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Mar 23, 2020

Most CFOs fear Covid-19 could trigger global recession

More than half of financial leaders say coronavirus pandemic could significantly impact business operations, finds survey

A Covid-19-triggered global recession is a top concern for American CFOs as they prepare for falling revenues and a drop in consumer confidence, according to a pulse survey from PwC.

In a survey of 50 leaders from a cross-section of industries in the US and Mexico polled during the week of March 9, 80 percent of respondents say they fear Covid-19 will lead to a global recession. When asked to name their top three concerns in response to the pandemic, 48 percent point to a fall in consumer confidence as well as the financial impact, including effects on company performance, liquidity and capital resources.

Full extent of damage to companies unknown
More than half (58 percent) of CFO respondents expect falling revenues and/or profits this year as a result of the pandemic. A further 40 percent find it too early to be able to assess the full extent of the disruption caused by Covid-19 on their business. Only a fraction (2 percent) of respondents do not expect any impact on the company’s revenue and/or profits in 2020.

The study notes that PwC surveyed finance leaders before the stock market volatility intensified and the US moved to ban travel from some European nations for 30 days starting on March 13.

The outlook for the finance leaders will no doubt change rapidly as more clarity on the scale of the pandemic comes to light. For example, 44 percent of respondents say they are thinking about adjusting guidance. As of March 6, 71 companies in the S&P 500 issued earnings guidance below expectations for the first quarter, while 33 issued positive guidance. 

In a separate development, the SEC has issued regulatory relief for issuers affected by Covid-19, allowing them a 45-day delay for disclosures – including quarterly reports – that were scheduled for release between March 1 and April 30.

Financial actions to tackle Covid-19 disruption
PwC anticipates an increased number of companies performing scenario planning and financial modelling to assess the potential impacts of the outbreak. 

‘We’re seeing models being revised to incorporate economic impacts of past pandemics, including Sars and Mers in the 2000s, as well as outbreaks in 1968 and 1918,’ say the study authors.

The US and Mexican companies polled do not plan to passively stand by when financial actions are needed to be taken to tackle Covid-19 disruption. The survey finds 62 percent of CFOs are implementing cost-containment measures. Besides maintaining expense levels, 44 percent are planning to adjust their guidance and a third of CFOs are considering deferring or cancelling planned investments.