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CFOs worry about financial and economic uncertainty, according Deloitte survey
Uncertainty is a major worrying point for Chief Financial Officers (CFOs) in Europe, according to a survey by professional services firm Deloitte in the first quarter of 2016.
68% of the 1,500 CFOs surveyed reported expriencing high levels of business uncertainty. Of this proportion, 92% of German CFOs are worried about external risk, closely followed by 83% of UK CFOs. The proportion rose from the third quarter of 2015, given the problems that both countries are currently facing. Germany businesses are dealing with low demand and geopolitical issues, while UK businesses await a June 23rd vote on whether the country will leave or remain in the European Union (EU).
Risk apetite has also shrunk, with 71% of CFOs in Europe reluctatnt to introduce risk to their balance sheets. Half of the UK CFOs surveyed indicated their averseness to new risk.
The UK CFOs surveyed indicated that their top concerns were indebted to the following factors: the UK’s Referendum on its membership in the EU; deflation and economic weakness in the Eurozone (including the possiblility of a new euro crisis); weak demand in the UK; higher interest rates in the UK and US; and volatlity in emerging markets, as well as growing geopolitical risks.
UK CFOs list the introduction of new products or services, or expansion into new markets as their top priority for the rest of the year. Other priorities include reducing costs, boosting cash flow, growing by acquisition and increasing capital expenditure.
The falling apetite for risk in Europe and in the UK in particular is mirrored in investors’ sentiments, which is reflected in the performance of currency markets. The pound sterling (GBP) has been weakening significantly on the whole since the start of 2016, with analysts believing that the trend will continue until after the UK’s EU Referendum vote.
“Uncertainty in currency markets has been mounting, and will continue to do so,” says Carl Hasty, Director of international payments specialist Smart Currency Business.
“One way in which businesses can mitigate currency exchange risk is by assessing their treasury management strategies from the core. Businesses need new risk management strategies to reflect these times of growing financial and economic uncertainty. In terms of currency protection, currency hedging strategies are popular, as these allow businesses to reserve currency exchange rates now for future use.”
