According to U.S. Bank’s 2022 CFO Insights Report, finance leaders’ priorities have shifted as they work to help guide their firms through choppy waters.
The top-line survey results revealed that improving risk identification and mitigation is now a top priority for 30% of finance leaders, while in 2021, risk management was the least identified top priority (18%). In addition, driving revenue growth is a top priority for only 21% of finance leaders this year, while in 2021, driving revenue growth was a top priority for 35% of leaders.
Thirty percent of finance leaders said cutting costs and driving efficiencies within the finance function is a top priority, while 29% of finance leaders said cutting costs and driving efficiencies across the entire business is a top priority.
When it comes to cutting costs, just 22% of finance leaders plan to reduce headcount across their enterprises, down from 40% in 2021. Instead, finance leaders plan to cut costs by investing in technology (37%), discontinuing low-margin/low-growth business lines (32%) and outsourcing certain business functions (29%). The automotive and transportation industry was most likely to reduce headcount to cut costs, while the chemicals and advanced materials, professional services and technology industries were least likely.
The lack of appetite to cut headcount might be explained by the top business risk identified by finance leaders: talent shortages, which were identified as a top risk by 40% of finance leaders. The results were nearly identical for firms with more than $1 billion in revenue (41%) and those with less (40%). Talent shortage risks were ahead of risks posed by the pace of digital disruption (36%) and high inflation (34%). Just 17% of respondents said rising interest rates were a top risk.
When it comes to talent shortage risks:
- 51% of respondents are assessing future skill requirements.
- 42% are reviewing salaries and other employee benefits.
- 42% are exploring opportunities to automate manual processes.
- Just 18% are offering hybrid working for certain roles to manage talent risks.
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“Our clients in the CFO office are facing a barrage of challenges — with new ones emerging seemingly every day — as they help guide their firms through a very uncertain external environment,” Stephen Philipson, executive vice president at U.S. Bank Corporate & Commercial Banking, said. “Finance leaders should take this opportunity to play an even more significant role in risk management, ensuring they have an appropriate strategy to play defense while continuing to grow the bottom line.”
Fewer than 15% of finance leaders are highly confident in their company’s ability to manage any of the identified business risks from the survey. For example, just 4% are highly confident they’ll manage high inflation. In addition, when it comes to managing high inflation:
- The majority of respondents (57%) are identifying opportunities to cut costs, but fewer than four in 10 are conducting any other possible steps to manage inflation risks.
- 35% are evaluating the credit risk of major customers.
- 32% are evaluating working capital practices.
- 32% are evaluating pricing.
- 31% are hedging against rising costs of certain commodities and currencies.
- Just 22% are evaluating salaries.
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Additional findings from the 2022 U.S. Bank CFO Survey include:
- Evaluating M&A, divestiture and partnership opportunities dropped from 26% in 2021 to 21% this year.
- Support and/or furthering ESG objectives dropped from 30% to 22%.
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