According to the findings of a poll released this week by U.S. Bank, finance chiefs are executing defensive tactics rather than pursuing growth due to the lingering effects of the Silicon Valley Bank failure earlier this year as well as larger macroeconomic challenges.
The study was conducted in the spring while executives were still in shock over the March closure of SVB and several other regional banks. According to the survey, many financial chiefs are divesting from non-core businesses, exploring restructurings, and banking their hopes on technology to reduce costs and increase productivity.
The event still resonates with financial leaders today, according to Stephen Philipson, the head of global markets and specialised finance at US Bank and one of the study’s authors, even though the reasons for the caution are changing. CFOs are extremely anxious about the future due to liquidity issues as well as chronically high inflation and interest rates, he claimed.
“Talking to clients today, it’s just more general economic uncertainty,” he added, noting that many were not entirely betting on a so-called “soft landing.” Back then, the banking industry may have been at the centre of economic concerns. It’s intriguing how frequently the story shifts.
They were concerned about the effects and the possibility of financial contagion leading to wider banking sector instability in March and April, when the survey was conducted. The markets then saw a period of stabilisation, but “now you see long-term rates spiking and we’re back to people taking defensive postures,” he claimed.
According to the report, CFOs now put cost-cutting and maximising efficiency as their top priority for the finance function, up from positions eight in 2021 and three in 2022.
Resources have therefore been diverted away from projects that could have a longer-term impact on innovation and growth, such as M&A. In comparison to 42% two years ago and 27% last year, only 26% of respondents said they are investigating new business models.
Simultaneously, fewer than a quarter (23%) of the executives polled indicated that they are producing insights for usage throughout the entire firm, down from 39% two years ago and 30% last year. Additionally, it revealed that companies are selling off non-essential assets. According to Philipson, this may indicate that a truck firm that has dabbled in electric scooters is going to drop that line and return to its core business.
Not every budget cut is expenditure. Technology continues to be a top priority, coming in at number three this year, despite the push for efficiency in both the finance function and the entire organisation.