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CFO InsightsSeptember 2020What’s keeping CFOs up at night in 2020?Let’s assume we know what’s been keepingCFOs awake for most of this year. Given theglobal impact of the COVID-19 pandemic, itmight be more appropriate to ask: How onearth have they gotten any shut-eye sinceearly spring?In the pandemic’s immediate aftermath,of course, it’s doubtful finance leaderssnoozed long enough to sink into a REMcycle. Forced to reconsider nearly everyaspect of how they conduct business, manyCFOs have spent months setting—andresetting—their priorities and expectations.In many cases, after shoring up liquidity,they also had to tap uncomfortable levers:pausing some projects, applying triage toplanned investments, balancing layoffs withsalary cuts and furloughs, and applying forgovernment relief.Many companies were also forced to notjust go virtual, but to accelerate their digitalCFO Programpowered byThejourneys. And CFOs, along with IT, hadto move quickly on business and digitaltransformations, implementing front-andback-office tools and platforms to enablevirtual selling and providing servicesremotely. In some cases, FP&A teamsrequired upskilling so finance leaders couldswiftly ramp up operational improvementsin budgeting and forecasting. Meanwhile,management and boards demanded moregranular data and, as much as possible,real-time visibility into key metrics,especially those related to the pandemicinduced recession.1Now, as some companies have begunexecuting on return-to-work plans, CFOsare far from worry-free. In Deloitte’slatest CFO Signals survey, just 37% ofrespondents reported that they expectto achieve 95% or more of the revenuethey originally budgeted for 2020 (seeFigure 1). Moreover, 25% say they won’treach or exceed their pre-crisis operatinglevel until Q1 2022 or later. Among the155 respondents, who represent many ofNorth America’s largest and most influentialcompanies, top concerns included newwaves of infections, more shutdowns, andthe possibility of a longer-term recession.2Those insights, along with others expressedin the other activities of Deloitte’s CFOProgram—including CFO TransitionLabs , CFO Forums, CFO Vision , and theDeloitte Module of the CFO Journal—informthe following list of factors fanning CFOrestlessness at a time when flux seems hereto stay. Individually, each concern signifiesan area that demands finance leadership;combined, they illustrate just how thepandemic has changed the day-to-dayfinance operations at many organizations.

What’s keeping CFOs up at night in 2020?Figure 1. What is your 2020 revenue compared to original expectations?How do you expect your calendar year 2020 revenue to compare to what you budgeted before thepandemic? Percent of CFOs selecting each range of budgeted nancial Services15% to 34%1% to 14%11%8%10%8%50%39%95% or higher of budgeted16%11%33%50%30%8%8%3%9% 3% armaServices2%1%8%7%36%75% to 94%9% 4% 9%55% to 74%9%35% to 54%0% and belowSource: CFO Signals, Q3 2020, CFO Program, Deloitte LLP.1. Rationalizing globalization. Supplychain disruptions, sparked by the pandemic,have led many finance leaders to cast afresh, critical eye on the role and impactof their global ecosystem. Deloitte’s CFOSignals for Q2 2020 found that nearly 40%of surveyed CFOs expect their supplychains to be more diversified post-crisis.3How significantly could options, such as“onshoring” or “nearshoring,” reduce risksand costs? As they reconfigure their supplynetworks to boost resilience, CFOs maydecide to swap their extended supplychains for more regional versions. Theymay also accelerate their investment inautomation, adding online risk-sensing toolsto increase traceability and transparency,and illuminating the entire supplychain ecosystem. Companies that haveexperienced production disruptions asa result of locating factories in China andelsewhere may see the pandemic as anopportunity to de-risk and diversify.2. Leveraging liquidity. When thepandemic first hit, liquidity and cash flowbecame paramount, with a number ofcompanies scrambling to shore up debt anddiversify financing sources. For companieswhose sturdy balance sheets withstood thepandemic’s onset, however, now may be the2time to raise debt, deploying funds to targetincreasingly affordable acquisitions (see“In the coming economy, M&A strategiesemerging as a big deal,” CFO Insights, June2020) in areas ripe for consolidation. CFOsmay also decide to divest assets to raisecapital for transformational transactionsthat can catapult them over their rivals.Companies still in need of liquidity, however,may decide to continue focusing on cashflow, reducing such costs as real estate (see“Space exploration: CFO considerations forstrategically evaluating real estate,” CFOInsights, July 2020).3. Accelerating digitalization. In the Q32020 CFO Signals survey, CFOs’ most-citedstrategic shift was toward more and longerterm remote work, but many also citedan acceleration of business digitalization.In fact, one respondent wrote that thecompany “had good digital capabilities, butexpected to use them 10% of the time; nowit’s 75%, and going-forward will probably be50%.” The crisis has also served as a catalystfor the finance function to expand its ownuse of automation, including in the annualplanning process and FP&A. As CFOsevaluate the range of new investments, theyneed to consider technology that not onlyallows for better business outcomes, butalso maintains data privacy and bolsterscybersecurity measures. Moreover, astheir companies develop capabilitiesfor digitalizing familiar activities (such asinvestor days, board meetings, and otherevents), CFOs will also have to evaluate theneed to invest in next-level technologies,such as AI-fueled analytics and RPA.4. Preparing for a long-term recession.For the first time in the history of CFOSignals, which dates back to 2010, there isa larger proportion of CFOs rating China’seconomy as good and expecting conditionsto be better there a year from now thanthose expressing a similar sentiment forNorth America. In the most recent survey,7% of CFOs rate the North Americaneconomy as good; 60% rate it as bad. Only43% expect conditions to be better a yearfrom now. That contrasts with the 22% ofCFOs who rate China’s economy as goodand the 47% expecting conditions to bebetter there a year from now. Still, that’snot the survey’s most discouraging news.Concerns among CFOs that the pandemicmight trigger a longer-term recession alsorose this quarter—and they aren’t the onlyones. The World Bank predicts that theglobal economy will endure its deepestrecession since WWII ended, with GDPcontracting 5.2% this year.4

What’s keeping CFOs up at night in 2020?5. Sustaining a virtual culture. Formany finance departments, the COVID-19pandemic introduced virtual work to afunction that traditionally required allhands on deck. It is turning out to be a notso-short-term experiment (see “Remotecontrol: How finance works, not where,matters most now,” CFO Insights, July 2020).In Q2 2020 CFO Signals, three-fourths ofrespondents said they expected more oftheir company’s workforce to work remotelyin the future. And almost three-quarters(72%) said that they anticipated that morefinance work will be conducted remotelypost-crisis.However, incessant connectivity can leadto creative exhaustion. CFOs need to learnhow to lead a virtual group, paying specialattention to the tone and inflection in theirvoices, speaking openly, and reinforcingdesired behaviors. In fact, as hybrid culturesdevelop, it might be wise to convene teamsto assess what worked well in the virtualenvironment and develop plans to maintaindesired behaviors and continually refreshenergies and focus. In addition, CFOsmight consider capitalizing on the pivot tothe virtual work environment to track anytalent gaps (e.g., areas that require digitalskills) that became evident and then teamwith human resources to develop plans tomitigate those gaps.6. Retaining talent. While talent is aperennial worry, many CFOs expressheightened concerns about retaining theiralready-remote colleagues and preventingthem from migrating to a different employer.Other financial leaders, having shownthemselves capable of leading through acrisis, are in demand by boards who mightfind their current CFOs lacking. Respondentsto the Q3 2020 CFO Signals survey ranked“retention of key talent” among their mostpressing concerns. “Even with a globalpandemic, the more talented, experienced,and high potential members of our teamsare being recruited,” wrote one respondent.Others echoed that sentiment in listing theirmost worrisome risks for the rest of 2020,with replies such as “talent developmentand retention,” “being able to pay our bestperformers enough to retain them,” and“motivating and retaining top talent.”37. Cultivating calmness. Unsurprisingly,CFOs have mainly been focused onmanaging costs and maintaining liquiditysince the pandemic hit. But stakeholdercommunication, also an important aspectof their role, has taken a new direction.To drive crisis management, and help theorganization make plans to re-engagecustomers in the post-COVID marketplace,CFOs have had to make an effort to lead, asone surveyed finance chief noted, by “beingtransparent and empathetic.” This economicdownturn is, at heart, a health crisis.Employees need to feel safe, meaning it’sup to management to convey compassion.In the Q3 2020 CFO Signals survey, one CFOwrote that the most important role he orshe has played since the pandemic has been“providing a sense of calm and perspectivethat the company is well positioned tomanage through this cycle.”8. Finding the outsourcing/automationbalance. With demand wobbly, CFOs willinevitably look to improve efficiencies andachieve cost reduction in nonessentialor repeatable processes. As a result,companies may increase their outsourcingof some activities. The Q2 2020 CFO Signalssurvey found that CFOs—with many havingoverseen their first remote quarterly close—overwhelmingly expect more automationand cloud computing; nearly one-half ofrespondents expect to have fewer financestaff in a year. Among respondents, 16% ofCFOs are expecting to use more outsourcedfinance services. Still, as the changed dutiesof the finance function come into view, itwill fall to CFOs to strike the right balancebetween outsourcing and automation, aswell as to determine what new skills canbe achieved through the cross-training ofcurrent staff.