CFOs: The future looks hazy

The good news is chief financial officers at the world’s top companies are a tad more optimistic than last quarter about when recovery will kick in and start benefitting their businesses, according to the Duke University/CFOGlobal Business Outlook Survey” reported in the magazine’s July-August 2009 issue.

CFO Survey July-Aug 09

Duke/CFO survey 2009

The bad news is – well, let’s skip over the CFOs’ plans to continue cutting workforces and capital spending. Underlying the bad news are two findings:

  • Most CFOs do not expect the US economy to begin recovery at least until 2010. The breakdown: 43% see an upturn starting in 2009, 50% in 2010 and 7% in 2011 or later. No wonder companies are still cutting costs.
  • The No. 1 concern for CFOs within their own companies remains the ability (or lack of ability) to forecast results. That makes business planning difficult, not to mention forward-looking discussions with investors.

CFO devotes a separate article (“Imperfect Futures“) to troubles companies are having with forecasting. When it comes to predicting the direction of sales or earnings, many more companies are invoking the “u” word – uncertainty. Says CFO:

Forecasting, never an activity companies felt particularly confident about, has now become nearly impossible. Processes that once results in mildly imperfect visions of the future now produce wildly imperfect ones.

The magazine cites some creative approaches, including collaborative efforts to identify new risks companies face in the marketplace, internal forecasting of which suppliers will survive or fail due to the recession, and prediction markets to draw out managers’ true feelings about the results they can deliver going forward.

For investor relations, the hazy economic future and its implications most likely will feed a continued trend away from companies providing specific earnings guidance. It’s even more important, then, for IROs to understand and communicate qualitative information on the key drivers – internal or external – of sales, costs and earnings.

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One Response to “CFOs: The future looks hazy”

  1. DCF: Discounted Crash Flow « Actuary-Info Says:

    […] Erosion These extreme short periods are the consequence of the No. 1 concern for CFOs: The fundamental and increasing lack of ability to forecast […]

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