Risk concerns remain for CFOs, but they see improvement ahead

Three in five finance leaders say “now is not a good time” to be taking greater risks, according to a recent survey, partly because of the prospect of interest rate cuts.

Deloitte’s first-quarter North American CFO Signals survey found that 60% of CFOs are risk-averse, with geopolitics, macroeconomics, the political environment, and interest rates among their top concerns. When the survey was conducted in February, the possibility of interest rate cuts was still unclear, but the Federal Reserve is now expected to cut rates by the end of the second quarter.

The survey was conducted among 116 CFOs, mostly from companies with over $1 billion in revenue. Eighty-eight percent of respondents were from the United States, with 9% from Canada and 3% from Mexico.

Finance leaders are cautious despite increases in their year-over-year growth expectations for earnings, revenue, dividends, and domestic hiring.

The possible rate cuts may have helped how CFOs view the attractiveness of debt and equity financing, along with the rise in stock prices. Thirty-seven percent see equity financing as attractive, and 18% view debt financing as attractive — both significant jumps from last quarter.

Optimism is up overall, too. Fifty-nine percent of finance leaders rate current economic conditions as “good or very good,” an increase from 47% in the 4Q23 survey. Fifty-four percent of CFOs also expect conditions to improve in a year. That’s up from 37% in the last quarter.

About two-thirds (65%) of CFOs believe that U.S. equity markets are overvalued, a big increase from 35% last quarter and the highest since 1Q22 when 72% said the same. “Whether this view indicates CFOs’ companies might hold off on M&A [mergers and acquisitions] is unclear,” the survey said.

The future of AI in finance

While AI isn’t making an impact in the finance function right now, leaders see it as part of the near future.

Slightly less than half of CFOs said GenAI has a “minimal or moderate impact” on current finance talent models, but 93% said bringing talent with GenAI skills into finance over the next two years is “important.”

The top reasons cited for concern in enabling their teams to use the technology were technical skills (65%), fluency (53%), and risk of adoption (30%).

About half of finance leaders said GenAI adoption has been encouraged most in IT (64%), business operations (54%), and customer/client services (50%) departments.

“Wherever GenAI takes business and the finance function specifically, adoption will likely require carefully balancing opportunity with risk and much consideration and planning to optimize its impact,” said Steve Gallucci, national managing partner for Deloitte’s U.S. CFO program.

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