The fact that rising oil prices, inflation, and the worsening economy have become a major worry for CFOs was reinforced by a survey released Friday from Financial Executives International and Baruch College’s Zicklin School of Business.
The outlook of the 219 finance chiefs surveyed by the FEI and Zicklin echoes that described by the CFOs surveyed in the most recent quarterly Duke University/CFO Global Business Outlook Survey, which came out in early July. For the first time, that survey found fuel costs had virtually tied with weakening consumer demand as the top worry of finance chiefs, with inflation also ranking high among CFO concerns.
According to the FEI study, CFO optimism has reached an all-time low, again echoing findings of the Duke University/CFO survey.
The economy’s ability to grow in the later half of 2008 gives CFOs the most anxiety, the FEI survey finds, with 48 percent reporting it as their number-one concern. As in the Duke University/CFO survey, oil prices register high on the radar of finance executives surveyed by the FEI. Rising oil costs were the top concern of 35 percent of CFOs.
Finance executives surveyed by the FEI also don’t expect to see oil prices coming down in the near future, though prices have fallen in recent days. Half of those surveyed say that in six months oil will be pushing $160 per gallon, if not more. Many say they are changing business behavior by increasing product or services prices, cutting back on corporate travel, and taking steps to become greener. The Duke University/CFO survey reported that 60 percent of survey respondents now say they are taking steps to address higher fuel prices, including reducing business travel, improving the energy efficiency of their facilities, and adopting more-efficient shipping processes.
In addition to top economic concerns, the FEI survey asked respondents to weigh in on the 2008 Presidential election, as well as the convergence of international financial reporting standards (IFRS).
Presumptive Republican Presidential nominee Sen. John McCain (Ariz.) is the candidate of choice for finance executives, according to the study, with 71 percent of CFOs saying he would be the most beneficial candidate for their company. Only 13 percent of respondents express a preference for presumptive Democratic Presidential nominee Sen. Barack Obama (Ill.). Tax policy is CFOs’ main concern with the Illinois senator, with 87 percent believing there would be a negative impact on taxes if he were elected.
Although 70 percent of those surveyed by the FEI think Obama would have an overall negative impact on their company, they don’t seem to think much more highly of McCain. Only 15 percent think he would have a positive impact, compared with 74 percent who believe he would have no impact at all.
In the realm of financial reporting, the survey reveals that CFOs aren’t widely embracing IFRS or XBRL: just over half (53 percent) of the respondents say they wouldn’t file or prepare financial statements in accordance with IFRS if given the opportunity. However, if required to do so, most say it would take only two to three years to adopt IFRS.