A new PwC pulse survey shows how finance leaders plan to react to COVID-19 — and what impacts they expect to see. Fifty leaders from a cross section of industries weighed in from the US and Mexico during the week of March 9. The survey will continue so we can track changing sentiments and priorities.
The potential for the coronavirus (COVID-19) outbreak to lead to a global economic downturn is the top concern for finance leaders based in the US and Mexico, according to PwC’s survey. That concern is followed by worries that consumer confidence, financial operations and workforce productivity will be adversely impacted as the unprecedented measures to slow the spread of the virus continue.
Potential for significant impact to our business operations, and it is causing us great concern
Limited to specific regions in our business currently, but we are monitoring closely
An isolated challenge; not greatly impacting our business currently, but we are monitoring the situation for any change
About half (54%) of respondents say the outbreak has the potential for “significant” impact to their business operations, while 34% say the impact has been limited to specific regions, but they are monitoring developments closely.
Companies are prioritizing workforce health and safety, while ramping up remote working capabilities to keep people connected securely, and to keep projects documented and moving forward. The crisis is revealing immediate infrastructure gaps for many businesses, in areas such as digital upskilling, bandwidth and cybersecurity limitations, and that’s likely to increase investments in digital transformation.
Potential global recession
Decrease in consumer confidence, reducing consumption
Financial impact, including effects on results of operations, future periods, and liquidity and capital resources
Effects on our workforce/reduction in productivity
Supply chain issues
Not having enough information to make good decisions
Lack of a comprehensive/tested company emergency preparedness plan
Difficulties with funding
Impacts on tax, trade, or immigration
Financial disclosures, including effects on results of operations, future periods, and liquidity and capital resources
The large-scale suspension of activities is likely to impact the financial performance of a broad base of US and Mexico businesses, the survey indicates. When asked about the potential impacts on revenue and/or profit this year, 58% expect a decrease, while 40% say it’s too difficult to assess at the moment. Leaders are considering ways to handle investor communications. For example, 44% of respondents say they are considering adjusting guidance. As of March 6, 71 of S&P’s 500 companies issued earnings guidance below expectations for the first quarter, while 33 issued positive guidance, according to FactSet.
The outlook for finance leaders could change rapidly as more businesses are able to quantify the business impacts. The situation is unfolding quickly in the US and around the world. On March 4, the SEC issued an order providing impacted companies with 45-day relief for filings otherwise due on or before April 30. The SEC is monitoring the situation closely and has indicated that it may extend the time period for relief or provide additional relief as circumstances warrant. It’s important to note that we surveyed finance leaders before the stock market volatility intensified and the US moved to ban travel from some European nations for 30 days starting on March 13.
We anticipate a significant increase in the number of companies that perform scenario planning and financial modeling for potential impacts as they seek to estimate the effect of the outbreak. We’re seeing models being revised to incorporate economic impacts of past pandemics, including SARS and MERS in the 2000s, as well as outbreaks in 1968 and 1918. The revisions underpin concerns that COVID-19 may signal a future in which pandemics are more frequent. Some companies are also coordinating closely with strategic vendors and business partners to share information and enhance their models.
Separately, when asked about plans to change disclosures, 48% say they’re planning changes as a result of COVID-19, with 8% saying those changes will be “significant.”
Difficult to assess currently
Not at all
Only 30% of companies are considering changes to their supply chain, with many having adopted short-term alternative sourcing strategies during the first quarter. However, the duration of the impact is the most important factor, and we expect that learnings from the outbreak will likely move the competitive forefront of supply chain operations toward more comprehensive proactive modeling.
Companies will begin to look at their supply chains in more depth and consider new dimensions. The COVID-19 outbreak is likely to result in longer-lasting reconfigurations of supply chains designed to build resilience, and this is already underway as some US companies diversify Asia operating models in response to shifting trade policies.
A majority of leaders expect that their business would return to normal within three months if COVID-19 were to end immediately. Companies that remain optimistic about resolution of the outbreak are focusing on near-term solutions to manage disruptions, rather than longer-term solutions with strategic implications. They are evaluating cost containment measures, such as plans to curb discretionary spending. However, if conditions continue to deteriorate, we expect to see a pullback in investment spending as companies shift strategies.
The longer-lasting effects of the outbreak on consumer habits are difficult to predict, but some companies are already updating strategies in the face of temporary — and potentially permanent — changes in some markets or business models. The crisis has led some to amplify plans to give customers “seamless” access to their services, whether that’s direct-to-consumer, home delivery shipments, or in-store interactions. Companies may want to identify an executive with responsibility for assessing and measuring the longer-term impact to the core business and markets in which they operate.
To help identify the business and economic impact of COVID-19, PwC is conducting a biweekly survey of finance leaders in the US and Mexico. Of the 50 surveyed during the week of March 9, 80% are based in Fortune 1,000 companies, with others in healthcare, nonprofit associations or privately held companies. The next set of results will be released on March 30, 2020. Sign up to receive regular survey updates.