Introduction
Economic Outlook
2020
Priorities
Geopolitics & Regulations
Technology
Talent
Tax Policies
in Flux
Industry Insights
Conclusion
Methodology
Introduction
But CFOs are no longer taking the wait-and-see approach. Instead, they are making big moves. From digital transformation to capital investments, CFOs aren’t holding back.
Read on to learn how CFOs are tackling the pace of change.
The rules of business have been reinvented. As middle market CFOs enter a new decade, they see more change ahead. A potential economic downturn, trade tensions, regulatory upheaval—there is no shortage of challenges.
The past decade has been defined by disruption, global volatility and regulatory complexity. Companies can no longer expect calm, they must learn to thrive in the chaos.
The cloud of a potential recession looms large. But despite what turbulence may be on the horizon, CFOs appear confident in their resiliency.
ECONOMIC OUTLOOK / The Calm Before the Storm
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of CFOs believe recession is coming in
2020
19%
2021
37%
2023
9%
2022
28%
is the #3 business threat in 2020
Potential economic downturn
Only say it is their biggest priority this year.
11%
Despite the threat of an economic downturn, CFOs are bullish about their performance in 2020 and are forging ahead with growth strategies.
69% Thrivers
27% Survivors
4% Strugglers
(profitable and/or experiencing robust growth)
(breaking even and stable)
(unprofitable and/or losing out to competition)
Bold Moves:
CFOs Reinvent Themselves for the Disruption Decade
BDO investigates the issues, opportunities and strategies of middle market CFOs across 7 key industries.
2020 BDO Middle Market CFO Outlook Survey
Increase by 51% or more
Increase by 26-50%
Increase by 10-25%
Increase by 1-9%
No change
Decrease by 1-9%
Decrease by 10-25%
Performance Predictions for 2020
REVENUE
REVENUE
Profitability
Profitability
Profitability
REVENUE
81%
predict revenues will increase
77%
predict profitability will increase
Curious about your industry’s predictions for 2020?
Digital Transformation
Product or Service Expansion
Geographic Expansion
Restructuring or Reorganization
Private Equity Investment
M&A
IPO
Here’s a breakdown of their growth plans:
With confidence in their financial performance, CFOs are acting today to prepare for the unknown tomorrow. And they aren’t playing it safe–instead opting to pursue strategies that will ultimately help them ensure their business’s long-term sustainability in an uncertain future.
2020 PRIORITIES
Learn more about the growth plans and threats affecting your industry.
Growth Plans for Keeping Pace with Change
54%
53%
41%
38%
29%
25%
8%
Department Spending
CFOs aren’t skimping internally, either. Instead of preempting a downturn with sweeping cuts, they’re investing–planning to expand resources in key departments like IT and operations. With dollars flowing towards most departments, it’s clear CFOs are betting big on themselves and their companies.
Investing Internally
Research & Development
Research & Development
Marketing
& Sales
Marketing
& Sales
Finance & Accounting
Finance & Accounting
Customer Service
Customer Service
Risk Management/ Compliance
Risk Management/ Compliance
HR/Talent
HR/Talent
Information Technology
Information Technology
Operations
Operations
26%
Stay the Same
12%
Decrease
62%
Increase
Research & Development
63%
Increase
23%
Stay the Same
14%
Decrease
Marketing
& Sales
58%
Increase
30%
Stay the Same
12%
Decrease
Finance & Accounting
58%
Increase
28%
Stay the Same
14%
Decrease
Customer Service
63%
Increase
25%
Stay the Same
12%
Decrease
Risk Management/ Compliance
63%
Increase
26%
Stay the Same
11%
Decrease
HR/Talent
69%
Increase
19%
Stay the Same
12%
Decrease
Information Technology
63%
Increase
24%
Stay the Same
13%
Decrease
Operations
It isn’t all coming up roses. CFOs must contend with forces they have little to no control over, whether they're moves by competitors or economic shocks. Internal threats also persist and are no less dangerous. Today’s CFO is a risk leader—and must weigh both internal and external risks in business planning.
Attacked from All Sides
1
1
2
2
3
3
4
4
Data Privacy
19%
Greatest Threats in 2020
Key INternal Threats
1
14%
2
Falling Behind on Technology Innovation
Trust/Reputational Damage
11%
3
9%
4
Fraud Waste
or Abuse
1
1
2
2
3
3
Regulatory Uncertainty
12%
Potential Economic Downturn
17%
Competitive Pressures
18%
Key external Threats
3
2
1
Learn more about the growth plans and threats affecting your industry.
What issues are CFOs in your industry watching at home and abroad?
Top 3 Geopolitical Challenges
CFOs know better than most that business performance is intrinsically linked to the broader global economy. And with new issues emerging every day, CFOs are dealing with more geopolitical complexity than ever before.
Geopolitical Issues
GEOPOLITICS & REGULATIONS
Potential Economic Downturn
Recession has been talked about in hushed terms, and while the timing is still uncertain, it’s clear CFOs believe it is an imminent and unavoidable challenge. But, after the shock of the recession in 2018, CFOs have learned from their mistakes and are trying to proactively prepare.
Potential Economic Downturn
International
Trade
Tensions
2020 U.S. Election
2020 U.S. Election
The results of the impending presidential election are anyone’s guess, but stand to impact everything from taxation to healthcare. With so much remaining to be seen, CFOs have to scenario plan for any outcome and for how the butterfly effect of the election stands to affect their businesses.
International Trade Tensions
2019 was characterized by unending shifts in trade policy, particularly with key partners like Mexico and China. The administration vacillated between various tariffs positions, leaving many companies shouldering not only additional costs, but extreme uncertainty. While supply chain reorganization or exemptions may provide relief, for many businesses trade tensions and tariffs represent an existential threat.
More than 1 in 4 CFOs say trade and tariffs are their top policy issue in the 2020 election.
CFOs' Personal Challenges
While financial regulations may have loosened in recent years, new areas of scrutiny are emerging. Data privacy and cybersecurity frameworks are proliferating, creating compliance burdens. Complicating matters, the IRS and Treasury departments continue to release regulations resulting from federal tax reform. CFOs are struggling to keep up—and keep compliant.
Regulation Redefined
Greatest Regulatory Concern
22%
Data privacy
22%
Employment and labor law compliance
20%
Tax policy
17%
Healthcare regulation
12%
Anti-corruption and bribery
7%
Antitrust
#1
Keeping up with regulatory change
#2
Increasing volume of work and higher expectations
#3
Managing the budget
Find out more about innovation and security in your industry.
Find out more about innovation and security in your industry.
Innovation Vs. Security
TECHNOLOGY / Balancing Innovation and Security
Often the first line of defense in managing and mitigating risk, CFOs understand the need to balance innovation with stringent security. They’re putting the attention, and the dollars, towards ensuring they strike the right balance.
#1 Business Priority for 2020:
Investing in Technology or Infrastructure
CFOs plan to increase IT spending
7 in 10
of CFOs plan to increase IT spending significantly
32%
#1 Business Threat:
Data Privacy Breach
Top Challenge for
Finance Department:
Information and
Data Management
Biggest Concern around
Financial Reporting:
IT Software and Security
The way we work is changing, and so are the job requirements. CFOs are focused on future-proofing their workforce. But doing so is often easier said than done. Top talent comes at a premium, and can be as hard to find as it is to hold on to.
TALENT / Workforce Woes
21%
Increasing Labor Costs
18%
Shortage of Skilled Workers
17%
17%
Training & Development
Attracting New Talent
Navigating Labor Disputes
10%
17%
Retaining Key Talent
How is your industry adapting to a changing workforce?
What’s taxing CFOs in your industry?
Top 4 Tax Challenges:
Taxation today looks different than even a few years ago. The reduction in the corporate tax rate was a boon to many, but companies are still struggling to implement tax reform changes. Coupled with shifts like the Wayfair decision and potential changes to the taxation of digital services, the tax environment remains in flux.
TAX POLICIES IN FLUX
1 in 5 CFOs say
Recruiting and Retaining Top Talent
#2 Business Priority?
Primary Workforce Challenge
tax policy is their biggest regulatory issue
Adopting new guidance on federal tax reform
Transforming the tax function
Navigating shifting trade and tariff policies
Understanding total tax liability
17%
18%
21%
23%
INDUSTRY INSIGHTS
Want to go deeper? Download our Industry CFO Outlook Reports for:
CONCLUSION
While CFOs are facing widespread shifts, they aren’t backing down from the challenge. Confident in their financial performance and ready to leverage diverse strategies to get ahead, CFOs aren’t passengers in determining the future of their organizations, they’re steering the ship.
METHODOLOGY / THE CFO VIEW
700
CFOs
50%
Public Companies
50%
Private Companies
7
Industries
THE CFO VIEW
Revenue
Revenue
Tenure
Tenure
Operations
Operations
29%
Under $500M
52%
$501M - $999M
19%
$1B - $3B
Revenue
Tenure
16%
2 years or less
47%
3-5 years
38%
6+ years
Operations
U.S. only
69%
U.S. and other areas
26% Canada
15% Europe
11% Latin/South America
6% Asia-Pacific
1% Africa
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31%
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What issues are CFOs in your industry watching at home and abroad?
How is your industry adapting to a changing workforce?
What’s taxing CFOs in your industry?
