Inflation tops concerns weighing on CFOs

Dive Brief:

Inflation is the number one challenge facing corporate finance leaders in 2023, according to a survey by business advisory firm FTI Consulting Inc.
More than 77% of respondents indicated that inflation posed a high or medium risk to achieving their objectives in the next 18 months, according to the study released Tuesday.
The potential for interest rates to drive up lending costs — often referred to as the cost of capital — ranked as the second biggest concern (76.7%) for the year ahead, followed by risks related to pricing power (70.4%) and supply chain disruption (67.1%).

Dive Insight:

Consumer prices rose 0.5% in January in the biggest gain in three months, and two Federal Reserve officials said Tuesday the central bank may need to intensify the most aggressive monetary tightening in four decades by increasing interest rates more than expected, as previously reported by CFO Dive.

Besides rising inflation and high interest rates, escalating international conflict and lingering COVID-19 effects are among other factors that continue to put downward pressure on the economy, according to the report, which was conducted in partnership with CFO Dive. Amid the economic uncertainty, financial forecast accuracy, liquidity, cash flow, and capital structure will be among top priorities for CFOs, according to the study.

“I think there’s a heightened concern about the impact of the uncertainty — not just the rising inflation and interest rates, but how that’s going to impact consumers and buying patterns,” Gina Gutzeit, global leader of FTI Consulting’s CFO Solutions practice, said in an interview.

Protecting margin is rising as a strategic imperative over the next 18 months as CFOs face the task of actively managing both revenue pipeline and enterprise costs, the report said. To do so, they will need to focus on areas such as sales effectiveness, pricing, productivity, and cost reduction to maintain profitability in a potentially down market, it said.

The use of technology was viewed as a key strategy for improving financial performance. About 44% of respondents said they expected to focus more on technology implementation over the next 18 months, with 40.8% saying they plan to upgrade enterprise resource planning and business intelligence technology. Another 39.1% said they plan to implement enterprise performance management/financial planning and analysis tools.

“Overall, the most popular tactic for improving financial performance is to implement operational improvements, and the most prevalent challenge among all CFOs was better understanding and implementing technology,” the study said.

In August 2022, FTI Consulting, in conjunction with CFO Dive, conducted a survey of senior finance executives in North America, Asia, Europe, Australia, and the Middle East/Africa. A total of 303 completed responses were collected, according to the report.