Despite global economic uncertainty, Canadian CFOs forecast a strong year ahead
TORONTO - Optimism is on the rise when it comes to economic growth, according to the sixth annual American Express/CFO Research Global Business & Spending Monitor. The Monitor, a survey of senior finance executives from the U.S., Europe, Canada, Latin America, Asia and Australia, found that fifty per cent of Canada's finance executives plan to support top-line growth this year, while improving profitability through modest spending and investment. Additionally, 31 per cent plan to increase real spending and investment by more than 10 per cent, compared to only 17 per cent of CFOs in the U.S.
The Monitor highlighted further differences between Canadian CFOs and their U.S. counterparts when it comes to optimism. Only nine per cent of Canadian CFOs expect political gridlock and uncertainty to negatively affect economic growth in Canada, compared to half of financial executives in the U.S., who are bracing themselves for the effects that the European recession and political uncertainty will have on their economy. The confidence seen among Canadian executives appears to be impacting their planning cycles as well, with nearly two thirds of Canadian CFOs claiming they have not shortened their planning horizon in response to increased market volatility in the past two years. Another 47 per cent say it's unlikely for them to do so in the next year.
"With many markets shortening their planning cycles in response to political and economic conditions, it's extremely encouraging to this level of confidence and optimism in our market," says Paul Parisi, Vice President & General Manager, Global Corporate Payments, American Express Canada. "The results indicate that Canadian CFOs are still looking ahead at long term opportunities for growth and spending rather than merely trying to survive in the short term."
There is also a strong indication that Canadian CFOs will focus on both local and international expansion. The Monitor shows that over half of Canadian finance executives (53 per cent) will focus primarily on increasing sales within the domestic market, yet the expansion into emerging markets remains lucrative. Eighty four per cent of Canadian Finance executives planning to expand global activities in the next year with the majority expanding operations into China (56 per cent), India (41 per cent) and Brazil (34 per cent). Comparatively, more than a quarter (26 per cent) of U.S. executives do not plan to expand globally this year.
The evolving role of CFOs in Canada
As companies expand and grow, it appears that Canadian CFOs are taking a more prominent and strategic role. Forty three per cent of Canadian CFOs say the experience of the recent global economic downturn has enhanced their influence within their respective organizations, with 44 per cent saying they have become more of a strategist when it comes to decision making. Looking ahead, over half of the Canadian CFOs surveyed believe that encouraging innovation will be their greatest contribution to enabling growth over the next two years.
"Finance executives are taking the lessons learned in the downturn to further shape their role in the company," says Parisi. "They are looking at their business with a more strategic lens to ensure that they are helping to lay the foundation for growth and innovation in years to come."
A global snapshot
While Canadian finance executives up their spending and investments, the prolonged economic recession is hampering enthusiasm in some other developed markets. Spain and France had the lowest expectations for economic growth at 39 per cent and 43 per cent respectively. In fact, the European malaise is impacting Russia, which is considered an emerging market, yet tracked more closely to its geographic neighbours, likely due to economic ties with euro zone members. Rather than sharing the optimism of their fellow emerging economies, only 39 per cent of those executives predict growth for Russia.
Senior financial executives in emerging markets see the most robust opportunities for growth over the next 12 months with 75 per cent predicting economic expansion in their respective countries. Several emerging markets surveyed reported exuberant expectations for economic growth:
100 per cent of respondents in Brazil
94 per cent of respondents in China
81 per cent of respondents in Mexico
78 per cent of respondents in India
The consensus for growth in Brazil is remarkable. However, perhaps due to recent concerns about inflation and lagging production, Brazilian executives appear to be adjusting planning horizons. Eighty-one per cent say they are likely to shorten their planning cycles in response to increased market volatility.
"Despite the European recession, we're seeing a blend of overall optimism regarding the economy," said Parisi. "As we increase investments in booming emerging markets we're offsetting economic uncertainty in Europe, giving Canadian executives the confidence to plan for growth long-term."