Insights from global finance leaders on the crisis and response — 15 June 2020
Since March 2020, PwC has been tracking sentiment and priorities among finance leaders about the COVID-19 outbreak. For our fifth look across the globe, we surveyed 989 CFOs from 23 countries or territories during the weeks of 1 June and 8 June.
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When we surveyed CFOs around the world about the impact of the coronavirus pandemic on their business two months ago, nearly half (45%) expected productivity loss because of a lack of remote work capabilities. At that time, many companies were in the early stages of crisis response, not yet thinking about strategies for recovery. Today, lockdowns are being lifted around the world as leaders of nations and companies accept that economies will reopen and function alongside a virus that remains a constant threat.
In the face of this sobering reality, CFOs have shifted their focus to bringing people back to a workplace that is fundamentally changed. This time, just 26% of CFOs surveyed anticipate productivity loss in the coming month. Many companies have weathered the immediate crisis — they’ve implemented safety measures, transitioned to remote work and other new ways of working, and are now thinking about what they need to survive and thrive moving forward. And, of course, they are doing so at a time of heightened social tension in which their leadership will be critically important. Even in a global sample with countries at different points of virus spread and government response, common themes emerge: concern about a new wave of infection and how to keep people safe, the need for agile plans to navigate a global economic downturn and reengage customers, and the pursuit of new revenue streams through innovation.
It’s now been a few weeks since many countries have embarked on phased reopenings, slowly permitting more commerce and other activities. As these decisions unfold, CFOs are navigating return-to-work plans, determining when and how — and to what extent — to bring employees back. Among our respondents, the top concern as they implement these plans is the impact of a global economic downturn (60%), but an almost equally high number are worried about a new wave of infections (58%). Concerns about financial impact on their business, including effects on results of operations, future periods, liquidity and capital resources, are also running high (47%). Of less concern are issues such as supply chain disruptions (17%) and the ability to effectively manage hybrid remote and on-site work models (16%). This may be attributed to the fact that many companies have proven their capabilities in these areas during the previous weeks and months.
When it comes to concerns about financial impact, we see notable disparity among territories — some of which may be attributed to differences in government stimulus and other support. Financial impact is the primary concern among CFOs in Cyprus (81%) and Africa (59%), but it is cited by just 35% in Denmark and 34% of CFOs in Germany. CFOs in Brazil (30%) and Africa (29%) are more likely than average to be concerned about supply chain disruptions, and CFOs in Lithuania (50%) are more likely to be concerned about the decrease in consumer confidence. The impact of a global downturn is a major source of worry across industries, led by industrial manufacturing and automotive CFOs (66%). Consumer markets CFOs, coping with shifting spending preferences and patterns, are more likely than average to be concerned about a decrease in consumer confidence (43%) and the increased cost of doing business (21%).
CFOs’ expectations of revenue decrease align with their concerns about the global downturn and financial impact, and with key economic indicators. The World Bank predicts that the global economy will experience the deepest recession since the end of World War II, with a 5.2% contraction in global GDP in 2020. Although the impact varies by region, none are untouched. Economic activity in the Middle East and North Africa, for example, is forecast to contract 4.2% as a result of the pandemic and oil market crisis. The European Commission projected that the EU economy will decrease by 7.5% this year.
Against this backdrop, 53% of CFOs expect a decrease in revenue and/or profits of up to 25%. Only 4% of CFOs say the impact of the crisis is still difficult to assess, with CFOs in Ireland more likely than average to be unsure of the impact. At opposite extremes, we see variance at the territory and country level. On the one hand, CFOs in countries such as Germany and Denmark are more likely than average to expect a decrease of less than 10%, no impact, or an increase in revenues and/or profits. On the other hand, CFOs in territories such as the Middle East, Africa and Cyprus are more likely to expect a decrease of more than 50%. From an industry perspective, health industries CFOs are more likely than average to expect a decrease in revenue of less than 10% or even an increase in revenue. Meanwhile, consumer markets CFOs — hard-hit by physical store closures and stay-at-home orders — are more likely to expect decreases of 25% to more than 50%.
While managing these financial challenges, the majority of CFOs in our survey have focussed on safety. They are planning new workplace safety measures (75%) and reconfiguring work sites to promote distancing (72%). But, of course, not everyone will be coming back to physical work sites. More than half of CFOs indicate they will take steps to improve the remote work experience (52%) and to make remote work a permanent option (52%), and 50% report they plan to accelerate automation and new ways of working. These findings correspond with the 75% of CFOs who say the increased flexibility developed during the crisis is a factor that will make their organisation stronger over the long term, and the 65% who cited the resiliency and agility they have built. To sustain these gains, company leaders will need to consider the tools, behaviours and incentives that will enable employees to be productive, collaborative and creative — and invest in areas that will have the most impact. Equally important, because remote work brings an elevated risk of burnout, leaders need to focus on employee well-being, including encouraging time away, offering mental health support and meeting people’s individual needs.
CFOs in Africa (68%), the Middle East (62%) and Turkey (61%) are more likely than average to plan to accelerate automation. In the Caribbean (39%), the Middle East (36%) and the US (35%), CFOs are more likely to plan to reduce their real estate footprint. At the industry level, energy, utilities and resources CFOs are more likely than average to focus on workplace safety (83%), reconfiguring work sites (77%) and changing shifts to reduce exposure (59%). Health industries CFOs, perhaps reflecting the quick adoption of telemedicine, are more likely to plan to make remote work a permanent option for roles that allow it (64%) and to improve the experience (69%). They are also among the most likely to consider exploring location tracking (26%).
Given their focus on the more tactical responses to bringing people back, it makes sense that CFOs report feeling very confident about their companies’ ability to provide a safe environment for customers (79%) and employees (74%). And, although a new wave of infection is among their top concerns, they also report feeling very confident that they would be able to respond effectively (71%). When it comes to more forward-looking measures, confidence starts to wane. Fewer CFOs say they are very confident about building skills for the future (45%) and identifying new revenue opportunities (27%). This makes sense: during the peak of the crisis, they were likely not as focussed on these areas.
CFOs in Turkey (92%) and Cyprus (89%) are most likely to report being very confident about meeting customer safety expectations, and finance leaders in the Caribbean (82%), Turkey (81%) and Africa (80%) have the largest share of respondents who are very confident in their second-wave response and shutdown protocols. Across industries, consumer markets CFOs (82%) report they are very confident in meeting customer safety expectations, a high priority in reopening retail stores. Consumer markets CFOs also report the highest level of confidence (34%) in the ability to identify new revenue opportunities, perhaps as a result of quickly pivoting to provide options for consumers while physical stores were closed. Financial services CFOs (76%) indicate the highest level of confidence about second-wave response and shutdown protocols.
As they consider the future, companies are eager to rebuild or enhance revenue streams — which, as noted above, is an area where confidence is flagging. Most CFOs (63%) cite offering new or enhanced products or services as most important to this pursuit — underscoring the fact that innovation will be a driving factor during the recovery period. There will be a growing need for new ways of working to enhance the creativity required to sustain this innovation — for example, new tools, new behaviours and reinforcing incentives and rewards. Other top choices include changing pricing strategies by increasing or decreasing prices or offering different payment terms (48%) and exploring alternative distribution strategies, such as changing from in-person to virtual sales or delivery (36%).
Changing product and service offerings is the top choice of CFOs in Denmark (72%) and the Caribbean (70%). CFOs in Mexico (38%) and the US (34%) are more likely than average to cite talent changes, such as hiring and upskilling. At the industry level, planned strategies vary widely. Technology, media and telecommunications CFOs (75%) are more likely than average to favour changes in products and services. Changes in pricing strategies are more likely to be cited by energy, utilities and resources CFOs (55%), who are also more likely to consider changes in geographic markets (37%). Health industries CFOs are more likely than average to consider changes to customer segments (48%).
Cost containment remains the top financial action CFOs are considering as a result of the novel coronavirus (81%), but more than half (56%) of respondents are considering deferring or cancelling planned investments. Among the latter group, fewer CFOs today than in past CFO Pulse surveys say they will consider cancelling or deferring planned investments in R&D (14%). This is good news, given respondents’ belief in the importance of developing new products and services. CFOs are also not as likely to cut from their planned digital transformation investment (11%), which corresponds to findings about their plans to accelerate automation and improve the remote work experience. The most common area for potential cuts remains (as it has been in all of our CFO Pulse surveys) facilities/general capex (82%).
CFOs in the Middle East (90%) and Mexico (89%), who are less optimistic than average in terms of the effect of COVID-19 on revenues, are most likely to consider cancelling capex investments. In the US, where more than 44m people have filed for state unemployment benefits since mid-March, CFOs are more likely than average to cite reductions in workforce investments (48%), as are CFOs in the Middle East (51%). From an industry perspective, energy, utilities and resources CFOs are more likely than average to consider reductions in operation investments (64%) and less likely to cite IT investments (19%). Financial services CFOs are less likely than average to think about cuts to R&D (10%), and technology, media and telecommunications CFOs are least likely to plan to cut investments in environmental, social and governance activities (6%).
Since we first surveyed CFOs about their perceptions of and responses to COVID-19 in March 2020, we’ve watched as they focussed on safety, managed health, economic and societal crises and adapted their business model to rapidly shifting circumstances. Ultimately, they accepted that they’ll need to find a way to exist alongside, and thrive in spite of, the ongoing threat of COVID-19 in the months and possibly years to come. While bracing for a second wave of infection and working to enhance revenue streams, finance leaders will continue to prioritise agility as they navigate this new world.
To help identify the business and economic impact of COVID-19, PwC has been conducting a global survey of finance leaders. Of the 989 surveyed for the global report during the weeks of 1 June and 8 June 2020, respondents were from 23 countries or territories: Central and Southern Africa*, Brazil, Caribbean**, China/Hong Kong, Cyprus, Denmark, France, Germany, Greece, Ireland, Japan, Lithuania, Malaysia, Mexico, Middle East***, Netherlands, Portugal, Singapore, Sweden, Thailand, Turkey, US and Vietnam.
*Representatives from Ghana, Kenya, Mauritius, Namibia, Nigeria, South Africa, Togo, Uganda and Zimbabwe
**Representatives from the Bahamas, Barbados, Bermuda, Jamaica and Trinidad
***Representatives from Bahrain, Egypt, Jordan, KSA, Kuwait, Lebanon, Oman, Qatar and UAE