PwC’s COVID-19 CFO Pulse Survey

Most companies impacted, though full extent unknown

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.”

Supply chain considerations

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.

Bouncing back

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.