A 59 percent majority of CFOs expect the congressional midterm elections to have a positive impact on their industry.
The group of 175 CFOs was surveyed at Deloitte’s CFO Vision conference earlier this month in Washington, D.C. More than 70 percent of the CFOs said they believe that current governmental financial policy has either had no effect or had a negative impact on their business.
Senior finance executives, however, remain concerned about the impact of new regulation on business and are calling for long-term efforts to reduce the federal budget deficit. With a slow domestic economic recovery in the United States, CFOs are looking beyond traditional markets to uncover opportunities in higher-growth emerging markets.
"Sovereign debt and China's possible property bubble, as well as the pending regulation, cost and repercussions of healthcare and financial reforms are making today, as one pundit phrased it, 'unusually uncertain times,'" said Deloitte LLP CEO Barry Salzberg in a statement.
He noted that another recent survey from Deloitte found that a majority of CFOs from large enterprises expect a prolonged “U-shaped” economic recovery, or even a “bathtub”-shaped, wide-bottomed recovery rather than a “doubled-dip” recession. “We are seeing CFOs adjust their strategy with a focus on staying agile and capitalizing on growth opportunities in a slow growth economy,” said Salzberg.
CFOs cited the impact of health care reform and financial regulatory reform as the most pressing regulatory issues. They expressed concern or uncertainty about the impact of the Dodd-Frank Act. Almost half (43 percent) are concerned about the additional cost burden of the landmark financial sector reform legislation, and 38 percent are unclear of its ultimate impact.
In keeping with the optimistic outlook around the midterm elections, 49 percent believe that the new Congress will have a positive effect on the implementation of financial regulatory reform. Moreover, 20 percent expect a neutral or negative effect while 32 percent believe it is too early to tell.
Nearly three-quarters (73 percent) believe the new Congress should act soon to establish a longer-term path to deficit reduction. Also, 15 percent believe Congress should act promptly to substantially reduce near-term deficits, and only 13 percent believe any action should be put on-hold until the economy is less fragile.
The vast majority — 88 percent — believe the new Congress should address 75 percent or more of the deficit via spending cuts rather than through taxes.
Availability of cash was not a dominant challenge in emerging markets. Of those CFOs who were already investing, or operating in emerging markets, only 3 percent cited securing or raising capital their biggest challenge. Only 12 percent of the CFOs who were not yet investing in or operating in emerging markets claimed that securing or raising capital was their biggest hurdle.
“CFOs understand that the economic environment is not going to turn around overnight, and therefore, many are aggressively looking for innovative ways to remain agile and grow outside of the traditional markets,” said Sanford Cockrell III, national managing partner of Deloitte’s U.S. CFO Program. “Many are investing in and expanding to emerging markets, which overall have fared better during the downturn, as a way to produce growth while traditional markets remain slow.”