Thanks to the contingency plans they developed after the Great Recession, finance chiefs think they’re in a relatively strong position going into the coronavirus outbreak, a survey of CFOs by PricewaterhouseCoopers found. 

Finance executives expressed concerns about the broader economy, however, with 80% expecting a global economic recession this year. 

"It speaks to the confidence organizations have in their own scenario planning, contingency planning, resiliency they’ve built into their organization over the last 10 years as they’ve thought about how they would respond to any kind of a global shock," said Amity Millhiser, PwC vice chair and chief clients officer, on a call to discuss the survey findings Monday.  

One reason behind executives' confidence is the strategic investment companies have made in technology that enable them to operate effectively during periods of uncertainty.   

"Companies are very focused on allowing their people to work remotely, wherever they can in order to keep their businesses running," said Millhiser. "And this goes not just for their workforce but also their interaction with customers … Those that are more digitally enabled are more likely to be strong as they weather the storm."

Short recovery time

Because of their relatively strong position, almost 70% of CFOs expect a return to business as usual in as little as three months, if the spread were to be contained today. The longer it’s not contained, PwC executives on the call said, the harder it becomes for finance leaders to gauge their company’s recovery time. 

"I would expect their ability to bounce back quickly will be challenged the longer and deeper the crisis goes," said Millhiser.

The survey of 50 CFOs in the United States and Mexico was conducted in the first half of last week, so it predates the Fed’s emergency interest rate cut on Sunday and the steep drop in stocks Monday. PwC will be tracking changes in sentiment by going out with the survey every two weeks going forward. 

Among the findings:

• 80% predict a global recession this year.
• 58% expect a decrease in revenue or profits.
• 54% expect a significant impact to their operations.
• 48% expect decreased confidence to slow consumer spending.
• 48% expect a decrease in their liquidity and capital reserves.
• 40% expect to change their reporting disclosures.
• 34% expect to see supply chain disruptions.

To help executives adjust to the uncertainty, the SEC earlier this month gave public companies an extra 45 days to get their reports in, but so far, they haven’t appeared to need it. But that will likely change as they move from end-of-year 2019 reporting to first-quarter 2020 reporting. 

"We’re not aware of any of our clients at this point who need an extension because of the virus," Tim Ryan, PwC chair and senior partner, said on the call. "They're a normal extension our clients ask the SEC for in the normal course of business. That being said, the big question on everybody’s mind is Q1. And we’re just in the early stages of that."

Unlike in the financial crisis a decade ago, capital remains available, and companies appear able to access the necessary cash to finance their operations and long-range plans, but companies are nevertheless pulling back on all but short-term priorities.

"What we don't see out there is the inability to access credit," Ryan said. "Credit is flowing, and we have not seen behavior similar to what we saw 10 or 12 years ago."

Nevertheless, few companies plan to embark on anything ambitious, like mergers and acquisitions, in the near term. 

"Market uncertainty will clearly be no friend for dealmaking," said Neil Dhar, PwC financial services leader for the U.S. "It’s much harder to do due diligence, to price risk.

"There’s the added complexity of doing scenario planning," Dhar added. "In this specific scenario, you have due diligence on the health matters that come into play. There’s also uncertainty around capital markets in relation to securing financing at the right price. For announced and signed deals, we’re seeing incremental scrutiny around material adverse change clauses. And what we may see in the future is a pick up in stock-for-stock deals. All that said, well capitalized and run companies will not need M&A to survive in the near term."