Middle Market CFOs Prioritize Stability in 2024 ? BDO Survey
BDO USA:
Survey Highlights:
- 66% of CFOs say economic volatility poses the same or greater risk now than it did a year ago.
- 36% of CFOs plan to increase monetary compensation for their employees, and 29% plan to enhance non-monetary benefits in 2024.
- 53% of CFOs say they have embedded ESG principles into their core business strategy or are actively working on it.
- Almost half of organizations have formalized or are in the process of formalizing a generative artificial intelligence (AI) policy.
Middle-market CFOs reach for strategic resilience
The 2024 CFO Outlook Survey found that with continued economic uncertainty tied to interest rates, inflation, geopolitics, and the upcoming presidential election, many CFOs have moderate expectations for 2024 compared to the previous year: Now, 32% predict flat or decreased revenues, while 34% expect the same for profitability. Last year, only 18% of CFOs predicted flat or decreased revenues, and a fourth expected the same for their profitability.
Despite the uncertainty, CFOs are finding opportunities to create stability and foster resilience in their organizations while also uncovering ways to promote growth. New tools like generative artificial intelligence (AI) and new approaches to business issues like worker engagement present exciting prospects that are shaping the middle market's focus this year.
"In this economic environment, thriving companies are being even more intentional about their approach to financial stability and long-term growth," said Wayne Berson, CEO of BDO USA. "Those looking to prosper as the market rebounds must take bold action now to gain market share, carve out a competitive advantage, and position their organization for sustainable growth."
CFOs monitor several risks and expand their involvement
Economic volatility is the top risk on CFOs' minds this year, with 66% saying it poses the same or greater risk now than it did a year ago. Generative AI and data privacy risks are also pervasive. To counteract these risks and build strategic resilience, 44% of CFOs plan to increase their involvement in digital transformation strategies, likely in an effort to improve efficiency and reduce costs.
CFOs prioritize their workforce
Although CFOs have felt some reprieve from the tight labor market and high attrition rates, workforce engagement remains a priority. Thirty-six percent of CFOs say their involvement in strategic conversations related to workforce strategy will increase in the next 12 months. Some of the biggest changes they'll make this year include increasing monetary compensation (36%), enhancing non-monetary benefits (29%), and expanding headcount (30%).
Companies strengthen their sustainability programs
Ninety-five percent of companies surveyed have an ESG strategy in place, up ten percentage points from the year prior. Further, more than half of CFOs (53%) have embedded ESG principles into their core business strategy or are actively working to do so. Companies increasingly see sustainability efforts as a strategic opportunity to build resilience.
Organizations bet on generative AI
Generative AI is transforming the way CFOs think about their businesses of tomorrow, especially when considering governance and maintaining data integrity. In a bid to future-proof their organizations, nearly half (49%) of companies have formalized or are formalizing a policy around generative AI. While the greatest opportunities are still being uncovered, CFOs expect it to support all areas of their business including compliance, customer service, safety monitoring, and more.
To dive deeper into the 2024 CFO Outlook Survey, download the full report here: https://insights.bdo.com/2024-BDO-CFO-Outlook-Survey.html
Gain industry-specific insights in BDO's five industry CFO reports:
- Healthcare: The healthcare industry continues to face a tough economic environment, but CFOs are seeing a light at the end of the tunnel, with 78% expecting to see profitability increases in 2024. To achieve growth, they'll revisit their revenue cycle management, accelerate AI adoption, and search for deal opportunities. They're also rethinking their investments, especially in specialty services like oncology, where 52% of CFOs report they'll increase spending.
- Life Sciences: Life sciences CFOs are battling a cash-low environment as investor scrutiny increases and M&A activity slows. The more austere economic landscape means many life sciences CFOs are looking for ways to recoup costs, with 42% saying they plan to claim tax credits as a cost optimization strategy. Despite rocky funding conditions, these leaders are still prioritizing fundamentals, with 77% expecting to boost spending in research and development.
- Manufacturing: Shifting supply chain regulations and risks, rising stakeholder demands around sustainability, and the acceleration of AI are defining new rules for resilience in the manufacturing industry. Manufacturing CFOs are adapting by rethinking their operations, with 89% expanding U.S. operations. and 47% increasing investments in AI and machine learning in 2024.
- Retail: Retail CFOs report positive outlooks for 2024 but are still tempering expectations in response to fixed consumer budgets and inflation. While 40% of CFOs anticipate profit growth between 10-25% in the year ahead, their paths to profitability vary. Some are adjusting their pricing strategy, while others are leveraging scenario modeling technology to improve supply chain operations. Retail CFOs are also eager to apply generative AI, with more than half of respondents already formalizing a policy for usage ? an investment that has the potential to enhance the customer experience and unlock cost efficiencies.
- Technology: Having faced stubborn inflation, rising interest rates, and stalled valuations, tech CFOs are pivoting their business strategies. They are planning new avenues for revenue generation through expanding products or services (51%) and leveraging AI for cost optimization (55%), while also seeking to leverage the full power of their tax departments. Building trust with customers is also a priority as they seek to grow their businesses in 2024.
The 2024 CFO Outlook Survey is a survey of 600 middle-market CFOs with revenues ranging from under $250 million to over $3 billion. The survey was conducted by Rabin Roberts Research, an independent marketing research firm, in October 2023.
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