Since March 2020, we have been tracking the sentiment and priorities of finance leaders in Ireland and around the world about the COVID-19 outbreak. In this report, we surveyed 69 Irish CFOs during the weeks of 1 June and 8 June, among 989 CFOs internationally.
When we surveyed CFOs in Ireland at the start of April, 61% of respondents expected to suffer a loss of productivity due to their lack of remote working capabilities. But since then, the working world is a different place and businesses have evolved to become more agile, embracing the new normal of an atomised workforce. As a result, their sentiment has changed, and they are looking forward - now, only 35% expect to suffer productivity losses because they are operating remotely.
Now, lockdown measures are being eased in Ireland and organisations are preparing themselves and their people for a return to a workplace that has fundamentally changed. What are their plans and concerns, and how are they anticipating operations will function in the weeks and months ahead? Although their priority now is to provide a safe and secure working environment in the wake of the coronavirus and protecting people as they return to work, are they thinking strategically about what they need to do to survive and thrive going forward?
In line with our previous CFO Pulse surveys, CFOs have significant concerns about the possible impacts on their operations of a global economic downturn, as well as the direct financial effects on their operations, liquidity and capital resources. All indications point to the negative effects of COVID-19 on global commerce. The World Bank predicts that the global economy will experience the deepest recession since the end of WWII, with a 5.2% contraction in global GDP in 2020. The European Commission projected that the EU economy will decrease by 7.5% this year.
Against this backdrop, 32% of Irish finance leaders believe they will suffer a decrease in their profits of up to a quarter in 2020, with 19% believing they will suffer losses of up to 50%. And while that is concerning, there is the added factor that twenty percent of the respondents feel that they cannot quantify or cannot assess the extent of the effect on their business. It is possible that the unknown waters that lie ahead regarding the reduction of restrictions and the reopening of the workplace are making it difficult for them to project forward with certainty. 26% believe that it will take more than 12 months for their organisation to return to the new normal.
In spite of that, they are considering the best ways to move ahead. 67% of CFOs believe that their approach to new, enhanced, repurposed or pared-down products or services and pricing strategies will be essential to rebuilding or enhancing their revenue streams in the wake of the COVID-19 pandemic. At the same time, new pricing strategies are 16% more important to Irish CFOs as compared to their global counterparts. It may be that they can see that their customers have changed as much as their own businesses, and there needs to be a reassessment of how they can maintain their financial position in light of the disrupted marketplace and possible recession ahead.
Implementing cost containment measures remains the highest priority financial action that companies are considering as a result of COVID-19. Two-thirds of respondents still expect to defer or cancel any planned investments they had prior to the start of the crisis. Facilities and capital expenditure remain at the top of the list of deferred capital investments. But there must be commitment to infrastructural safety enhancements to allow their people to return to work, and that requires outlay.
As the course of the pandemic continues and restrictions start to be lifted, organisations are considering their return to work, although it will be a very different workplace that people return to. 38% of companies expect that in the next month there will be higher demand for employee protections including sick leave policies and increased demands for benefits.
There are a number of high value considerations for companies as they do start to bring people back to the workplace that will be part of the CFO agenda. In our results, we can see that 88% of businesses are planning to reconfigure their working sites to promote physical distancing, compared to 72% of global respondents.
72% of Irish CFOs will be implementing changes to their workplace safety measures and requirements. There will be a requirement for wearing protective items, temperature testing and the provision of deeply cleaned conditions on an ongoing basis. With that in mind, 45% of CFOs are planning to change shift patterns, or alternate crews to reduce their potential exposure to the virus.
At the same time as companies consider returning to the workplace, remote working remains a priority, at least until social distancing rules can be stood down or altered by the Government. Not every organisation will be able to immediately implement and accommodate a complete return to the workplace for staff, so other considerations are in coming to mind. 58% of the Irish respondents to the survey say in the next month they will implement improvements to the remote working experience.
It is an acknowledgement that the new normal will include continuing the revolutionary working practices that have become necessary in the wake of COVID-19. This can be also be seen in the fact that 55% of finance leaders want to make remote work a permanent option for roles that allow it into the future. Not everyone will be able to return to the workplace, and many will not feel comfortable or able to return.
42% of our respondents are looking to their IT teams and the technological resilience they have shown in the last 13 weeks to accelerate automation and new ways of working. These practices have been effective, much more so than many organisations anticipated, and streamlining their future strategies with the learning from COVID-19 in mind should now be a priority.
This is backed up by the responses we received when we asked about finance leaders’ opinions regarding the things about the current situation that will make their organisations better in the long run. 78% cited the flexibility regarding working hours and locations. 68% said that they had become more resilient and agile. But only 43% or Irish CFOs compared to 58% globally cited their technology investments as an improvement. It is perhaps underestimating the importance of innovation, something that the global survey bears out as a critical factor. Most international 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.
Amid all of the immediate physical and practical considerations as a return to work is planned, there are critical operational and strategic matters that need to be borne in mind at the same time.
When asked about returning to the workplace, 80% of CFOs in Ireland and internationally said they felt very confident in their ability to provide a safe working environment for their people, and 83% expect that they will be able to meet their customer's safety expectations. Finance leaders also have a concern about the possibility of a second wave of COVID-19. Among our respondents, while their top concern as they implement their back to work plans is the global economic downturn, an almost equally high number are worried about a new wave of infections. In spite of that and based on their experience in the last three months, 77% of Irish CFOs believe they can confidently provide clear response and shut-down protocols if cases in their area rose significantly or if there was a second wave.
In spite of their clear confidence in those areas, there are related areas where they clearly feel less confident, which is telling. During the peak of the crisis, they were likely not as focused on their strategic priorities but instead on the practical considerations, and now that returning to work is on the agenda, physical practicalities and safety are front of mind, but the bigger, long-term picture needs to be kept in mind. Only 55% are moderately confident they can manage employee morale and well-being upon a return to work, while 46% are moderately confident about their ability to retain key staff. 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%). Retaining the people who can bring your organisation into the future and ensuring they are equipped to accompany you on that journey is essential for your future success and survival.
To sustain the gains in terms of efficiency, reliance and agility borne out of the crisis, 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 and people that will have the most impact. Equally important, because remote work brings an elevated risk of burnout, leaders will need to focus on employee well being, including encouraging time away, offering mental health support and meeting people’s individual needs.
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.
As the COVID-19 pandemic has progressed, your attention has been on crisis management and immediate actions to address its impacts on your business. It’s now time to look forward with confidence and plan to succeed in spite of the lingering uncertainty. We have the expertise and experience to help you put the right strategies in place and ensure the new normal is the foundation of your future success. We are ready to talk to you today.
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/HK, Cyprus, Denmark, France, Germany, Greece, Ireland, Japan, Lithuania, Malaysia, Mexico, Middle East***, Netherlands, Portugal, Singapore, Sweden, Thailand, Turkey, US and Vietnam.