CFO Optimism Falls as Inflation Rises

Inflation, labor shortages, and financial concerns are having an effect on economic optimism at the CFO level. According to a Grant Thornton LLP Q1/2022 CFO survey, optimism has fallen 30 percentage points, to just 49 percent.

Inflation topped the list of concerns, with 80 percent of CFOs citing rising costs as the top reason for their negative outlook. Supply-chain issues and the war in Ukraine were also bringing down the numbers.

On the positive side, 50 percent of the more than 270 CFOs surveyed said they believe the economic impact of Covid-19 is waning. And whereas one-third (33 percent) of the respondents in Grant Thornton’s previous CFO survey (released in February 2022) said they expect inflation to impact their business for more than a year, that number fell to 25 percent in the Q1 survey.

“Given the aggressive rate-hike schedule the Fed is now proposing, many CFOs are hopeful that inflation will begin to moderate,” said Enzo Santilli, national managing partner of transformation at Grant Thornton. “Still, finance leaders are preparing to grapple with a host of complex challenges throughout the rest of 2022.”

Grant Thornton’s Q1/2022 CFO survey also found many leaders still struggling with the Great Resignation. Fifty-seven percent of CFOs said talent attraction and retention is their primary human capital challenge, while 48 percent of CFOs are expecting their compensation and benefits investment to increase. Nearly half (45 percent) plan to spend more on recruiting.

When asked about their return-to-office plans, CFOs were speaking from both sides of their mouths. While 74 percent believe hybrid and remote work are here to stay and are committed to improving that model, 61 percent of respondents also said they are focused on getting most or all of their people returning to work on-site. The latter stat runs contrary to what most employees covet: In Grant Thornton’s most recent “State of Work in America” survey, 80 percent of respondents said they want flexibility in where and even when they work.

Interestingly, the survey revealed a slow-down in investment plans for environmental, social, and corporate governance (ESG) initiatives, as well as diversity, equity, and inclusion (DEI). Just 34 percent of the CFOs surveyed expect to increase their investments in DEI, and only 31 percent plan to increase investments in ESG.

“It may be tempting for CFOs to let focus on DEI and ESG slip when conditions begin to tighten,” said Marjorie Whittaker, a managing director of ESG and sustainability at Grant Thornton. “However, the new SEC regulations won’t be the last we see in this area—and public, employee, and investor focus isn’t going away. Organizations will need to maintain, and probably even increase, these efforts.”

From: BenefitsPRO