PwC is tracking sentiment and priorities about the COVID-19 outbreak from finance leaders around the world. More than 150 finance executives from a variety of territories — including Bahrain, the Netherlands, the Philippines, Portugal, Qatar, Switzerland, Thailand and the United Arab Emirates — weighed in during the week of March 23. (We refer to these respondents as multi-territory finance leaders.) This survey, which follows similar efforts in the US and Mexico to track the business impact of COVID-19, is our first look across the globe. We will continue to expand the global scope, with financial leaders from more than 20 territories included in the next survey, which will be released April 13, 2020.
As the coronavirus (COVID-19) outbreak spreads, finance leaders are proactively taking steps to contain costs and prepare their businesses for a slowdown in economic activity. This is the case for the majority of executives surveyed, even though the spread of the pandemic has been uneven around the world. This has prompted governments like Thailand to announce a broad lockdown, while countries like Qatar said they would ban all gatherings but have yet to order a country-wide lockdown.
The findings signal CFOs’ increasing concerns as the world slips into what the International Monetary Fund now considers a global economic recession due to COVID-19. The IMF expects a liquidity crunch, so it’s unsurprising that 67% of CFOs from multi-territories rate the possibility of a global recession as their top concern. Many (60%) also worry about the financial impact on operations, liquidity, future periods and capital resources, as well as a reduction in productivity (44%). Despite the fast-changing nature of COVID-19 and the limited — and sometimes conflicting — information about the virus, only 13% said they are concerned about not having enough information to make good decisions.
A majority of multi-territory finance leaders surveyed report that they have already taken measures to contain costs, and many have deferred or canceled investments. They are also weighing additional moves: 55% of multi-territory finance chiefs are considering measures to contain costs. Nearly half (47%) report that their company is evaluating whether to delay or cancel planned investments, with facilities and/or general capital spending the most likely areas targeted for deferrals or cancellations. In comparison, finance executives based in the US and Mexico are more likely to consider additional measures, such as changing their M&A strategy.
Business leaders are considering these initiatives as several central banks around the world have lowered interest rates amid the outbreak, and various governments have started to take additional steps to provide relief. For example, Switzerland is setting up plans for stimulus spending to support people and businesses that have been sidelined by public health measures implemented to contain the virus, and the US passed a $2 trillion economic stabilization package on March 27. Businesses are also facing potentially significant and pressing tax challenges. PwC specialists collaborated to create a tax response resource to help inform companies of measures local tax authorities are taking in response to the crisis.
When asked about the impact on the workforce over the next month, about half (52%) of multi-territory respondents expect productivity losses due to the lack of remote work capabilities. This compares with 60% of their counterparts in the US and Mexico, where large-scale social distancing is already under way. The shift to remote work can be bigger than many companies realize, and productivity impacts are possible in the short term as teams learn how to collaborate and connect in new ways, while dealing with personal and family well-being matters. The crisis is also revealing immediate infrastructure gaps for many businesses, such as broadband access.
The findings show expectations that the virus will affect the workforce in many ways over the next month. Just under one-third (30%) anticipate higher demand for employee protections, such as expanded sick leave or benefits, over the next month. Moreover, nearly one-third (32%) of multi-territory respondents expect layoffs.
The outbreak’s impact on global supply chains is fast-changing. For example, even as production ramped up in March in China, COVID-19 spread to regions that are integral to outsourced technology and business process services, such as India. At this moment, the effect on supply chain strategies is mixed: While close to half (47%) of multi-territory finance leaders say they don’t believe they need to make a change, the rest say they’re considering their next moves or have yet to decide how to respond. Relationships with suppliers and scenario-planning capabilities have been put to the test during the crisis. Companies should plan for recovery and target time to remodel their supply chains in light of new risk and competitive performance dimensions.
Companies are dealing with immense uncertainty as the effects of COVID-19 on their businesses and the economy become more widespread. So how long do finance executives think it would take to recover if the outbreak were to end immediately? Multi-territory respondents are cautiously optimistic: 75% say their business would return to normal in less than three months, similar to sentiments shared in the US and Mexico. Still, 21% of multi-territory finance leaders say it would take three to six months to get back to normal.
We expect more companies to explore different scenarios regarding the duration of the outbreak to assess the range of potential impacts on their financial performance. Leaders are also considering ways to handle investor communications. Companies should have a firm grasp on the full scope of financial impacts when stakeholders ask — because they will ask.
When questioned about plans to change disclosures, 49% of multi-territory respondents say it’s currently too difficult to assess what changes will need to be made, if any.
It's clear that multi-territory CFOs, like those in the US and Mexico, are facing daunting challenges. What's also clear is that they understand those challenges and are taking concrete steps to deal with them. As they do so, we will continue to track and report on their progress.
To help identify the business and economic impact of COVID-19, PwC is conducting a biweekly survey of finance leaders globally. Of the 153 surveyed for the multi-territory report during the week of March 23, 2020, respondents were from a cross-section of industries and based in Bahrain, the Netherlands, the Philippines, Portugal, Qatar, Switzerland, Thailand and the United Arab Emirates. Concurrently, we surveyed 55 finance leaders in the US and Mexico. The next set of results will be released on April 13, 2020.
Partner, Digital & Forensic Investigations, PwC United Kingdom
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Partner, Global Forensics Leader, Global Crisis Consulting Leader, PwC US