Despite a growing number of economists forecasting a downturn, CFOs still identified talent shortages as a major business risk, with 40% of the 750 financial leaders recently surveyed indicating this was the top risk facing their businesses.

Worker shortages were just one of the top executive concerns that emerged from the 2022 U.S. Bank CFO Insights Report released Nov. 1. It also found that CFOs facing a challenging macroeconomic environment are reconsidering where they should focus their energies, with risk mitigation and cutting costs emerging as two of their top priorities. 

“What’s interesting is the one thing that's remained consistent has been that focus on talent and labor retention and ability to attract workers,” Stephen Philipson, EVP, U.S. Bank corporate and commercial banking, said of the survey. 

Aside from talent shortages, 36% of CFOs pointed to the pace of technology change as their main business risk, while 34% pointed to high inflation while just 17% of CFOs indicated high interest rates as a top risk, according to the report.

The study also indicated that financial leaders are pivoting and prioritizing risk management over revenue growth. Thirty percent of finance leaders said risk identification and mitigation is now their top priority, compared to the 18% which said the same in 2021. Meanwhile, 21% of CFOs said driving revenue growth was their key priority, compared to the 35% who said the same in 2021.

“I think it just represents a shift in posturing in general from one of offense to one of defense,” Philipson said. The change is likely driven by all of the uncertainties of the macro environment including inflation, the war in Ukraine, supply chain issues and continued tightening by the Federal Reserve, he said.

“I think it makes sense for corporate finance leaders to be shifting their approach to their balance sheet and just how they're managing their financials to one that's it's a little bit more defensive in nature,” he said in an interview.

Talent shortages and cutting costs

CFOs facing continued talent shortages as well as high interest rates, inflation and other cost concerns are focused on reducing expenses. Thirty percent of finance leaders said reducing costs and improving efficiencies in the finance function is a top priority, while 29% said it was important to do so across the business.

However, the measures financial leaders are looking to take in order to do so are in flux — with fewer financial leaders today considering layoffs as a cost-cutting measure than a year prior, according to the study.

Twenty-two percent of financial leaders stated they currently intend to bring down headcount in a bid to reduce costs, compared to the 40% who said they had the intention to do so 12 months ago.

The ongoing struggle to retain talent in a red-hot labor market could be one factor making layoffs a less likely cost-cutting measure; recent data from the Labor Department shows layoffs declined in September as job openings increased to 10.7 million — outstripping the 5.8 million individuals seeking work.    

The slump in those considering layoffs may also be because many companies have already taken steps to reduce their headcount. The technology industry, for example, has reported a number of layoffs in recent months — Microsoft, for example, confirmed job cuts after warning of slowing growth in mid-October, according to an Oct. 17 report by CNBC.

Other firms such as Peloton and Fiserv have also made workforce cuts as they and other CFOs struggle to steer their companies through the current environment.

The technology industry — combined with the media and telecommunication industries — reported the highest level of concern when it comes to talent shortages, however, with 49% of CFOs in these industries identifying talent shortages as a top risk. This compares to 27% of those in the banking and insurance sector.

“That's a sector that's had a lot of publicly disclosed layoffs in recent months and probably provides the most work location flexibility,” Philipson said. “So it was interesting that’s where we saw the most concern about talent shortages.”

Forty-two percent of CFOs are also looking at ways to automate manual processes as they look for other ways to reduce costs, according to the study. Implementing such technologies could be another way CFOs can reduce costs and potentially solve some of their challenges with the labor market, Philipson said.

“The other thing we've heard from a lot of companies is they're trying to adopt technology and automation to become less reliant on as large of a human element such that you're not as subject to the conditions in the labor market,” he said. “And that's where they ultimately I think, can cut costs and labor and are seeking to cut costs and labor.”