Deloitte: New report finds CFOs ‘less optimistic’ for economy

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After a period of generally sustained economic optimism, CFOs are entering 2022 with a diminishing view of the economy and business outlook, according to Deloitte’s new Signals survey for 1Q22. Amid looming geopolitical tensions and rising inflation, CFOs signaled lower expectations for several key trade indicators. The investigation ended on February 25, 2022, the day after Russia invaded Ukraine.

According to the CFO Signals report, the 36% of CFOs expecting the North American economy to get better fell from 45% in the previous quarter. Similarly, 26% of CFOs said they expected the European economy to improve within a year, down sharply from 40% in 4Q21. There was also a drop in the percentage of CFOs expecting the Asian economy, excluding China, to improve year over year, to 33% from 37% in 4Q21.

Main risk issues

Similar to 4Q21, talent/workforce topped CFOs’ list of internal risks of most concern, particularly retention. CFOs also raised concerns about prioritization of initiatives and execution of strategy. Along with inflation and geopolitical instability, CFOs cited politics and regulations as a key external risk.

Other external risks cited include supply chain issues, a potential downturn in the economy and rising interest rates. Some CFOs have expressed concern about new variants of COVID-19. Together, these concerns could explain why less than half (47%) of CFOs said now was the time to take on more risk, down from 57% in the previous quarter, according to the Deloitte report.

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IT function management

CFOs are increasingly recognizing the critical role that their organization’s IT function plays, not only in keeping systems running smoothly, but also in contributing to the ability to compete, improve financial performance and manage cyber threats, the report says.

While more satisfied than dissatisfied with their IT function, surveyed CFOs identified several areas they would like to see improved to derive greater value, including speed, agility, and innovation; governance, accountability and transparency; talent, skill and business acumen; and digitization.

Of the 97 CFOs who responded to the question of whether their primary IT manager (CTO, CIO, etc.) reported to them, 28% said they directly supervised their organization’s IT manager, while 7% said their IT manager reports to them. indirectly. The remaining 65% said their organization’s IT manager does not report to them.

Additionally, more than a third (34%) of CFOs said they were very satisfied (5%) or satisfied (29%) with their organization’s IT services. Another 34% said they were somewhat satisfied. Sixteen percent of CFOs said they were somewhat dissatisfied with their organization’s IT services. Eight percent said they were dissatisfied and only 1% said they were very dissatisfied.

On average, CFOs reported that their organization’s overall IT spend was 3.1% of annual revenue. The percentage varied somewhat from industry to industry. In the top tier, 8% of CFOs said their overall IT spend was more than 6% of their annual revenue. The 3.1% average was lower than the 4.25% average cited by CIOs in the 2020 Global Technology Leadership Study for their company’s technology budget as a percentage of annual revenue.

On average, 23.7% of CFOs said their organization’s IT spend was dedicated to agile initiatives. The highest percentage cited 70% and above, which the Deloitte report suggests could be an outlier, while 14% of CFOs said it was below 1%, and 16% said that between 1% and 5% of their IT spend was on agile initiatives. (44 of 97 CFOs answered this question). Whether IT leadership is a direct or indirect report, it can be difficult to get visibility into IT spending, including allocations to agile activities, the report says.

The majority (52%) of respondents said their IT spending was on maintaining day-to-day operations. The rest was split between improving existing capabilities and operations at 26% and building new capabilities for their business at 22%, according to the report.

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Extract value from IT

The top three CFO responses to valuing IT were talent, complexity, and non-standardization, and business partnerships and alignment. Tech debt, prioritization and execution, and time to value were the other most common challenge categories.

When asked what steps their organization has taken to improve the value derived from the information technology function and technology spend, CFOs’ responses fell into eight categories:

  • Change IT management
  • Improving governance
  • Increase investment
  • Increase talent
  • Leverage the ecosystem of their organizations
  • Increase agile development
  • Restructure the IT operating model
  • Basic modernization

To measure the effectiveness of their IT function, surveyed CFOs cited metrics in these key categories: reliability, cost/revenue, user satisfaction, help desk statistics, and return on investment (ROI).

Some CFOs mentioned using benchmarks and measuring the effectiveness of their IT functions against data from their peers. Others reported that their organizations track the number of cyber incidents averted, the number of web channel threats, and internal phishing failures to measure the effectiveness of IT functions.

When asked if their IT function could improve three things to realize greater value, what would they be, CFOs offered far more than three things, the report notes. Overall, they focused on four areas: speed, agility and innovation; governance, accountability and transparency; talent, skills and business acumen; and digitization.

Data interfaces, analytics and information management, and operational execution and efficiency are other areas that, if improved, could position the IT function to deliver more value, according to the report. .

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