The Economy

Top Ten Concerns of CFOs

Forecasting woes, volatile currencies and low employee morale rise up the list of finance chiefs' worries.
Jason KaraianFebruary 2, 2009

Where do you turn for information on the fast-changing financial crisis? Siebe van Elsloo hopes it is to a newspaper, a magazine or the journals at the local library. In fact, any publication will do. For the CFO of Royal Swets & Zeitlinger, a Dutch subscription-services company, the greater the demand for news, the more the firm’s customers — mainly academic institutions and large companies — will need help managing their periodicals.

But as customers scramble to understand the fast-deteriorating economic situation, van Elsloo, like most other finance chiefs around the world, cites shaky consumer demand as his top concern. As in previous quarters, this remains the top external worry among CFOs, according to the latest poll of nearly 1,300 senior finance executives by CFO Europe, Tilburg University and Duke University. (See “Top External Concerns” and “Top Internal Concerns” at the end of this article.)

Also on the list of worries, a note­worthy climber in the latest survey is currency volatility. The strength of the euro has certainly put a dent in results at globally minded Swets, van Elsloo remarks. The finance chief also frets about the long-term implications for currency values as a result of the huge bank bailouts in the UK and the US, key markets for the firm.

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And then there’s forecasting. As the uncertain economic environment wreaks havoc on budgeting and planning processes, finance chiefs now rank the ability to forecast effectively as their top internal concern. Van Elsloo has been broadening the scope of the scenarios that his company considers when forecasting. While the company’s academic clients are holding up relatively well, corporate customers cut back in the fourth quarter of last year. Although the ultimate severity of these cuts is difficult to predict, van Elsloo says they are responding by “working harder on making the company’s cost structure more flexible.” With labour accounting for two-thirds of the firm’s costs, this is understandably leading to unease among employees.

And this, of course, affects employee morale. Maintaining staff happiness during the downturn rocketed up the list of CFOs’ concerns in the latest quarter, ranking in the top three in Europe, the US and Asia. At Swets, the company is holding “town hall meetings” and communicating more frequently with nervous staff. “Of course, they are looking for more job security,” van Elsloo says. “We tell them that this is not something we can offer right now. The only thing we can promise is to keep them informed as well as we can.”

Nowhere to Go

However, morale isn’t such a concern for Yevgeny Pogorelov. At Samson, a Russian distributor of office supplies where he is CFO, employees are paid competitive salaries, work five-day weeks and can count on reasonable job security. The firm had to let go of only 3% of its 1,150 staff last year, while other companies near its headquarters in Voronezh have been cutting back aggressively on hours and staff. In a sense, “there is nowhere else to go” for Samson employees, Pogorelov says. 

Nevertheless, the CFO shares plenty of the other concerns prevalent among his peers, especially when it comes to forecasting and currency volatility. Successive devaluations have left the value of the rouble nearly 20% lower against the euro and the dollar over the past three months. As the central bank raises interest rates to defend the currency, Pogorelov is struggling to run forecasts as the firm’s supply chain and borrowing costs fluctuate unpredictably.

To date the company’s sales are in line with expectations, the CFO says. The prospect of financial-sector malaise spilling into the real economy remains “a fear but not yet a reality,” he says. “But nobody knows the depth of the downturn. The expectations are not good.”

Jason Karaian is deputy editor
of CFO Europe.

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