The lingering after-effects of the Silicon Valley Bank collapse earlier this year, combined with broader macroeconomic headwinds, has left finance leaders executing on defensive strategies rather than pursuing growth, according to the results of a survey released this week from U.S. Bank.
Many finance leaders are divesting from non-core assets, considering restructurings, and pinning their hopes on tech to cut costs and grow productivity, according to the survey conducted in the spring as executives were still reeling from the March closure of SVB and several other regional banks.
Stephen Philipson, US Bank’s head of global markets and specialized finance and one of the study’s authors, said in an interview that the event still resonates today with finance leaders, even as the drivers of the wariness are shifting. Liquidity challenges combined with persistently high inflation and interest rates are keeping CFOs highly concerned about the future, he said.
“The banking sector may have been at the heart of economic concerns back then, but today talking to clients it’s just more general economic uncertainty,” he said, with many not fully betting on a so-called soft landing. “It’s interesting how much the narrative changes.”
In March and April, when the survey was done, they were concerned about what the impacts were and the risk of financial contagion resulting in broader banking sector instability. Then there was a period where markets stabilized and “now you see long-term rates spiking and we’re back to people taking defensive postures,” he said.
The study found CFOs ranked cutting costs and driving efficiencies as their number one priority in the finance function, jumping from number eight in 2021 and number three in 2022.
As a result, resources have shifted away from more growth-centered activities like M&A, as well as innovation initiatives that might lead to longer-term benefits. For instance, only 26% of respondents said they are evaluating new business models, compared with 42% two years ago and 27% last year.
At the same time, less than a quarter (23%) of the executives surveyed said they are generating insights for use across the wider business, compared with 39% two years ago and 30% last year. In addition, it found that businesses are divesting from non-core assets, with Philipson suggesting this might mean a truck company which had dabbled in electric scooters might be deciding to abandon that line and get back to basics.
It’s not all spending cuts. Despite the drive for efficiencies in both the finance function and the enterprise as a whole, technology remains a strong priority, ranking number three this year.
While CFOs remain concerned about spending, there is a belief that investing in the right technology, such as artificial intelligence, can help executives save their way to better times by driving costs down through productivity increases and time savings — this is, in fact, the number one plan that finance chiefs had when it came to finding new savings, followed by restructuring the workforce, according to the findings.
Still, Philipson said this emphasis on technology is just as much about keeping up with the competition as it is trying to edge past it.
“You can’t stop investing in technology, regardless of the business you’re in. … There is acknowledgment there is a critical level of technology investment you need in order to be competitive. It’s not a luxury, even in an environment where you cut costs,” he said.
The third annual U.S. Bank CFO Insights Report polled 1,420 finance professionals in businesses across the U.S. Half of the survey participants were group, regional or divisional CFOs and the remainder were senior managers within the finance function.
