Welcome to our third look across the globe as we track the sentiment and priorities of finance leaders about the COVID-19 outbreak. During the week of 20 April, we surveyed 871 CFOs from 24 countries or territories, including 41 from Ireland. We are continuing to add territories and companies to offer a robust view of how the crisis is affecting people and businesses worldwide.
The message among global CFOs is clear: most companies have moved beyond the short-term, reactive phase of the novel coronavirus pandemic. During that first phase of the crisis, companies mobilised their response plans to address immediate concerns, such as health and well-being. Today, they still need to do what it takes to ensure the safety of their people and the survival of their business, but they are also thinking about how to stabilise. They are taking the tactical steps that will prepare them to operate in ‘the new normal.’
These moves come as the news about coronavirus ebbs and flows around the world. Many countries in the EU have now passed the peak of the initial wave of transmission, and several European countries — Germany, Denmark, the Czech Republic and Spain, among others — have begun to ease restrictions.
We see this complexity reflected in our current CFO Pulse results. Finance leaders are worried — the overall percentage (70%) who report being greatly concerned about the potential business impact of the coronavirus is consistent with our previous survey. But in some countries where the lock down is being eased such as Denmark, Switzerland and Germany, the percentage of those greatly concerned is now less than 50%. Most CFOs are still considering cost containment measures, but they are also planning various actions around work sites, supply chains and investments to position themselves to succeed in the post-crisis world, and to emerge stronger and better prepared to face future crises.
An overwhelming majority (88%) of Irish finance leaders remain greatly concerned about the potential of COVID-19 to have a significant impact on business operations. We are also seeing that Irish CFOs are more certain in their belief that revenue or profits will fall as a result of the coronavirus - 98% expect to experience a decrease, as opposed to only 80% of their global counterparts.
But in spite of their concerns for their operations, businesses are thinking about how they bring people back to the workplace and what that might mean for their operating model and their people. An essential part of stabilising business operations is the reopening of offices, factories and other work sites. Of course, doors can’t simply be flung open, and company leaders are determining how best to protect their employees and customers.
There is clearly a greater focus on workplace and workflow issues in this edition of our survey than previously, as perspectives and priorities change as the realities of the virus and its effect on work and working practices continues to become clear. Productivity losses as a result of remote working capabilities is half as much of a concern as it was in the last survey, with 29% of CFOs expecting to experience this consequence in their organisation. A change in staffing due to low or slow demand is now the main concern for finance leaders, with demand for employee protections having fallen from 35% to 22%.
In physical terms, there were several considerations we asked CFOs to consider. Three-quarters of Irish leaders are significantly in favour of reconfiguring working sites to promote physical distancing, which is expected to be a core consistent measure that will persist beyond the relaxation of lockdown restrictions. They also believe that they will need to implement changes to workplace safety measures and requirements for their staff, such as wearing masks and offering testing to workers (59%) and over half expect to have to change shift patterns or provide alternate staffing arrangements to reduce any potential exposure.
As well as the practical physical examples of how work might change in order to account for the post-COVID-19 world, there is evidence to suggest that organisations are considering that the new normal might become more of a permanent feature, and that the transition to new ways of working and digital transformation might become more prevalent in their businesses.
61% of Irish finance leaders believe that they may make remote work a permanent option for roles that allow it, while 41% are considering accelerating automation and new ways of working in their operating models. Our experts believe that there has never been a better time to consider digital transformation and solutions to overhaul business models and efficiency.
International CFOs are weighing how technology will help ease their transition back to on-site work. Overall, 46% of CFOs say they will accelerate automation and other new ways of working; at least 60% of CFOs in Germany and in Mexico cite automation and remote work among their top-three actions. Remote work is also a top-three choice for financial services CFOs, selected by 56% of global respondents.
However, it is concerning to contrast this with the result of our analysis of the types of investment that may be deferred or cancelled as a result of COVID-19's impact on organisations. While facilities and capital expenditure remains the highest both in Ireland and globally (73% and 81% respectively), workforce, digital transformation and IT expenditure are high on the list of those areas where expenditure might be downsized. Workforce is an obvious target for reduced investment as businesses try to maintain a status quo with their current or revised staffing structure, but scaling back on digital transformation has increased in Ireland at a time when it might be the thing that helps many businesses recover and prosper beyond the immediate horizon.
It is also interesting to note that cost containment is becoming an even more pressing concern for CFOs. 95% have now said they are looking to implement cost saving measures in their organisations, up from 78% in our last roundup. This is more pronounced than for global finance leaders, with just over 80% saying they were considering cost containment plans being put in place. Deferring or cancelling planned investments is also more of a consideration for Irish CFOs, with almost three-quarters (previously 61%) saying they will put investment plans on hold during COVID-19.
Also key to stabilising an organisation during the crisis is a high-functioning supply chain. The changes required of business operations with a high dependency on their supply chain are a concern for CFOs. It is clear that they are considering how they might restructure their supply functions to account for ongoing restrictions and limitations brought about by the responses of governments and overseas organisations to COVID-19.
We asked CFOs what areas they expected to change as a result of the current crisis in terms of their supply chain strategy, and while understanding the financial and operational health of suppliers and developing additional, alternate sourcing options were the top two considerations for global and Irish CFOs, there was a marked indication that Irish finance leaders are hungrier to implement more stringent risk protection measures, such as disaster insurance coverage and more flexible force majeure contract clauses.
This is borne out by anecdotal evidence we are hearing locally, with business leaders conscious of the limitations of their supply chains in recent weeks and the challenges they experienced in planning for Brexit. The realities of supply chain disruption have played out more rapidly than the scenarios prepared for Brexit and the effects it has had, need to be mitigated to ensure future operational efficiency.
Generally, organisations with supply chains that are highly integrated both internally and externally will be better equipped to develop alternative sourcing options or extend visibility to suppliers. Companies that fit this profile have already automated most of their supply chain processes and decisions, both inside the organisation and with external partners. Yet according to PwC’s recently published Connected and autonomous supply chain ecosystems 2025, only 36% of companies surveyed were operating at this level of integration (this figure goes up to 81% among ‘digital champions’ — companies ahead of the curve when it comes to supply chain excellence).
The rapidity or otherwise of a return to business as usual has become more polarised in this edition of our survey. In our last assessment of sentiment, the majority of CFOs felt that it would take between 3 and 12 months for their organisations to return to business as usual. Now, we see that some 20% of Irish CFOs feel it would take less than a month and 22% are expecting BAU to return in more than twelve months, significantly higher than the global figure of 8% thinking it would take more than a year for business operations to get back to normal - or the new normal.
Of course, the crisis is not ending today. And we’ve seen that, even in countries such as Singapore that appear ready to relax restrictions, new waves of infection can emerge. Around the world, governments are struggling to balance protecting the safety of citizens with restarting the economy. Some CFOs may take encouragement from hard-hit countries in the EU that have been able to slowly lift some restrictions and open parts of the economy. Finance leaders may also find reason for optimism in the growing amount of stimulus funds set to become available: on April 23, EU leaders agreed to a €1tn (US$1.1tn) recovery fund to help Europe’s economy, though they will not settle specific details of the package until mid-May, and many individual countries have announced assistance programmes and tax relief.
Despite the sizable percentage of respondents who feel that ‘normalcy’ is within reach, finance leaders around the world recognise that the global economy is facing dire challenges. In mid-April, the IMF predicted that the global economy will shrink by 3% in 2020, ushering in the worst economic downturn since the Great Depression. In Ireland, the ESRI predicted that assuming the shutdown measures stay in place for a 12-week period and the economy recovers afterwards, it expected the economy to contract by 7.1 per cent in 2020. They also stated that the path to recovery is complicated by the extremely open nature of the Irish economy. While the domestic authorities may be successful in limiting the spread of the virus, the performance and recovery of the Irish economy will now also depend on the effectiveness with which other countries deal with COVID-19.
Finance leaders in Ireland are more concerned about the potential global recession as a result of coronavirus than their global counterparts, 75% as opposed to 70% internationally. They are more concerned about the effect COVID-19 is having on their workforce and productivity as the realities of the new normal start to take hold, with almost half of respondents now, as opposed to a quarter in the last round, expressing their concern for staff and output.
Most CFOs (80%) across all territories expect a decrease in revenues and profits. CFOs in Ireland take the most hardline view, with 98% saying they expect the crisis to lead to a decrease. Even in countries with a more optimistic outlook, CFOs take it as a given that the economic impact of the coronavirus will reduce revenues and profits, with finance leaders in Switzerland (80%), Denmark (73%) and Germany (66%) all reporting that they expect to see a decrease.
As the crisis progresses, finance leaders will need more information to finalise plans across their organisations. Many companies are still managing and monitoring their response to COVID-19 on their business, and have yet to make decisions that will shape their recovery. We’ll continue to track finance leaders’ perceptions and actions, to understand how their response is evolving throughout the COVID-19 pandemic.
To help identify the business and economic impact of COVID-19, PwC is conducting a global, biweekly survey of finance leaders. Of the 824 surveyed for the global report during the week of 6 April 2020, respondents were from 21 countries or territories: Armenia, Brazil, Colombia, the Czech Republic, Denmark, France, Germany, Greece, Ireland, Japan, Kazakhstan, Mexico, Middle East*, Netherlands, Philippines, Portugal, Singapore, Sweden, Switzerland, Thailand and the US. The next set of results will be released on 28 April 2020.
* Representatives from Bahrain, Oman, Qatar, KSA, Kuwait, UAE, Egypt, Jordan, Lebanon and Palestine