Globetrotting With The CFO

Earlier this year, American Express and CFO Research released findings from its latest Global Business and Spending Monitor to gauge where Canadian financial executives position themselves in the current market climate. Analysts concluded that “guarded optimism” best described the sentiment of Canada’s CFOs, but how does that stack up to the rest of the world?

In its report “Positioning The Enterprise For Future Growth,” analysts for American Express and CFO Research found evidence of similar feelings of this guarded optimism. Why CFOs may remain hesitant in the 2016 global economy, however, varies depending on geographical market.

Analysis of more than 650 CFOs, treasurers, controllers and other financial executives across four continents and 15 markets pulled back the curtain on what’s going on in the world that everyone is worried about and some of the situations unique to local markets.

Optimism Levels

According to researchers, Latin American CFOs are most confident that their businesses will grow in the coming year; 73 percent of executives in this region reported being optimistic about near-term expansion, compared to the global average of 65 percent.

The Australia-Asia market, however, remained the least optimistic, with just 59 percent predicting growth in 2016; European CFOs also fell below the global average, with 62 percent reporting optimism for the year.

North American financial executives, however, may be most consistently confident about the next year. In addition to CFOs in this region reporting a 6 percent increase over the global average in terms of optimism of future expansion, North American CFOs also saw some of the highest percentages of survey respondents reporting higher revenues compared to last year.

Seventy-five percent of U.S. CFOs, for instance, reported revenue gains, while 62 percent of Canadian CFOs said the same.

And while Asia may have come in last place in terms of confidence for future expansion, 62 and 63 percent of India- and China-based CFOs, respectively, reported higher revenues this year than last — making the top five in this category.

Latin America 

Latin American CFOs may be confident in future growth, but they failed to land in the top five short list of regions that saw significant increases in year-over-year revenue.

Researchers attributed some of this disconnect to the economic uncertainty and political instability of Brazil; this year, the report stated, Mexico and Argentina outlooks are so positive, they outweigh the negative sentiment in Brazil.

That optimism doesn’t negate that only 37 percent of CFOs in this region reported revenue gains from the year prior, researchers noted.

“Even in Mexico, where the strongest revenue performance was reported, only about half of the respondents (49 percent) said that their companies had made revenue gains,” explained researchers.

This means CFOs must overcome this lack of performance to make their optimistic outlooks a reality, especially with Brazil’s continually struggling market.

Europe

Despite U.K. CFOs securing the number two spot for the percentage reporting revenue gains (64 percent), European money managers are far more cautious about the coming year than their Latin American counterparts.

Researchers uncovered “large declines” in the number of CFOs from Russia and Germany hopeful about future economic growth, falling 9 percent and 11 percent, respectively, compared to the year before.

Declining oil prices, coupled with inflation, are marring Russia’s businesses; less clear, however, is what is making German CFOs so pessimistic.

That doesn’t mean European CFOs are struggling across the board.

Three-quarters of U.K. CFOs anticipate economic improvement this year, and France’s financial managers also saw economic optimism increase “dramatically,” from 29 percent last year to 47 percent this year. Survey respondents attributed France’s spike in optimism to more favorable trade agreements and financial restructuring within their own companies, the research found.

Australia-Asia

While China and India landed in the top five list of nations with the most CFOs reporting revenue gains, pessimism across Asia and Australia is running rampant. Singapore, China and Hong Kong experienced the steepest drops in optimism from the year before, with the latter two each reporting a 20 percent decline in the number of CFOs expecting economic expansion this year.

“This year, the growth engine for China’s companies has slowed in the face of production issues, unfavorable exchange rates and currency devaluation,” the researchers concluded, adding that Hong Kong is now the least optimistic market of any other in the survey this year.

Australia, however, emerged as the only market in the region to report an increase in optimism — impressive, researchers noted, considering the country’s historical dependence on trade with China and its migration away from a dependence on mining and commodity exports.

India remains the most optimistic market across the globe, the report found, continuing its streak from past reports. CFOs here have some of the most “aggressive” approaches to corporate spend and investment, and while regulatory pressures are complex, businesses in this nation report a strong commitment to innovation and growth, researchers wrote.

North America

North American CFOs were described as “solidly optimistic,” with some of the highest instances of revenue growth. There are some disconnects in the region, however.

For instance, U.S. CFOs’ optimism is now above the global average; Canadian CFOs, however, have fallen below it.

The U.S. also ranked first in the percentage of respondents reporting plans within their organizations to aggressively spend and pursue investments — 31 percent — representing an 18 percent increase from 2015 results.

Global Trends

Across the board, there are some consistencies. Researchers pointed to the commonality of CFOs reporting an increased focus in domestic markets, with a high instance of money managers across jurisdictions also reporting plans to increase investments in risk management and security.

Companies across the world also share a vision that their growth is likely to occur mostly in their perspective markets.

Optimizing cash flow is also a key goal for CFOs regardless of country, and more than one-third of survey respondents agreed that they will likely have to access outside financing to boost their cash positions — probably through traditional lines of credit and supply chain financing, researchers found.

Technology will prove paramount for CFOs everywhere to usher their corporations into success, according to American Express and CFO Research.

“To prepare themselves for the future, survey respondents recognize the value of developing a broader knowledge base along with better technical skills,” the report stated.

According to one survey respondent, failing to do so means “you’re going to struggle to build the CFOs of tomorrow.”