Most Chief Financial Officers (CFOs) are focused on growth and turning the lessons from the pandemic into a guide for the future, according to a recent survey by Grant Thornton.
This survey reveals that many CFOs plan to cut travel and real estate expenses in the coming year and beyond. Of the 250 finance chiefs surveyed in February 2021, 31 percent plan to minimize real estate and facilities expenses over the next year, while 32 percent plan to permanently decrease their company’s real estate footprint. Further, 45 percent expect a decrease in travel expenses over the next year, while 41 percent plan to decrease travel expenses permanently.
The survey also shows that finance leaders found unexpected upsides over the past year: more than 60 percent of CFOs pointed to improved flexible and remote work environments at their companies — and more than 40 percent reported improved collaboration. Similarly, 40 percent noted improved business processes and an ability to better focus on strategy. These findings came as something of a surprise in a year when businesses have either severely curtailed face-to-face interactions or eliminated them entirely.
“Sometimes a crisis can accelerate positive change,” said Chris Schenkenberg, Regional Tax Business Lines national managing partner at Grant Thornton. “It’s clear that, especially among private companies, finance leaders haven’t settled for going back to the past. They’ve asked what’s possible, not just what’s wrong, and found new ways to push their organizations forward.”
Racial unrest across the country turned the spotlight on DE&I (diversity, equity and inclusion) — while ESG (environmental, social and governance) concerns continue to be a top focus for businesses. More than 75 percent of survey respondents reported DE&I and ESG as being “priorities” or being “important” within their organizations, with more than half planning to increase investment in these areas.
When asked how they plan to track DE&I investment, 50 percent of senior finance executives said they would use employee engagement tools, while 48 percent indicated recruitment practices. 56 percent of CFOs said they plan to use software solutions to track ESG investment.
“Consumers and employees alike are demanding increased action and more transparency on DE&I and ESG issues,” said Enzo Santilli, Transformation Advisory Business Line leader at Grant Thornton. “It’s vital for businesses to invest in these areas, and that means learning how best to measure returns on them.”
According to the survey, the pandemic has also pushed senior finance executives to reprioritize technology investment: fifty-three percent of respondents are prioritizing long-term foundational technology infrastructure investment over technology that addresses immediate business needs, which is 47 percent.
When asked about the dramatic expansion of remote work arrangements over the past year, 61 percent of companies indicated that they expect to increase investment in cybersecurity in the next year to safeguard against data breaches attributed to remote work. This investment was followed closely by digital transformation at 60 percent. When asked to name the three biggest challenges facing their companies, 46 percent indicated cybersecurity risks, 46 percent chose technology upgrades and 30 percent said remote workforce issues.
“Striking a balance between solving immediate needs and longer-term technology investment that can transform a company is a critical challenge,” said Santilli. “Finding an iterative approach that delivers immediate solutions while still driving transformative change is the elusive North Star for most companies.”
When asked about the Biden administration, CFOs appeared to be keeping something of an open mind to policy changes. They were even largely receptive to potential increases in environmental, labor and financial regulations: 44 percent said the new administration’s plans for environmental regulations would positively impact their businesses.
Forty percent were favorable toward the Biden administration’s labor regulations, and 39 percent thought financial regulations would impact their businesses positively. When asked about Biden’s trade and supply chain policies, 46 percent of senior finance executives felt they would help their organizations.
Taxes were the one issue on which CFOs skewed toward negativity. Thirty-nine percent of respondents said the Biden administration’s tax plans will negatively impact their businesses, while 34 percent said the new administration’s tax policy will be a net positive. Among companies over $1 billion in revenue, 55 percent expected tax changes to have a negative impact, while only 29 percent of companies with revenues between $101 and $500 million felt the same.
CFOs were also concerned about policy matters: almost 70 percent of respondents felt that the lack of policy consistency in Washington will at least somewhat negatively affect their ability to plan future investments. That sentiment was especially pronounced among manufacturing and technology and telecommunications companies, with 83 percent of respondents in both groups expressing that concern.
Also of note, the survey found that 84 percent of private company respondents indicated that SPACs (special purpose acquisition companies) have increased their interest in going public. When asked whether a SPAC or a traditional IPO (initial public offering) would be their choice, respondents were almost equally split, with 49 percent choosing a SPAC and 51 percent choosing an IPO.
“SPACs offer an exciting option for companies considering going public,” said Sean Denham, leader of Grant Thornton’s Global Services industry. “But CFOs have reasonable concerns about potential regulatory attention, valuations and the possibility of a bubble.”
When asked about the potential pros and cons of SPACs, more than 70 percent of CFOs said they believe SPACs improve access to capital for start-ups, and 67 percent said they can help get an IPO to market sooner. However, 69 percent expect increased SPAC regulation from the Securities and Exchange Commission (SEC) in 2021, while 55 percent believe SPACs leave new public companies overvalued. On top of that, 55 percent think SPACs could create a market bubble.
Denham sums the survey findings up by saying: “For CFOs, 2021 could be a transformational year — one where the finance function transitions from crisis management to growth. Whether it be investment in technology, social change or looking to take a company public, the old ways of doing things will no longer work. Finance executives must apply the lessons learned throughout the pandemic and create a new path forward.”
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