New Year, new optimism

Jan 07 2009 by Nic Paton Print This Article

We all know times are hard but, rather than freezing in the headlights, managers need to recognise the slump may offer new opportunities, sources of revenue and bargains, say chief finance officers.

In fact, more than eight out of 10 UK CFOs say they see potential opportunities from the downturn, according to a poll by consultancy Deloitte.

Its survey of 86 chief finance officers from a sample of FTSE-100, 250 and small cap companies has found that, while the continuing shortage of credit and the contracting economy remain key challenges, there is recognition that, for the canny operator, there are nevertheless opportunities to be had.

Some 84 per cent of the CFOs polled said they saw opportunities in the current downturn, while three quarters perceived opportunities to expand their market share or to snap up companies or other assets at bargain prices.

Nearly two thirds of the CFOs thought the downturn would provide a chance to build their long-term presence.

More than half also believed it offered an opportunity to make the significant changes that should really have been made before the credit crisis.

More than a third said they planned to profit from weaker and cheaper labour markets, with some 38 per cent even expecting to take on more skilled staff.

Ian Stewart, UK economist and director at Deloitte, said what this optimism showed was that, despite a focus on reducing debt levels and conserving cash, CFOs were looking beyond the immediate crisis.

"While CFOs' priorities for 2009, of cash, confidence and costs, are pressing and immediate, management are also thinking and planning ahead," he said.

The overriding aim for most CFOs this year was simply to strengthen their balance sheets, primarily through maximising their cash flow, bolstering investor confidence and curbing costs.

Given this, risk aversion had risen sharply among CFOs, with 98 per cent believing this was a bad time to be taking additional risk on to their balance sheet.

Margaret Ewing, Deloitte partner and vice chairman, said: "Faced with an unprecedented speed of economic downturn in recent months, a further deterioration in credit conditions and exceptional uncertainties, CFOs have become significantly more risk averse and many are simply focused on survival for their companies.

"Consequently, strengthening the balance sheet by whatever means available, including maximising cash flow and curbing expenditure, plus improving investor confidence, both debt and equity, are the priorities for CFOs in 2009," she added.

The challenge, therefore, for CFOs over the coming months was to balance what can be seen as potentially conflicting priorities, she contended.

"Whilst CFOs recognise the significant priorities of cash, confidence and costs for 2009, they are also aware that these conditions will provide opportunities for many companies," she said.

"The CFO's challenge is to balance the priorities with ensuring that their company is well placed to take advantage of the opportunities," she added.

The Deloitte poll builds on research carried out by the consultancy back in November which suggested that, while not for those of a nervous disposition, cash-rich companies can almost double their shareholder return by completing deals during an economic slump.

But it also suggests some business might finally be moving beyond the hand-to-mouth survival strategies many ended up pursuing over the autumn.

At that time, a poll of CFOs by consultancy KPMG and specialist magazine CFO Europe, for example, found finance departments were spending much of their time simply looking at ways to relieve the pressure of the credit crunch, including negotiating longer payment terms with suppliers and tightening credit terms.

In a similar vein, a U.S poll in October by consultancy Towers Perrin identified improved risk management is now the number one priority for CFOs and, more widely, board-level senior managers alike.

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