5 2023 Financial Trends and What CFOs Need to Know
As a CFO, you know that the finance world is constantly changing. Here are five 2023 financial trends we’re anticipating.
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Why CFOs are Leading Company-Wide Sustainability Efforts
The report, “The Ceres Roadmap for Sustainability: Why CEOs and CFOs are Stepping Up,” found that many finance chiefs are taking the lead on sustainability issues within their companies. The report’s authors attribute this 2023 financial trend to four factors: 1) the increasing awareness of the financial risks associated with unsustainable business practices; 2) the growth of sustainable investing; 3) increased demand from investors for information on companies’ environmental, social and governance performance; and 4) mounting evidence that embracing sustainability can improve a company’s bottom line.
Today, sustainability efforts remain in the headlines. In a recent survey of CFOs, 48% said they planned to increase their spending on environmental, social, and governance (ESG) initiatives, even though there is high inflation and a risk of recession. Additionally, 39% of finance leaders said they will maintain their ESG budgets in 2023, while only 6% plan to invest less.
While the integration of sustainability efforts is a company-wide effort that requires buy-in from everyone, including board members, management, and front-line employees, the CFO and finance team play the most critical role in enabling it.
CFOs can be sustainability leaders within their companies. By implementing ESG initiatives, they can help their businesses become more sustainable and reduce their risk of financial losses. Additionally, CFOs can play a role in educating other members of their organization about the importance of sustainability. By taking a leadership role on sustainability issues, CFOs can help their companies become more environmentally and socially responsible while also improving their bottom line.
- CFO Dive, CFOs plan to boost ESG spending despite recession risk: survey
- CFO.com, How CFOs Can Be Sustainability Leaders
How CFOs are Tackling the Rising Inflations Rates and a Looming Recession
In the current economic climate, CFOs are facing several challenges, including supply chain difficulties, a tough labor market, rising inflation rates, and a looming recession. To tackle these challenges, CFOs are implementing a variety of strategies.
One strategy that CFOs are using to combat rising inflation rates is to increase revenue by expanding their customer base or increasing prices. In a recent Deloitte survey, 76% of CFOs indicated their organizations would raise prices for a substantial portion of their products or services to offset inflation. To prepare for a potential recession, CFOs are forecasting how a recession could impact their business and developing contingency plans. “CFOs ultimately need to drive long-term shareholder value,” Bill Koefoed, CFO of OneStream, told CFO.com. He confirms that finance executives need to be prepared, but the key to preparation is forecasting beyond an economic downturn.
By implementing these strategies, CFOs are helping their companies weather the current economic climate. By preparing for the worst and beyond, they can help ensure that their businesses remain stable throughout difficult times.
- Deloitte, CFO Insights—How CFOs Can Rise To Meet The Challenge Of Soaring Inflation
- CFO.com, 75% of CFOs Say Economic Disruption is 2023’s Biggest Challenge: Weekly Stat
The Benefits CFOs See in Continuing a Hybrid Work Model
The hybrid work model is a combination of two or more work arrangements, such as full-time, part-time, and remote work. It offers several advantages for both employees and employers.
For employees, the hybrid work model allows them to have more flexibility in their schedules and to balance their work and personal lives. Additionally, it allows them to learn new skills and stay up-to-date with technology. For employers, the hybrid work model helps them reduce costs. A recent study by the research firm Global Workplace Analytics found that companies can save up to $11,000 for every employee working two or three days remotely per week thanks to reduced rent, increased productivity, and lower absenteeism and turnover rates. Companies may realize additional savings by hiring remote workers on a project basis or part-time basis. The hybrid work model also enables companies to retain talented employees. In the 3Q 2022 CFO Signals survey, 71% of CFOs said providing flexibility for work location was the most effective action for retaining talent.
The hybrid work model is becoming increasingly popular due to its many benefits. CFOs should be aware of these benefits so that they can decide if this type of arrangement would be beneficial for their company.
- Deloitte, How CFOs can learn the ins and outs of the hybrid work model
- Fortune, CFOs see hybrid work as a cost-cutting opportunity
The Role CFOs Now Play in Talent Retention
As the competition among employers continues to heat up, so too does the need for companies to offer better employee retention incentives. This could include bonuses, additional vacation days, or even access to professional development opportunities such as training sessions or conferences. As business owners look more closely at their bottom line during this period of economic uncertainty, investing in employee retention strategies can be a great way to cut costs while also helping retain top talent and boosting morale within the workplace.
The influence of the CFO has expanded in recent years. According to HR Future, finance leaders are playing a bigger role in attracting, developing, and retaining talent throughout the business. This is likely because labor costs are a significant expense for companies and due to the cross-functional relationships required by the finance office. PYMNTS noted in a recent article, “One of the most important roles a CFO can play within the enterprise is to act as the facilitator of connectivity, not only within finance teams, but across the entire organization.”
- HR Future, CFOs now champions for talent retention and cultural change
- PYMNTS, Voices of the CFO: Competing for and Retaining Talent
The Corporate Impact of the Strong Dollar
While the world’s economies are struggling to recover from the COVID-19 pandemic, many countries have been hit with another economic shock – currency fluctuations. This year, the U.S. dollar hit a twenty-year high against other global currencies and the Wall Street Journal Dollar Index is up nearly 15% since January. The Financial Times reported that the strong dollar is significantly impacting businesses with global operations. CFOs are reviewing their hedging strategies and seeking additional protections to help ensure that their overseas earnings are worth a certain amount when translated into U.S. dollars.
- Financial Times, Strong dollar wipes billions off US corporate earnings
- Wall Street Journal, CFOs Boost Currency Protections, Extend Hedge Contracts as Strong Dollar Takes Toll