What’s keeping CFOs awake at night?
Chicago -- The nation’s finance chiefs have a lot on their minds these days, from uncertainty in the U.S. economy to cybersecurity to regulatory and compliance issues. Another big concern: Congressional dysfunction around tax reform.
This is all according to the latest edition of Grant Thornton LLP’s CFO Survey, which reflects the insights of more than 900 CFOs and other senior financial executives from a range of industries, including retail, across the United States.
Particularly frustrating for CFOs is the dysfunction in Congress over a bill to extend more than 50 popular tax provisions that expired at the end of 2014. When Congress returns from August recess next week, it remains to be seen whether it will revisit the bill and allow the use of these tax benefits on 2015 filings. According to the survey:
• More than a third (37%) of executives are acting as though the extension will not occur;
• Twenty-six percent are assuming some amount of risk that it will not occur, and are planning accordingly; and
• Just 9% of CFOs assume fully that the extension will occur
The study noted that that 51% of companies that actually use the provisions are doing all their planning with the assumption that the extension will not occur.
“In past years, negotiations over the tax extenders bill dragged on into December – this is very troublesome and creates major headaches for U.S. businesses,” said Mel Schwarz, partner and director of tax legislative affairs in Grant Thornton’s Washington National Tax Office. “Lawmakers need to agree on at least a two-year retroactive extension of nearly all the provisions, with a one-year extension as an absolute fallback.”
More than half (55%) of CFOs say uncertainty in the U.S. economy is a major concern that could impact their businesses’ growth in the next 12 months. This is despite the fact that most CFOs expect the U.S. economy overall to remain the same (49% or improve (43%) in the next 12 months, suggesting that factors other than the overall health of the economy are presenting a barrier to growth.
“While the U.S. economy has stabilized, our data suggest that uncertainty related to other economic factors is making strategic planning difficult for financial executives,” said Randy Robason, Grant Thornton’s national managing partner of Tax Services. “CFOs are looking to Washington, regulators and the Federal Reserve for answers and getting nothing but indecision.”
Cybersecurity: Cybersecurity is also a major source of worry for financial leaders. When considering what the most significant cyber risks they face are, 44% of CFOs say the most significant risks are the unknown risks, and 57%) say it is the potential for undetected breaches. Interestingly, more public companies (47%) fear they are at risk of reputation loss compared to private companies (31%).
Regulatory and compliance burdens also top the list of concerns for finance chiefs. Nearly half (45%) of CFOs say that increasing costs of compliance present the biggest challenge to growth, and nearly a third (31% ) say that keeping up with the volume and complexity of regulations is their number-one challenge.
Meanwhile, good news for finance professionals: CFOs are aggressively looking to develop and hire new talent. Seventy percent of CFOs say finding and retaining the right talent is a critical need for supporting growth. Forty percent expect their business’s new hiring to increase in the next six months; 52% expect hiring to remain the same. And 67% plan to increase salaries in the coming year, holding steady since 2014.