A new report from Euler Hermes, global leader in Trade Credit Insurance, examines how much the Covid-19 crisis shifted European financial leaders’ confidence and priorities for 2020. Carried out before and during the Covid-19 crisis with more than 1,000 CFOs participating across Europe, the survey reveals that financial executives were cautiously optimistic at the beginning of the year, but that the pandemic has increased their concerns, especially with regard to payment delays. Moving forward, new technologies remain a key focus for CFOs, but this must be conditional on protecting the business from risk.
The Covid-19 crisis has changed CFO’s expectations
At the beginning of 2020, financial leaders expected better financial performance despite high political risk in the world, rising protectionism and climate change. The two most frequently cited reasons for this optimism were growth in sales and profits, driven by the improved macroeconomic situation in Europe and the use of new technologies. Since the pandemic, this sense of optimism has decreased considerably: the percentage of those who say they are "confident" for 2020 has fallen from 50% to 36%; those reporting being "worried" have almost doubled from 19% to 32%. The number of CFOs saying they are "scared" has more than doubled from 9% to 23%.
Preserving working capital is now the top priority
Prior to the pandemic, new technologies were the top investment priority. Since then, the way financial executives view their priorities has changed. Concerns about their company's cash flow and working capital dominate. The proportion of finance leaders seeing short-term debt, day-to-day operating expenses and management of large inventories as their main preoccupation increased from 17% to 30%. Preserving working capital is now the top priority for one in three CFOs. Despite a potential temporary delay of investments in new assets in the short term, technology remains high on the priority list of CFOs (21% compared to 22% before Covid-19). The need to understand technology is a key skill of a CFO for 49% of CFO respondents. Only three skills are even more important according to them: financial planning (67%), strategic decision-making (56%) and business plan development (53%). Payment delays are the most pressing concern for CFOs Even prior to the Covid-19 outbreak, risks related to payment delays and customer creditworthiness were major concerns for CFOs, affecting respectively 47% and 32% of companies over the previous year. Since the crisis, things have escalated further: 65% of the companies surveyed said they had experienced payment delays in the last two months.
In addition, only one in three companies feel "fully prepared" to deal with payment incidents (31%) and a possible insolvency of a customer (35%). According to a recent Euler Hermes study, the number of insolvencies worldwide will increase by 35% by 2021. The increase in insolvencies forecast for Belgium is +26%.
Businesses that are well prepared to manage risks will emerge strongly
Ultimately, the interviews conducted as part of Euler Hermes' CFO survey show that CFOs believe that the current crisis may cause a polarisation of the business landscape. Businesses that are tech-savvy, who can adapt the quickest and who have robust risk-mitigation strategies in place, will survive.
Read the full report here.