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Feb 03, 2022

Inflation and pandemic batter CFO confidence for 2022

Most CFOs plan to handle disruptions by increasing cash flow and liquidity to bolster cash reserves

Rising inflation and the aftermath of the pandemic are clouding the US economic horizon for the next six months, a new survey of CFOs reveals.

Net optimism is down 12 percentage points to 57 percent, while net pessimism has almost doubled, from 11 percent to 21 percent, Grant Thornton reports. Ongoing supply chain issues and workforce concerns have added to CFO woes, while the Omicron variant of Covid-19 – which broke after the survey was held in Q4 – and the latest surge in Covid cases may well have eroded CFO optimism even further, the firm notes.

The report says more than half (53 percent) expect inflation to continue to hit their businesses for at least six months, while 33 percent anticipate it persisting for more than a year. Larger companies with more than $1 bn in revenue are most concerned about inflation, with 41 percent predicting inflation will continue for more than 12 months.

Biggest challenges

When Grant Thornton asked CFOs for the three biggest challenges facing their business, ‘supply chain’ jumped 16 percentage points from 24 percent to 40 percent, taking over from cyber-security risks as CFOs’ top concern. Asked which business issue was most likely to have a negative impact on their business, CFOs cite ‘supply chain’ and ‘workforce shortages’, both at 53 percent.

Enzo Santilli, Grant Thornton

Asked what actions they plan to manage disruption, the majority (52 percent) of CFOs say they intend to step up their focus on cash flow and liquidity to bolster cash reserves. That proportion in Q4  is up 17 percentage points over Q3.

‘In Q1 and Q2, with vaccines being rolled out and Covid numbers falling, there was a sense we would put the pandemic behind us more quickly,’ says Enzo Santilli, national managing partner of transformation at Grant Thornton.

‘CFOs now see the fallout from the pandemic dragging on far longer and are adjusting both their outlook and their responses accordingly.’

James Beech

James Beech joined IR Media Group as editor-in-chief of IR Magazine and Corporate Secretary in January 2022. He was a multimedia journalist, editor, client relationship manager, awards host and public speaker at Campden Wealth, for and about the...