The Year of the Balancing Act: Identifying Priorities for CFOs in 2023

New Risks and A Need for Caution: The Challenges Ahead

Uncertainty remains the name of the game in 2023, as businesses continue to operate in a challenging environment from both a geopolitical and macroeconomic perspective. Rightly so, attention has been on the Ukraine crisis, but CFOs must stay alert to the broader geopolitical landscape as traditional relationships shift. On the macroeconomic side, a slowdown in the post-pandemic bounce-back is expected by many forecasters. Global growth is set to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023, according to the IMF¹.

While inflation remains elevated, forecast to be 6.5 percent globally this year², and job losses across high-profile sectors such as tech have attracted attention³ (although headlines do not always reflect broader trends, with the US seeing strong job growth in its latest monthly data⁴), consumer confidence is nonetheless holding up on a global level, according to Ipsos⁵.

The big question for business, however, is whether the expected slowdown will be more focused on certain territories, or more widespread. Looking to the CEMEA region, it is worth noting that across much of the GCC (Gulf Cooperation Council) nations and in Africa, government spending is the main catalyst of economic activity. If global economic trends cause oil prices to soften, reduced investment by governments that are more reliant on oil revenues could affect economic activity in their countries, in turn.

According to a recent McKinsey global survey of CFOs⁶, financial leaders see the biggest risks to company growth as being tied to economic outlook, naming rising interest rates and inflation, as well as supply chain disruption (which is in turn exacerbated by rising costs⁷) as their top concerns. Just 12 percent view the pandemic itself as a prominent risk to company growth. In response, CFOs report that they are focused more on the pricing of their companies’ products and services, and less on the setting of corporate strategy, large-scale transformation, and M&A⁸.

Transformation and Transparency: Identifying Opportunities

The more positive news is that these challenges offer an opportunity for business leaders to continue delivering on their commitment to shareholders. In this environment, sustainable growth will become ever more important for their companies. With business performance no longer buoyed by the pandemic aftereffects, CFOs will need to consider how can they think differently, listening to clients and delivering what they want, to achieve their competitive advantage regardless of the wider environment.

To do this, businesses need to accelerate transformation – not just in terms of the much-discussed shift to digital, which is well under way, but in terms of integrating sophisticated data tools, AI, even augmented reality, into their operations. Leaders must ask themselves: how can we use new technologies to take care of lower-value tasks, allowing our talent to focus on the services that create tangible value to our clients? Here, with a mission to empower more people and businesses to thrive in a digital-first world, Visa is working with clients to expand new revenue streams in key areas – with a focus on co-creating new solutions and sharing knowledge and best practices.

The need for transformation means that, despite the economic headwinds, the war on talent will intensify. Here, leaders may benefit by being conscious of potential cultural gaps between them and their talent: for example, a coder might not be motivated by their company’s share price so much as being able to point to something unique their software achieved. Leaders might want to consider how to best protect their key employees, by cultivating an environment that enables them to grow in ways that matter to them. And there are indicators that CFOs recognise that challenge, with 54 percent of finance leaders stating that hiring and retaining talent will be the most difficult task for them to manage over the next 12 months, followed then by forecasting (36 percent), cutting the right costs (35 percent) and pricing (27 percent)⁹.

There will also be a need to focus on businesses’ environmental, social, and governance (ESG) frameworks. Companies will increasingly be evaluated not only on their financial performance, but in terms of what they return to society, to their environment, and how they are governed – transparency will be increasingly important. A strong enterprise risk management (ERM) system becomes even more crucial and must integrate an ESG framework as well as the impact of new technology and regulation.