to date? What impact do you believe this action plan will have on boosting fiscal and economic matters?
0
10
20
30
40
50
0%
50%
39%
0% 0%
11%
Very positive impact Some positive impact
Minimal impact Some negative impact
Very negative impact
Too early to judge
Figure 13: Do you consider these targets to be achievable?
Do you consider these targets to be achievable?
2016 Target 2020 Target0
10
20
30
40
50
60
70
80
56%
44%
61%
39%
Achievable
Not achievable
14
Sentiment amongst CFOs is divided regarding when both the Irish and the European economies will recover. 44% of CFOs believe that it will be the latter half of 2014 before the eurozone returns to growth. However, sentiment amongst CFOs regarding their individual companies are relatively more positive as 39% consider that their companies have already returned to growth.
Figure 14: In your view when will- (the eurozone return to growth, your company return to growth, the Irish economy return to growth)?
In your View When Will? (The Eurozone Return to Growth, Your company return to growth, The Irish economy return to growth
The Irish economy return to growth
Your company return to growth
The eurozone return to growth
H1 2015
H2 2014
H1 2014
H2 2013
Alreadyreturned
29%11%
22%
12%
44%
29%28%28%
6%22%
6%
24%39%
0%
0%
0 10 20 30 40 50
Deloitte perspective:The first quarter of 2013 was significant for both the Irish and the European economies. Domestically, the quarter was defined by a number of key economic events, namely the deal on the Irish promissory note and Ireland’s return to the bond markets. Yet it was a turbulent quarter for the eurozone, as the single currency faced on-going threats posed by the Cypriot crisis. Sentiments amongst CFOs indicate that they welcome the promissory note deal, with over three-quarters considering it an effective step on the road to recovery. This is unsurprising considering the fact that the expected effect of this deal is to lower the burden of the promissory note by a third, or €8 billion in today’s money. It remains to be seen whether the savings from this deal will be injected into the economy and availed of to ease next year’s budget.
The creation of jobs is also a crucial step to recovery and remains a central priority for the Government. Yet CFOs are not wholly convinced that the targets set out by the Government's ‘Action Plan for Jobs’ strategy are achievable. Sentiment suggests that CFOs believe this strategy will succeed somewhat in boosting economic growth; however none are convinced that it will have a very significant impact. This may be attributable to the fact that unemployment stands at over 14% in Ireland, equating to almost 295,000 of the labour force being unemployed.
Overall, opinion remains divided on when exactly the Irish and European economies will recover. Forecasters have predicted marginal growth this year for Ireland of approximately 1%. In Europe, unemployment is at a record high while eurozone GDP is widely expected to have contracted for a sixth consecutive quarter in the first three months of 2013 with forecasters predicting another year of modest contraction for the eurozone as a whole in 2013.
Yet this cloud is not without a silver lining, as 39% of CFOs believe that their companies have already returned to growth. This is an extremely positive indication, and is reflective of the perseverance of Irish businesses in these challenging economic times.
15
Managing company performance clearly presents the greatest challenge for CFOs. 40% of respondents identified company performance as the top challenge with the multiplicity of stakeholder relationships ranked as the second most challenging aspect of the CFO’s role (20%). Dealing with uncertainty follows closely behind the top two challenges as 16% of CFOs consider economic or strategic ambiguity to be the third most challenging aspect to their role.
88% of CFOs recognise the need to place greater emphasis on managing change to drive business transformation, evaluate and execute strategies. This reflects the expanding role of the CFO and the growing involvement in strategy and change initiatives. Similarly, 82% of respondents are placing greater emphasis on developing relationships with senior executives and alignment on strategic decision making and financial objectives.
Risk is also a priority for CFOs reflecting the continuously uncertain market conditions. 65% of respondents recognise the need to place greater emphasis on their role as a gatekeeper of risk and the requirement to provide a financial perspective to risk management.
Figure 15: As Head of Finance/CFO, what are the top three most challenging aspects of your role?
Multiplicity of stakeholder relationships
Company performance
Economic or strategic ambiguity
Changing regulatory and governance requirements
Building the right capacity and capability within your finance team
Breadth of responsibility
Poor quality/quantity/reliability of information
Other
As Head of Finance / CFO, what are the top 3 most challenging aspects of your role?
20%
40%
16%
6%
4%
10%
2% 2%
Figure 16: What elements of your role as CFO have evolved in recent years? Please indicate below the degree to which emphasis has changed:
What elements of your role as CFO have evolved in recent years? Please indicate below the degree to which emphasis has changed:
0 20 40 60 80 100
60%
18%59%
65% 12%
88%
25% 69% 6%
40%
12%
23%
47% 6%
35%65%
47%
82% 18%
23%
0%
0%Developing the CFO/CEO relationship and alignment on
strategic decision making and financial objectives
Acting as a gatekeeper on risk and providing a financial perspective to risk management
Building an integrated performance management and accountibility framework accross the business
Developing a constructive and supportive, but independent relationship with the audit committee
Liaising with external stakeholders and providing quality information to fortify investor relations
Managing the change agenda to drive business transformation, evaluate and execute strategies
Poor quality/quantity/reliability of information
Relationship with the board
No changeGreater emphasis
Less emphasis
0%
0%
Section 3: The role of the CFO and finance function
16
Transaction processing (27%), followed by consolidate, close and report (23%) and performance and decisions (19%) are considered to be the top three most time consuming activities performed by the finance function. This indicates that the more traditional aspects of the CFO’s role continue to constitute the greatest portion of a CFO's time.
As the finance function evolves and interacts with other organisational functions, CFOs are increasingly involved in influencing non-financial as well as financial measures. This is reflected by survey respondents as 94% of CFOs disagree with having finance focused solely on financial reporting. At the same time, 59% of respondents believe that the finance function spends too much time on financial and management reporting rather than understanding what is driving the business.
64% of CFOs believe that business managers have a good set of key performance indicators (financial and non-financial to aid decision making). In addition, 94% of those surveyed believe that the finance function has a good understanding of the organisation’s future expected performance.
Figure 17: What are the top three most time consuming activities performed by the finance function?
Transaction processing
Consolidate, close and report
Performance and decisions
Risk, controls and capital
Regulation and governance
Strategy and execution
What are the top 3 most time consuming activities performed by the Finance Function?
27%
23%19%
14%
3%
14%
Figure 18: Please state whether you agree or disagree with the following statements on performance management:
Please state whether you agree or disagree with the following statements on performance management:
0 20 40 60 80 100
11% 17%
94%6%
18% 18%64%
6%94%
59% 12% 29%
72%
0%
0%
No opinionAgree Disagree
The finance function spends too much time on financial and management reporting rather than
understanding what is driving the business
The finance function has good understanding of the organisation’s future expected performance
Business managers have a good set of key performance indicators (financial and non-financial to aid decision making)
Finance should focus on financial reporting and let the business focus on non-financial measures
The finance function should provide business managers with the facility to develop ad hoc
reports on finance and operational performance
17
Deloitte perspective:The expanding role of the CFO to incorporate a greater emphasis on strategy and overall company performance represents a key theme, reflecting the evolving role of the CFO and the finance function. CFOs are also confident in their ability to manage and be involved in the strategic direction of the organisation, underpinned by the 94% of respondents who believe that the finance function has a good understanding of the organisation’s future expected performance. The need to juggle various initiatives including organisational change and transformation will continue to grow in importance for CFOs, diminishing the time spent on traditional finance activities such as transaction processing, consolidation, close and reporting activities.
The expanding role of the CFO to incorporate a greater emphasis on strategy and overall company performance represents a key theme, reflecting the evolving role of the CFO and the finance function.
Interestingly, given the current economic climate, 69% of CFOs consider their corporate strategy to be expansionary. Nearly a third of participants consider their corporate strategy to be defensive.
Unsurprisingly the majority of CFOs (82%) believe that market uncertainty will have a negative effect on their company’s investment plans for the next 12 months.
82% of CFOs believe that long term growth for their products and services will have a positive effect on their company’s investment plans for the next 12 months while this positive sentiment was cited by 59% of CFOs in relation to actual or expected growth in the US and Asia.
Figure 19. Would you consider your corporate strategy expansionary or defensive?
Expansionary
Defensive
Would you consider your corporate strategy? Expansionary, Defensive
69%
31%
Figure 20: What effect do the following factors have on your company’s investment plans for the next 12 months?
What e�ect do the following factors have on your company’s investment plans for the next 12 months?
Positive
Neutral
Negative
Market uncertainty
Expected growth in the Euro area
Actual or expected growth in Ireland
Cost and availability of external finance
Availability of internal finance
Actual or expected growth in the US and Asia
Actual or expected growth in the emerging markets
Long term growth for your products and servies
12%
35%41%
24%
24%47%
29%
18%59%
23%
44%50%
6%
0%
0%
59%41%
47%47%
6%
82%18%
6%82%
0 20 40 60 80 100
Section 4: Corporate priorities for CFOs in the next 12 months
19
Revenue, at 65%, is the financial metric most expected to increase over the next 12 months. This is followed by operating cash flows and levels of cash and cash equivalents at 53%.
41% of CFO respondents expect operating costs and 35% expect bank borrowing to decline over the next 12 months.
The majority of CFOs expect no change in equity issuance, dividends/share buy backs, bond issuance and inventory levels.
Talent retention remains a priority despite pressures to engage in cost cutting and downsizing, according to 94% of CFO respondents.
Figure 21: What change, if any, do you expect in the following financial metrics over the next 12 months?
What change, if any, do you expect in the following �nancial metrics over the next 12 months?
0 20 40 60 80 100
53%
100%
17% 65% 18%
12%
53%
65%
6% 94%
35%
53% 47%
88%12%
24% 41%
17% 18%
35% 12%
53% 35%
18%
35% 30%35%
6%
47% 47% 6%
76% 18%
29%
35% 35% 30%
0%0%
Discretionary spending
Operating margins
Inventory levels
Capital expenditure
Hiring
Equity issuance
Financing costs
Bank borrowing
Operating cash flows
Revenues
Dividends/share buy backs
Operating costs
Levels of cash and cash equivalents on balance sheet
Bond issuance
No changeExpected to increase
Expected to decline
0%
0%
Figure 22: Has retention of talent remained a priority in your firm despite pressures to engage in cost cutting and downsizing?
Yes
No
Has retention of talent remained a priority in your firm despite pressures to engage in cost cutting and downsizing?
94%
6%
20
CFO respondents rank pricing trends at 22%, market contraction (declining demand/customer base) at 22% and industry regulation/legislation at 12% as the top three industry challenges currently facing their businesses.
Availability of people/skill sets is not considered to be an industry challenge currently.
As expected, market uncertainty is ranked as the top external financial challenge facing CFO respondents’ businesses today. Low economic growth at 23% and the global recession at 15% are ranked as the second and third top external financial risks.
Figure 23: What are the top three industry challenges currently facing your business today?
What are the top three industry challenges currently facing your business today?
0 5 10 15 20 25
22%
22%
12%
11%
10%
6%
6%
3%
2%
2%
2%
2%
0%
Pricing trends
Market contraction (declining demand/customer base)
Industry regulation/legislation
Input prices
Changing cost structures
New competitive tactics
Overcapacity/excess inventory
Market growth (increasing number of products/services/customers)
Product substitutes
Foreign competition
Mergers and aquisitions
New market entrants (domestic)
Availabilty of people/skill sets
Figure 24: What are the top three external financial challenges currently facing your business today?
What are the top three external �nancial challenges currently facing your business today?
9%
15%
13%
23%
40%
Europe’s soverign debt crisis
Global recession
Market uncertainty
Financial stress
Low economic growth
21
Deloitte perspective:Given the current economic landscape it is becoming increasingly important for businesses to set corporate priorities and objectives for the year ahead.
It is interesting to note that the majority of CFOs consider their corporate strategy to be expansionary rather than defensive considering the fact that market uncertainty continues to be the top external financial challenge facing their businesses. This indicates that businesses are developing proactive strategies to expand and to address the difficult environment in which they are operating.
Despite pressures to engage in cost cutting and downsizing, talent retention remains a priority. Since companies can easily match compensation packages, Deloitte believes companies can differentiate themselves in the talent marketplace by going beyond financial incentives and creating customised retention strategies that address issues such as career advancement and greater recognition. The availability of people and skill sets is not considered to be an industry challenge however, anecdotally, CFOs would say it’s hard to get high calibre people or people with specific skills, for example, US GAAP experience.
While revenues, operating cash flows and levels of cash and cash equivalents on the balance sheet are the metrics most expected to increase over the next 12 months, operating costs, bank borrowing, discretionary spending and operating margins are the financial metrics most expected to decline over the next 12 months. Overall it would seem that businesses are trying to increase their cash flow position by increasing revenues and tightening up their operating costs and margins.
Shane MohanPartnerT: +353 1 417 2543E: [email protected]
Jennifer CaseyManagerT: +353 1 417 3813E: [email protected]
If you would like further information on the Deloitte CFO Survey or wish to participate in the future, please contact:
For more information on the Deloitte CFO Survey please contact:
Shane MohanPartner, Management ConsultingT: +353 1 417 2543E: [email protected]
Alan FlanaganPartner, Management ConsultingT: +353 1 417 2873E: [email protected]
Tom CassinPartner, AuditT: +353 1 417 2210E: [email protected]
Pádraic WhelanPartner, TaxationT: +353 1 417 2848E: [email protected]
Michael FlynnPartner, Corporate FinanceT: +353 1 417 2515E: [email protected]
Cathal TreacyPartner, AuditT: +353 61 435511E: [email protected]
ContactsDublinDeloitte & ToucheDeloitte & Touche HouseEarlsfort Terrace Dublin 2 T: +353 1 417 2200 F: +353 1 417 2300
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