Dive Brief:

• Half of CFOs anticipate their operations costs will increase in the next year even as finance chiefs report growing optimism about the state of the economy, according to a survey by Grant Thornton.  
• Thirty-four percent of CFOs reported being “very optimistic” about the U.S. economy, representing an 11-quarter high for the audit and advisory service provider’s quarterly 2024 CFO survey, Grant Thornton said in a release. Despite rising costs, 71% are also projecting growth in net profits for the next 12 months.
• However, finance chiefs are still facing notable macroeconomic challenges; inflationary pressures — including a rise in global shipping expenses — are the driver behind the expected jump in operations cost, for example, Paul Melville, national managing principal of CFO Advisory Services for Grant Thornton said in a statement.

Dive Insight:

The expectation that the Federal Reserve could soon lower rates may be contributing to some of this positivity, according to Grant Thornton executives.

While inflation is moving “sustainably” toward the Fed’s 2% goal, recent data such as a higher than expected jump in the Consumer Price Index last month indicates that it’s “likely to take longer than expected” to achieve the confidence needed for the central bank to lower interest rates, Fed Chair Jerome Powell said Tuesday.  

In the face of persistent inflation, cost optimization remains a priority for CFOs, with 55% indicating it as a top focus, according to Grant Thornton. To help offset these costs, finance chiefs are turning to emerging technologies like automation, data analytics and artificial intelligence, with an all-time high of 47% stating they are utilizing generative AI.  

More and more companies are moving to take advantage of GenAI’s promised benefits, but the continued popularity of the new technology is also leading to more scrutiny surrounding its security and ethics; the jump in finance chiefs who report their organizations are using the technology coincides “with a 10-percentage point increase in the portion of CFOs who said they expect their cybersecurity costs to increase,” Grant Thornton said.

Seventy percent of CEOs said their companies feel prepared to navigate the ethical concerns surrounding GenAI, according to a recent report by Big Four Accounting Firm KPMG. To facilitate responsible adoption, companies are deploying initiatives including employee education and training as well as regular audits and oversight, CFO Dive reported.

As well as the increase in operations and cybersecurity costs, CFOs are also expecting to spend more in other areas, with 37% stating they anticipate they will boost their real estate and facilities spending.

However, that doesn’t necessarily indicate a rising demand for office space or growth in the return-to-office trend— rather, it’s related to a boom in warehouse building related to nearshoring in manufacturing, Melville said in a statement.

Commercial real estate values is expected to decrease 26% by the end of next year, with the office space anticipated to be the hardest hit, according to a recent report by Moody’s Analytics. The Financial Stability Oversight Council in December flagged CME as a leading risk to financial stability in the face of rising vacancy rates, CFO Dive previously reported.