CFOs Rethinking Risk Amid COVID-19

June 23, 2020

Baltimore, June 23, 2020 – According to a survey released today by Euler Hermes Americas, the world’s largest trade credit insurer, 93% of CFOs and their direct reports say their organization has been impacted by COVID-19, with 50% making significant cuts to staff, 40% reporting major cash-flow disruptions, and 33% making significant changes to their business models. The CFO Pulse survey was distributed to 250 U.S. CFOs and their direct reports to assess how their risk appetite has been altered by COVID-19, and to better understand how top concerns have changed since the second annual “Risky Business” survey was conducted in late 2019.

Workplace Safety Rises To Top Concern

In the wake of COVID-19, CFOs report their top three concerns to be workplace safety, supply chain disruption, and a lack of predictability around regulatory changes and fiscal stimulation. Now a key issue, workplace safety was not cited by a single participant as a top concern in the late 2019 version of the survey. In the 2020 survey, it rose far and beyond other concerns with 28% reporting it as their top issue. Regulatory/compliance predictability, the second most chosen concern, clocked in at only 13%.

As businesses struggle to reconfigure themselves in a way that allows them to stay afloat during this economic downturn, achieving growth has fallen significantly on the priority list for CFOs.  Only 20% of respondents cited achieving growth as a top concern in the 2020 survey, as compared to 58% in late 2019. Cash flow is also a concern, with 61% of respondents reporting an increase in non-payment events when compared to the same time last year, for some by as much as 100%.

“If businesses can’t grow and trade on a global scale, that only exacerbates the slowdown we are seeing in the world economy,” said James Daly, CEO at Euler Hermes North America. “In just a few months, we have seen business leaders restrict credit terms and slash expansion plans. This is why it is so important to consider risk mitigation strategies like trade credit insurance, which allows for growth even in times of crisis[SJ(A2] .”

Changing Risk Strategies

Many business leaders have found themselves struggling to agilely respond to the hurdles presented by COVID-19, and the Euler Hermes survey results confirm this sentiment. 94% predict that their company will be changing their overall risk strategy to some extent in preparation for future crises like COVID-19.

Some of those changes come with their own business risks. Just under half (45%) plan to be more restrictive with credit terms extended, which can result in additional losses. In 2019, more than four in five (80%) CFOs had experienced a loss of business from stricter payment terms, smaller credit limits and deposit requirements, up significantly from 57% in 2018. 81% had unrealized revenue from stricter payment terms, with businesses losing an average of more than $1 million in revenue because of their risk posture in 2019.

“Risk postures like these typically end up worsening cash flow problems they set out to solve,” said Daly. “This is why it’s so important to prepare for every scenario via thorough knowledge, business partners, and a toolset that will simultaneously mitigate risk and stimulate growth.

For more information on risk tools that help business leaders focus on growth, visit  https://www.eulerhermes.com/en_US.

Methodology

Euler Hermes analyzed responses from 250 U.S. CFOs and their direct reports. Quotas were established to ensure that half of the respondents were from small companies (revenues between $5M and $25M) and that the remainder were “medium sized” (with revenues of $25M or more). Survey responses were collected during the period of October 30 – November 14, 2019. The team then re-contacted 120 previous respondents and 130 new CFOs and direct reports with a short “pulse” survey in May 2020 to learn how the COVID-19 pandemic had changed their attitudes about risk.

Euler Hermes
Alix McCabe
1-410-753-0596 alix.mccabe@eulerhermes.com
Hot Paper Lantern
Kristina Corso
1-212-931-6189 kcorso@hotpaperlantern.com