The Economist’s CFO Summit: “Your World in 2013. Policy. Economy. Growth?”, brought together more than 100 leading CFOs to discuss the challenges and opportunities facing their businesses. Despite the cautious optimism expressed by many of those in attendance, slow economic growth, instability within the Eurozone and price risk, remain major concerns.
Despite the economic green shoots highlighted in many of the presentations throughout the Summit, slow growth remains the major concern for finance leaders. More than half of those surveyed felt that a stagnant economy represented the main challenge for 2013.
It should be noted that although the CFO Summit brought together a wide selection of finance leaders from various industries and markets, the majority were based in western economies. This was further demonstrated when one fifth selected a lack of stability in the Eurozone as the primary threat to their business.
During the Summit, Andrew Palmer, Finance Editor at The Economist, asked those present for their views on the UK holding a referendum on the country’s status within the EU. The vast majority of attendees were against the vote. Many expressed the view that stability and free trade were essential to keeping Britain competitive.
When 4C Associates carried out the CFO Survey in 2012, Price Risk was selected as the greatest risk for finance leaders. The latest survey confirmed this trend with 65 per cent of those questioned selecting price as their foremost supply challenge. The main reasons given by respondents were volatile commodity prices and an inability to pass any increases on to consumers. In this context analysing and modelling price risk is crucial to any large organisation.
Reputational Risk, went from being the most relevant supply threat for 36 per cent of respondents in 2012, to 16 per cent. This is surprising given the intensity of recent media reports surrounding companies such as Appleand Tesco, but may reflect a more considered approach to analysing risk. Several speakers were keen to make the point that the risks which receive extensive coverage are often those which are best guarded against, as they are the most visible.
Concern relating to Supply Risk remained stable although a number of attendees felt smaller suppliers may suffer from a lack of readily available finance. One speaker in particular, explained that although large companies were able to secure funding at attractive rates, suppliers may struggle to support any consequent growth.
A number of panellists discussed the fundamental role of analysing and monitoring threats. Risks discussed included terrorism, government regulations, the emergence of new low cost competitors and access to funding.
Improving Efficiency and Reducing Costs
Faced with a difficult economic climate, 49 per cent of CFOs highlighted Operational Efficiency Improvements and Cost Reduction as pivotal for their 2013 strategy. Increasing sales was another major focus, with 42 per cent of respondents underlining the importance of growth. However, with many western economies struggling, opportunities are primarily found in emerging nations.
In terms of transforming costs, Organisational Change was selected as a priority by half of those surveyed. Supply chain and Procurement followed with 20 per cent and 15 per cent respectively.
Asked if additional savings were available through improved procurement, 68 per cent of finance leaders said yes. A further 58 per cent felt there were additional savings opportunities accessible through optimised supply chain and logistics practices.
Challenges and Opportunities
This year’s CFO Summit highlighted the extent to which modern businesses continue to rely on their finance leaders. Driving growth, managing risks and delivering savings, are all vital to keeping a company afloat in uncertain economic times.
- Increased optimism regarding the global economic situation has done little to alleviate concerns related to slow growth. Effective cost management remains a vital element of driving businesses forward.
- Risk management is an increasingly important component of the CFO’s role. Tighter margins, unstable markets and inflexible supply chains have magnified the threat and potential impact of supply failure.
- The Eurozone is embarking on a slow and painful, road to recovery. Many CFOs who were able to invest in emerging markets have unearthed significant opportunities to boost revenue.
Survey Respondent Overview
The CFO Survey was carried out amongst the attendees of The Economist’s CFO Summit 2013. More than 100 finance leaders attended the event to discuss issues affecting the role of the CFO.