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Insights from U.S. Bank Report: CFOs Remain Cautious on Short-Term Economic Outlook

CFOs play a critical role in guiding their businesses through uncertain market conditions and must adeptly navigate the complexities of the broader economy. They are tasked with not only achieving organizational goals and targets, but also with forecasting, strategizing, and preparing for how economic fluctuations may impact their operations.


As companies streamline costs, embrace digital transformations, and prioritize employee well-being and culture, it's essential to consider how these initiatives intersect with the broader economic landscape.


Amidst geopolitical turbulence and the backdrop of a significant election year, the latest CFO Insight Report by U.S. Bank reveals that only 37 percent of surveyed CFOs express high confidence in the economic outlook for the next 12 months. Despite this short-term uncertainty, there is a notable increase in long-term financial optimism, with 58 percent expressing confidence in the U.S. economy over the next three years.

CFOs are increasingly prioritizing cost reduction and efficiency improvements within their finance functions, with 44 percent citing it as a top priority. This represents a notable increase of six percentage points compared to the previous year and a significant surge of 91 percent since 2021 when only 23 percent regarded it as a top concern.


Cost-cutting emerged as a primary concern in recent data collected by Grant Thornton last month. However, U.S. Bank's findings indicate a consistent year-over-year figure concerning cost-cutting across businesses, unlike the data specifically focused on cost-cutting and efficiency within finance functions.


Comparatively, Grant Thornton's survey highlighted CFO optimism, with 34 percent of the 273 surveyed senior U.S. finance leaders expressing "very optimistic" views about the U.S. economy. This figure represents an 11-quarter high in the quarterly survey.


Interestingly, priorities such as revenue growth, ESG initiatives, and improved cash flow have experienced significant drops in interest since 2021, remaining relatively low and consistent since then.


Despite a somewhat bleak short-term economic outlook and ongoing cost-cutting efforts, most CFOs maintain a positive outlook regarding their business' financial prospects. Approximately 45 percent anticipate positive growth over the next 12 months, while over six in 10 (61 percent) foresee positive growth over the next three years.


Regarding top risks, talent retention remains a prevailing concern among CFOs, although worries about inflation are diminishing. Only a quarter (25 percent) of respondents ranked high inflation as a top-three risk, down from 38 percent last year. Meanwhile, talent shortages persist as the primary concern for the third consecutive year, with 41 percent of CFOs expressing concerns about the talent pool in 2024.


Furthermore, geopolitical tensions have emerged as the fourth most pressing issue for businesses, according to CFOs. Over a quarter (26 percent) cited geopolitical tension as a risk to their business, representing a notable increase of 9 percent from both 2023 and 2022.

Two critical elements of digital transformations are causing concern among CFOs. The pace of technology change, along with cybersecurity attacks, were highlighted as top concerns, with 38 percent and 28 percent of CFOs expressing worry, respectively. While these issues remain the second and third most prominent concerns, there has been a slight decrease of 200 basis points from last year's findings.


As CFOs and their teams delve into the potential of artificial intelligence (AI) and AI-powered solutions, there's a notable expansion in the application of AI to areas such as risk management and fraud prevention. Forty-two percent of CFOs identified risk management as a key AI application for their businesses, closely followed by fraud identification at 41 percent. The goal is to enhance confidence in addressing emerging risks, an area where 39 percent of CFOs admitted to lacking confidence.


While over half of respondents prioritize investing in AI within the finance function, risk management emerges as the primary motivation, as indicated by survey respondents. Other areas of interest include process automation (37 percent), automated data entry and processing (34 percent), and predictive analytics and forecasting (26 percent).

If you are a business owner or CEO within the San Francisco Bay Area or Silicon Valley, in need of an experienced fractional or outsourced CFO to help your company control costs, increase profit margins, improve cash flow as well as identify strategic growth opportunities, our highly skilled outsourced CFO services provide direct access to high-quality expertise in a cost-effective manner.


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