Dive Brief:

• Risks to company strategy and transformation edged out worries over finding and recruiting talent for CFOs still facing macroeconomic pressures, according to the Q2 2023 CFO Signals Survey released by Big Four accounting firm Deloitte Thursday.
• Execution risks to company strategies or transformations narrowly topped talent on CFOs’ lists of top internal risks, with 81% of finance leaders pointing to strategy concerns compared to the 80% who identified the scarcity, cost, and recruiting or retention of talent as a top worry. CFOs are also growing more cautious when it comes to taking new risks and less optimistic about their own companies’ financials in the future.   
• “It continues to be a challenging environment for CFOs,” Steve Gallucci, global and U.S. CFO program leader at Deloitte told CFO Dive in an interview. “I think that's evidenced by where their focus is, which really is cost reduction.”

Dive Insight:

CFOs are under growing pressure to reduce costs, with 54% of finance leaders stating their CEOs are asking them to find, evaluate and launch cost-saving initiatives, according to the survey. Just below reducing expenses, 40% of finance chiefs said their CEOs are also asking them to focus on company strategy and transformation.

“We weren't surprised to see CFOs being asked to take leadership roles around that,” Gallucci said. “I think that's representative of the evolution of the role of CFO being much more focused on the commercial value creation aspect of their companies, versus the role of the more steward, operator type.”

This need to refocus on transformation may also have pushed execution risks on transformation and strategy to top CFOs’ list of internal concerns over talent — executing these initiatives, which now falls under the finance chiefs’ remit, takes “significant effort,” not to mention outlays of capital which is growing scarcer, Gallucci said.

However, talent “continues to be a big concern of CFOs,” Gallucci noted, even as there has been some softening in the largely strong job market.

Talents’ slip to second place comes as potential cracks have emerged in the labor market, with unemployment rising to 3.5% in May compared to 3.4% the previous month in what is the biggest monthly gain since April 2020, according to recent data from the Labor Department. The average work week length also declined to its lowest level since the beginning of the pandemic to 34.3 hours.

At the same time, the labor market still remains a “bright spot” in the murky economy, American Staffing Association CFO Richard Wahlquist told CFO Dive, with May also seeing a surge in job gains with the hiring of 339,000 workers.

“I think certainly what we've seen over time is as the economy starts to heat up, or if the economy starts to strengthen a bit...companies will begin to execute against longer range capital investments and plans like that,” Gallucci said about whether the drop in talent as a top concern is a trend that will continue in the future. Talent has been the top internal risk cited by CFOs in Deloitte’s survey since 2020, he said. “That typically requires more investment in talent, per se. So I think we’re going to have to wait and see.”

CFOs who are caught between cutting costs, keeping their eye on talent, and driving greater business transformation are also keeping their eye on inflation, with 81% of finance leaders pointing to inflation and interest rates as their top external risk concern for the quarter. 

While the Federal Reserve announced a pause in interest rate hikes Wednesday — following ten consecutive increases in its most aggressive monetary tightening in decades — chair Jerome Powell warned the Fed had not ruled out further hikes in July depending on economic factors, he said.

In the face of such continued uncertainty, CFOs — already risk-adverse by nature — are even less willing to take on new risks this quarter, Deloitte found, with 33% of finance leaders saying now is a good time to take risks compared to 40% in the prior quarter.

Optimism surrounding their own companies’ financial prospects also fell slightly from 32% to 30%, with the number of CFOs pessimistic about future financial outcomes ticking up to reach 24% compared to 19% in the prior quarter.

Deloitte’s second quarter survey was conducted between May 1 to May 15, 2023, with a total of 122 CFOs participating, the company said.