deloitte cfo global insights

CFO Global Insights What CFOs around the world are

thinking and doing

Third Quarter 2010 Deloitte CFO Surveys:

North America, United Kingdom, Ireland, Spain,

Belgium, Netherlands, Switzerland, Middle East,

Australia, South Korea

Deloitte’s CFO Global Insights December 2010

© 2010 Deloitte Global Services Limited Deloitte CFO Global Insights i

About Deloitte’s Global CFO Program

The Global CFO Program aims to position Deloitte to be the preeminent advisor to the CFO. Recognizing that the CFO's role has evolved rapidly over the last few years, the Program focuses on building relationships and eminence and has successfully captured the attention of the CFO community through surveys, forums and executive development programs. The Program has also produced a rich library of intellectual property, newsletters and podcasts used to deliver key insights to CFOs in many different countries.

About Deloitte’s CFO Surveys

Seventeen Deloitte member firms have launched CFO Surveys in recent years. The objective of the surveys is to collect CFOs’ opinions on a range of areas including economic outlook, financial markets, business trends, their organizations, and CFO careers. The focus of each member firm’s survey may vary.

The composition of the respondent group may vary between surveys. For example, more than 70% of respondents for the North American CFO Survey are from companies with more than US$1 billion in annual revenue and 75% are listed companies. The respondent group from other surveys may have a different composition. Please refer to the reports from individual CFO surveys for details on their participants.

About Deloitte’s CFO Global Insights

The goal of the Deloitte CFO Global Insights report is to provide highlights of recent CFO survey results from Deloitte member firms. This issue includes the results of the third quarter 2010 CFO Surveys from the following Deloitte member firms:

• North America: The tide is turning toward pessimism, but not for everyone

• United Kingdom: Cost control is still king

• Ireland: Uncertainty rises

• Belgium: Optimism confirmed by good results

• Netherlands: Change in funding preferences

• Switzerland: More appetite for risk

• Spain: Insufficient measures to combat stagnation

• Middle East: Resilience for growth

• Australia: The long haul to recovery

• South Korea: Optimism in a time of ambiguity

Contacts

Paul Robinson Managing Director, Global CFO Program 416-874-3317 [email protected]

Dave Walker Program Manager, Global CFO Program 514-390-1732 [email protected]

For additional copies of this report, please email [email protected]

Contents

Summary 1

North America 2

United Kingdom 3

Ireland 4

Belgium 5

Netherlands 6

Switzerland 7

Spain 8

Middle East 9

Australia 10

South Korea 11

Deloitte CFO Surveys 12

© 2010 Deloitte Global Services Limited Deloitte CFO Global Insights 1

CFO Global Insights

Summary for Third Quarter 2010

CFO sentiments in the third quarter generally reflect the current state of their countries’ economies and opinions about the pace of recovery. The uncertainty in the global economy has contributed to the tide turning toward pessimism in North America and the UK, while other countries in the Eurozone and Australia have a generally positive financial outlook.

CFOs surveyed in Ireland and South Korea appeared more cautious in the outlook for their companies. However, recent developments around the financial bailout for Ireland and the tense political situation in the Korean peninsula may portend increasing pessimism for both these countries.

In North America, the UK, and other areas where optimism persists, CFOs report improved access to capital and reduced concerns about debt and liquidity. There is an increased appetite for risk; increased gearing is anticipated in the next year by UK and Australian CFOs due to positive views on arranging new credit or issuing debt. The ability to service debt has also improved for many. Not surprisingly, CFOs in Ireland and Spain raise concerns about the availability of new credit and difficulty in obtaining funding.

Despite a continued focus on cost control, many CFOs are considering strategies to grow revenues. There is also a desire to increase their involvement in the strategic decisions of their companies.

Gauge of CFO Sentiment*

Optimistic

Pessimistic

SwitzerlandNetherlandsBelgiumMiddle EastAustralia

Cautious

IrelandSouth Korea

North AmericaUnited Kingdom

*At the time of respective CFO Surveys in the period

© 2010 Deloitte Global Services Limited

North America

The tide is turning toward pessimism, but not for everyone

One clear message from our second quarter survey was that, despite considerable uncertainty, CFOs were predominantly optimistic about their companies’ prospects. present, that sentiment is not as strong as it was in our previous survey. The primary reason: much more somber assessments of what’s happening in companies’ external business environments.

Sobering global economic conditions

Since the last survey, sluggish consumer spending, declining effects of government stimulus, and stagnant job markets in the U.S. and across most of North America, have contrislowing economic recovery and volatile equities marketsSovereign debt crises and a weakening euro have changed the economic landscape in Europe, and China’s tightening of monetary policy has raised further fears that global economic growth will slow.

Coming to grips with slowdown implications

CFOs are clearly concerned about these developmentsUnemployment, which wasn’t at the top of many lists of concerns last quarter, jumped to the top of this quarter’s concernsContributing to this sentiment is increasing unemployment approaching double digits and a decline in housing prices.

Worries about the impact of unemployment and housing prices on consumer spending are reflected in companies’ increasing focus on revenues. Companies’ concerns about ramaintaining demand jumped this quarter, with revenue growth getting a larger share of their strategic focus. revenues also seems to be heating up, with growing concerns about pricing trends, new competitive tactics, M&A, and the success of new initiatives.

With the slowdown of global economies has come increased fear of a volatile or prolonged recovery. The good news is that CFOs don’t consider a W or “double-dip” recovery a likely scenario in their business planning (only 9% do)good” news is that they don’t generally expect the faster recoveries associated with a “V” or a “U,” eitherexpect a “bathtub” shaped recovery (a “U” with a wider bottom)One in ten expects an “L” recovery.

All eyes are still on government, both because of the effects policy will ultimately have on the broader economy, but also because of the effects it will have on competitive environments within and across industries.

Little concern about debt and liquidity

CFOs – at least those of very large companies concerned about debt and liquidity. Fewer than onecapital availability and cost in their top three economic concernsOnly one in ten CFOs names sourcing capital a top three company challenge. Fewer than half of CFOs indicate they have debt-reduction strategies that rely most heavily on cash reserves and operating cash flows (rather than asset sales and equity offerings).

Deloitte CFO Global Insights


One clear message from our second quarter survey was that, considerable uncertainty, CFOs were predominantly

. Although still present, that sentiment is not as strong as it was in our previous

The primary reason: much more somber assessments of companies’ external business

Sobering global economic conditions

Since the last survey, sluggish consumer spending, declining effects of government stimulus, and stagnant job markets in the

and across most of North America, have contributed to a slowing economic recovery and volatile equities markets. Sovereign debt crises and a weakening euro have changed the economic landscape in Europe, and China’s tightening of monetary policy has raised further fears that global economic

Coming to grips with slowdown implications

CFOs are clearly concerned about these developments. Unemployment, which wasn’t at the top of many lists of concerns last quarter, jumped to the top of this quarter’s concerns.

nt is increasing unemployment decline in housing prices.

Worries about the impact of unemployment and housing prices on consumer spending are reflected in companies’ increasing

Companies’ concerns about raising and maintaining demand jumped this quarter, with revenue growth

. Competition for revenues also seems to be heating up, with growing concerns about pricing trends, new competitive tactics, M&A, and the

With the slowdown of global economies has come increased The good news is that

dip” recovery a likely scenario in their business planning (only 9% do). The “less-good” news is that they don’t generally expect the faster recoveries associated with a “V” or a “U,” either. More than half expect a “bathtub” shaped recovery (a “U” with a wider bottom).

government, both because of the effects policy will ultimately have on the broader economy, but also because of the effects it will have on competitive environments

Little concern about debt and liquidity

se of very large companies – are not overly Fewer than one-third place

capital availability and cost in their top three economic concerns. Only one in ten CFOs names sourcing capital a top three

than half of CFOs indicate they have reduction strategies that rely most heavily on cash reserves

and operating cash flows (rather than asset sales and equity

Highlights from the 3rd Quarter North American CFO Survey:

• Nearly half of CFOs are more optimisticabout their company’s prospects, but pessimism is growing.

• Unemployment concerns rose sharply, topping the list of economic concerns.

• Sales and earnings expectations are even more optimistic than last quarter, but variability is rising.

• Costs are still a heavy focus, but revenue growth/protection is gaining focus.

• Competition appears to be heating up with increased challenges around pricing trends, new competitive tactics and M&A.

• Government is still a major focus with regulatory requirements topping career and industry concerns.

• CFOs are not very concerned about debt and liquidity.

Still optimistic, but for how much longer?

Despite rising worries about the economy, companies in this survey are still projecting growth on the wholesales are expected to increase roughly 11% on average, with earnings increasing almost 20%. But there is increasing variability across companies. While these numbers are fairly optimistic even when adjusted for volatility, they mask the fact that many companies still have a long way to go before returning to their pre-recession trends.

The blurry road ahead

Variability in companies’ outlooks obscures the picture of what to expect next. Whom should we believe optimism is still rising, or those who are becoming more pessimistic?

As employment and economic recovery sputter, pessimism seems to be gaining more momentum than optimism doesthese just the first people to reach the top of the rollercoand see the decline ahead?

An equally strong argument might be made for why a substantial portion of companies will not only survive but thrive during a period of cheap capital, effective austerity measures and substantial long-term growth opportunitand inorganic). Could this be a retrenchment and strengthening period that leads to bigger and better things for some companies?

Based on this survey, we could well be seeing a bifurcation of the business environment, where large, healthy(like the majority of those involved in this survey) have superior capital access and costs that provide substantial competitive advantage.

Deloitte CFO Global Insights 2


Highlights from the 3rd Quarter North

CFOs are more optimistic this quarter about their company’s prospects, but pessimism is

Unemployment concerns rose sharply, topping the list of

Sales and earnings expectations are even more ability is rising.

Costs are still a heavy focus, but revenue

Competition appears to be heating up with increased challenges around pricing trends, new competitive tactics

with changing regulatory requirements topping career and industry

FOs are not very concerned about debt and liquidity.

Still optimistic, but for how much longer?

Despite rising worries about the economy, companies in this projecting growth on the whole. Year-over-year

sales are expected to increase roughly 11% on average, with But there is increasing

While these numbers are fairly r volatility, they mask the fact

that many companies still have a long way to go before

Variability in companies’ outlooks obscures the picture of what Whom should we believe – those whose

optimism is still rising, or those who are becoming more

As employment and economic recovery sputter, pessimism seems to be gaining more momentum than optimism does. Are these just the first people to reach the top of the rollercoaster

An equally strong argument might be made for why a substantial portion of companies will not only survive but thrive during a period of cheap capital, effective austerity measures

term growth opportunities (both organic Could this be a retrenchment and

strengthening period that leads to bigger and better things for

Based on this survey, we could well be seeing a bifurcation of the business environment, where large, healthy companies (like the majority of those involved in this survey) have superior capital access and costs that provide substantial competitive


United Kingdom

Cost control is still king

The 2010 third quarter Deloitte CFO Survey, published on October 2010, shows that CFOs believe their businesses are facing elevated levels of economic uncertainty. Their optimism about the financial outlook for their own business dropped in the third quarter to the lowest level since 2009 spring.

While the economic outlook is uncertain, credit conditions have continued to improve. CFOs now see the cost of new credit as being lower than at any time since the CFO Survey started in the third quarter of 2007. Perceptions of credit availability rose sharply in the third quarter. For the first time, more CFOs have rated credit as being “available” than “hard to obtain”.

CFOs think that excessive leverage in the corporate sector as a whole has been largely eliminated. With interest rates seen as being at very low levels and credit increasingly available, CFOs expect to increase their demand for credit over the next year.

Over the last year, the UK has seen an economic recovery, which, by historical standards, has been fairly robust. Nonetheless, CFOs have remained cautious about the sustainability of the recovery. As a result, CFOs have maintained a strong focus on controlling costs. This remained CFOs’ top priority in the third quarter. Cash flow is a lesser concern than a year ago, a change which reflects improved cand stronger corporate cash flow. Expansionary strategies, including introducing new services and expanding by acquisition, feature as prominent priorities and testify to a continued search by the corporate sector for growth opportunitie

Despite all the uncertainties, CFOs are positive on the outlook for corporate revenues and profit margins over the next 12 months. CFOs also see capital expenditure rising over the next year. But, with cost control at the fore, the balance of opinion isthat hiring and discretionary spending will shrink over the next year.

So, overall, the good news from this quarter’s CFO Survey is that large UK corporates are finding it easier to raise capital. CFOs are positive on the outlook for corporate revenues anprofits; many are looking for growth opportunities. Yet one of the dominant features of this Survey during the recession persists a year into the recovery - in an environment of uncertainty cost control is king.


Cost control is still king

The 2010 third quarter Deloitte CFO Survey, published on 11th October 2010, shows that CFOs believe their businesses are facing elevated levels of economic uncertainty. Their optimism about the financial outlook for their own business dropped in the third quarter to the lowest level since 2009 spring.

economic outlook is uncertain, credit conditions have continued to improve. CFOs now see the cost of new credit as being lower than at any time since the CFO Survey started in the third quarter of 2007. Perceptions of credit availability rose

e third quarter. For the first time, more CFOs have rated credit as being “available” than “hard to obtain”.

CFOs think that excessive leverage in the corporate sector as a whole has been largely eliminated. With interest rates seen as

vels and credit increasingly available, CFOs expect to increase their demand for credit over the next year.

Over the last year, the UK has seen an economic recovery, which, by historical standards, has been fairly robust.

utious about the sustainability of the recovery. As a result, CFOs have maintained a strong focus on controlling costs. This remained CFOs’ top priority in the third quarter. Cash flow is a lesser concern than a year ago, a change which reflects improved credit availability and stronger corporate cash flow. Expansionary strategies, including introducing new services and expanding by acquisition, feature as prominent priorities and testify to a continued search by the corporate sector for growth opportunities.

Despite all the uncertainties, CFOs are positive on the outlook for corporate revenues and profit margins over the next 12 months. CFOs also see capital expenditure rising over the next year. But, with cost control at the fore, the balance of opinion is that hiring and discretionary spending will shrink over the next

So, overall, the good news from this quarter’s CFO Survey is that large UK corporates are finding it easier to raise capital. CFOs are positive on the outlook for corporate revenues and profits; many are looking for growth opportunities. Yet one of the dominant features of this Survey during the recession persists a

in an environment of uncertainty cost

Highlights from the 3rd Quarter Survey

• Optimism has declined for the third consecutive quarterCFOs believe their business face elevated levels of economic uncertainty.

• The credit and financial crisis for the larger UK corporates seems to be over. Corporate credit availability rose at the fastest pace since the Survey started in the third quarter of 2007.

• Debt capital is seen as cheap and increasingly attractiveCFOs are increasingly willing to contemplate raising gearing.

• CFOs are positive about revenues, margins and cash flow, but are cautious about hiring and discretionary spending.

• For a majority of CFOs, cost control remains the top priority.


ighlights from the 3rd Quarter UK CFO

Optimism has declined for the third consecutive quarter. CFOs believe their business face elevated levels of

The credit and financial crisis for the larger UK Corporate credit

he fastest pace since the Survey

Debt capital is seen as cheap and increasingly attractive. CFOs are increasingly willing to contemplate raising

CFOs are positive about revenues, margins and cash e cautious about hiring and discretionary

or a majority of CFOs, cost control remains the top


Ireland

Uncertainty rises

Dark clouds:

The key challenges to the Irish economy are well documented at this stage – the budget deficit and the cost of bailing out banks. Some clarity is being brought to the scale of these challenges and, over the coming months, the measures that will be put in place to redress them will be revealed by Government. The most significant event in the coming quarter will be the announcement of the Budget 2011, in addition to a four year austerity plan to bring the country’s finances back into order. The budget, which is being signaled as one of the toughest in years, will now seek to exceed its initial €3bn deficit reduction target with figures of €4bn to €5bn being quoted.

Competitiveness is also a key challenge but also one of the enablers of a return to growth. The Annual Competitiveness Report 2010, prepared by the National Competitiveness Council in July had some positive messages but gains have to be maintained and interest and exchange rates pose additional threats.

While the Government has been able to raise bonds on the international market, these have been at substantially higher costs with ratings agencies again downgrading Ireland’s ratings status. With the Government not needing to return to the bond market until Spring 2011, budget measures over the next few months are critical to ensure a stable supply of funds.

... with a silver lining?

It’s not all doom and gloom out there though. Our topical questions this month show that in terms of competitiveness, the Irish labour market is at last starting to readjust to expected norms with 88% of CFOs stating that salary expectations are average or low. The survey results also indicate that CFOs believe that the quality of available resources is also high. Standard and Poor’s have further highlighted this perception by stating that Ireland’s economy will recover more quickly than several other European countries as our competitiveness improves due to the flexible labour market. Also, the agency does not detect ‘reform fatigue’ in Ireland’s politicians, and believes that concerns about fiscal and political risks to the country are exaggerated.

Alongside this, 24% of CFOs are now looking to reverse some of the cost reduction measures implemented during the initial stages of this recession. CFOs are also still confident in their own company’s ability to return to growth in the short term with over 40% stating that their company has already done so.

Expectations of revenue and turnover still broadly positive

Almost 60% of CFOs are anticipating increases in turnover over the next six months, while 30% are projecting no change. Another positive finding is a fall in the number of CFOs predicting a decrease in turnover. These figures continue the trend in previous quarters with a broadly positive outlook for growth in turnover, perhaps reflecting the high percentage of the respondents whose businesses trade internationally. However, analysis of the underlying data indicates that no CFO expects significant turnover growth in the next six months, demonstrating that optimism is being tempered by continuing uncertain economic conditions and the expectation thahave a negative impact on consumer confidence and spending power in the domestic market.


The key challenges to the Irish economy are well documented at deficit and the cost of bailing out banks.

Some clarity is being brought to the scale of these challenges and, over the coming months, the measures that will be put in place to redress them will be revealed by Government. The most

coming quarter will be the announcement of the Budget 2011, in addition to a four year austerity plan to bring the country’s finances back into order. The budget, which is being signaled as one of the toughest in years, will now seek

€3bn deficit reduction target with figures of

Competitiveness is also a key challenge but also one of the enablers of a return to growth. The Annual Competitiveness Report 2010, prepared by the National Competitiveness Council July had some positive messages but gains have to be

maintained and interest and exchange rates pose additional

While the Government has been able to raise bonds on the international market, these have been at substantially higher

ngs agencies again downgrading Ireland’s ratings status. With the Government not needing to return to the bond market until Spring 2011, budget measures over the next few months are critical to ensure a stable supply of funds.

s not all doom and gloom out there though. Our topical questions this month show that in terms of competitiveness, the Irish labour market is at last starting to readjust to expected norms with 88% of CFOs stating that salary expectations are

ow. The survey results also indicate that CFOs believe that the quality of available resources is also high. Standard and Poor’s have further highlighted this perception by stating that Ireland’s economy will recover more quickly than

an countries as our competitiveness improves due to the flexible labour market. Also, the agency does not detect ‘reform fatigue’ in Ireland’s politicians, and believes that concerns about fiscal and political risks to the

side this, 24% of CFOs are now looking to reverse some of the cost reduction measures implemented during the initial stages of this recession. CFOs are also still confident in their own company’s ability to return to growth in the short term with

stating that their company has already done so.

of revenue and turnover still

Almost 60% of CFOs are anticipating increases in turnover over the next six months, while 30% are projecting no change.

is a fall in the number of CFOs predicting a decrease in turnover. These figures continue the trend in previous quarters with a broadly positive outlook for growth in turnover, perhaps reflecting the high percentage of the

e internationally. However, analysis of the underlying data indicates that no CFO expects significant turnover growth in the next six months, demonstrating that optimism is being tempered by continuing uncertain economic conditions and the expectation that Budget 2011 could have a negative impact on consumer confidence and spending

Highlights from the 3rd Quarter Ireland CFO Survey:

• Market risk is the biggest concern: 58% of respondents identify market risk as their most worr

• Expectations of revenue and turnover still broadly positive: almost 60% of CFOs are anticipating increases in turnover over the next six months, while 30% are projecting no change.

• Cost and availability of credit: the cost of credit remains on an upward trend, with 50% of CFOs expecting market interest rates to increase over the next 6 months

• Selective recruitment and high skills availability: over half of respondents indicated that their companies are currently recruiting; however, in manvery specific roles, rather than large scale increases in staff numbers.

As for profit, a significant proportion (61%) of CFOs surveyed anticipates some continuing improvements in profitability, again continuing the positive trends of previous quarters. Only 9% of respondents are anticipating a decrease in profitability.

Cost and availability of credit continues to clog up the system

We have consistently highlighted in our surveys that the high cost and lack of availability of credit is hindering business in the Irish market, particularly smaller companies, and this quarter is no exception. While the Deloitte UK CFO Survey for Quarter 3 has shown a dramatic rise in credit availability and a reduction in cost in the UK, our survey repcompanies continue to be challenged by the availability of new credit and that there is widespread difficulty in obtaining funding, be it from banks, equity release or bonds. Respondents rated domestic banks as the most challenging source of credit with 54% of CFOs considering that it is still very hard or somewhat hard to obtain credit domestically.

Market risk is the key worry

Market risk has emerged as the key concern facing CFOs with 58% ranking it as their highest concern. Respondenfears of a double dip, deterioration in customer confidence, lack of credit, the impact of Budget 2011, and confidence in the Irish economy as just some of the key market risks companies are currently managing. Strategic, operational and financialrisks were significantly less of a priority for CFOs.

What to expect from next quarter will be a key milestone in our country’s economic landscape. The budget that will be announced in December 2010 will have significant implications for all of our economic futures. Our survey will have a budget focus with topical questions covering some of the key issues surrounding Budget 2011 and will contain key insights from CFOs on the impact of the budget on their companies and the economy.


Highlights from the 3rd Quarter Ireland CFO

Market risk is the biggest concern: 58% of respondents identify market risk as their most worrying risk.

Expectations of revenue and turnover still broadly positive: almost 60% of CFOs are anticipating increases in turnover over the next six months, while 30% are

Cost and availability of credit: the cost of credit remains on an upward trend, with 50% of CFOs expecting market interest rates to increase over the next 6 months.

elective recruitment and high skills availability: over half of respondents indicated that their companies are currently recruiting; however, in many cases this is for very specific roles, rather than large scale increases in

As for profit, a significant proportion (61%) of CFOs surveyed anticipates some continuing improvements in profitability,

of previous quarters. Only 9% of respondents are anticipating a decrease in profitability.

Cost and availability of credit continues to

We have consistently highlighted in our surveys that the high is hindering business in

the Irish market, particularly smaller companies, and this quarter is no exception. While the Deloitte UK CFO Survey for Quarter 3 has shown a dramatic rise in credit availability and a reduction in cost in the UK, our survey reports that Irish companies continue to be challenged by the availability of new credit and that there is widespread difficulty in obtaining funding, be it from banks, equity release or bonds. Respondents rated domestic banks as the most challenging

of credit with 54% of CFOs considering that it is still very hard or somewhat hard to obtain credit domestically.

Market risk has emerged as the key concern facing CFOs with 58% ranking it as their highest concern. Respondents cited fears of a double dip, deterioration in customer confidence, lack of credit, the impact of Budget 2011, and confidence in the Irish economy as just some of the key market risks companies are currently managing. Strategic, operational and financial risks were significantly less of a priority for CFOs.

What to expect from next quarter will be a key milestone in our country’s economic landscape. The budget that will be announced in December 2010 will have significant implications

ic futures. Our survey will have a budget focus with topical questions covering some of the key issues surrounding Budget 2011 and will contain key insights from CFOs on the impact of the budget on their companies and the


Spain

Insufficient measures to combat stagnation

Fragile economic recovery

CFOs have not changed their views on Spain’s economic situation, since 84% of them continue to believe that it is poor or very poor. In addition, macroeconomic indicators point to a delay in economic recovery. The survey conducted in March 2010 showed that 84% of CFOs expected recovery to take place before 2012 (during second half 2010 and 2011), but now, 61% believe that Spain’s recovery will occur in 2012 or later.

Moreover, from a global perspective, 76% of CFOs expect the Spanish economy to be in a stage of stagnation or recession for the next 12 months, while almost all respondents anticipate that the global economy will begin to recover.

Inadequate or inappropriate measures

Almost half of all respondents consider measures taken by the government in response to the Spanish economic situation as "appropriate but not sufficient”, while 45% believe that they “are not appropriate."

CFOs believe it is necessary to have greater labor market flexibility, increased training, and reform in the education system. They also propose reducing the tax burden, increasing control of current expenditure at all levels of government, and increasing investment in infrastructure.

Regarding the financial system, Financial Directors propose measures to facilitate access to financing and improved flow of liquidity, to increase control and transparency, and to complete the process of financial sector reform.

The Public Sector financial position increases the risk of default

Most respondents did not see signs of decline in major risk factors affecting the operations of their companies

Specific risks are still concentrated in the areas of access to capital, economic recovery, falling demand, and consumer confidence and default. This last factor is the main concern in financial management, with many respondents citing the difficult financial situation in the Public Sector as one of the reasons for the risk.

Confidence in debt repayment ability

Most respondents felt that their ability to repay debt will increase in the next three years. This will be driven by flow generated from disposal of assets, companies and businesses.


measures to combat stagnation

CFOs have not changed their views on Spain’s economic 84% of them continue to believe that it is poor or

very poor. In addition, macroeconomic indicators point to a delay in economic recovery. The survey conducted in March 2010

CFOs expected recovery to take place nd half 2010 and 2011), but now, 61%

believe that Spain’s recovery will occur in 2012 or later.

Moreover, from a global perspective, 76% of CFOs expect the Spanish economy to be in a stage of stagnation or recession for

respondents anticipate that

Inadequate or inappropriate measures

measures taken by the government in response to the Spanish economic situation as

ficient”, while 45% believe that they “are

CFOs believe it is necessary to have greater labor market flexibility, increased training, and reform in the education system. They also propose reducing the tax burden, increasing control of urrent expenditure at all levels of government, and increasing

Regarding the financial system, Financial Directors propose measures to facilitate access to financing and improved flow of

nsparency, and to complete

The Public Sector financial position increases

Most respondents did not see signs of decline in major risk the operations of their companies.

Specific risks are still concentrated in the areas of access to , economic recovery, falling demand, and consumer

This last factor is the main concern in many respondents citing the difficult

ial situation in the Public Sector as one of the reasons for


Most respondents felt that their ability to repay debt will increase driven by anticipated cash

assets, companies and

Highlights from the CFO survey for the period March 2010 - September 2010:

• 84% of CFOs consider Spain’s economic situation to be bad or very bad, while 61% expect recovery to begin in 2012.

• Three quarters of the respondents believe that the Spanish economy will remain in a stage of stagnation or recession for the next 12 months despite a the global economy.

• 40% of respondents indicated that the yieldsovereign bonds are at high or very high

• CFOs considered government reform to be "adequate but insufficient", and more market flexibility.

• Most respondents feel that the fiscal policy measures are inadequate and call for reducing the tax burd

• In the area of public expenditure, it is necessary to deepen the cut in current operating expenses and increase investment in productivity.

• With respect to the financial system, initiatives to enhance liquidity and access to finance necessary to complete the process of

• Default risk is perceived to be the greatest operations of companies in the coming months. Tfinancial position of the public sector greatest concerns.

• Expectations of the ability to repay debt years have improved.

• The demands on the CFO and the challenges that financial departments face are mainly related to business strategy and operational priorities, as well as liquidity and obtaining funding.

Challenges of the Finance Function

As operations and results become stabilized, financial departments must confront the challenge of participating in the decision-making process.

Thus, according to respondents and in line with the risks identified, the main challenges facing Financial Directors are encouraging and influencing decisions on business strategy and operational priorities, and seeking financing while maintaining an acceptable cost of capital.


Highlights from the CFO survey for the September 2010:

economic situation to be 61% expect recovery to begin in

respondents believe that the in a stage of stagnation or

despite a recovery in

that the yields on ry high levels.

reform in the labor market and would like to see

Most respondents feel that the fiscal policy measures are inadequate and call for reducing the tax burden.

In the area of public expenditure, it is necessary to current operating expenses and to

in productivity.

With respect to the financial system, initiatives to enhance liquidity and access to finance are considered

of sector reform.

the greatest risk to ies in the coming months. The public sector is one of the

pay debt in the next three

he demands on the CFO and the challenges that financial departments face are mainly related to business strategy and operational priorities, as well as liquidity and

enges of the Finance Function

As operations and results become stabilized, financial departments must confront the challenge of participating in the

Thus, according to respondents and in line with the risks allenges facing Financial Directors are

encouraging and influencing decisions on business strategy and operational priorities, and seeking financing while maintaining an acceptable cost of capital.


Belgium

Optimism confirmed by good results

Higher confidence and good actuals

Financial optimism decreased somewhat as compared to the previous survey, but remains strong. Belgian CFOs almost unanimously expect sluggish but albeit sustained recovery of the economy. More than 80% of CFOs report the actual financial results of their organizations are on budget. As in the previous quarter, 40% of CFOs report having outperformed their company budgets. The proportion of CFOs expecting declining cash flows continues to shrink quarter by quarter.

The growing optimism the survey has reported since the first quarter of 2010 has translated in good company resultsDemand for products and services have started to accelerate in the third quarter for 1/3 of the surveyed organisationsfirst time since the launch of the survey the expectations on the timing of accelerated demand for products and services did not move backwards. At present, the majority of CFO’s expect the acceleration in demand before or in the second half of 2011.

Financial repair accelerates

Contrary to CFO expectations as reported in the 2009 editions of this study, the financial repair that had started slowly in the beginning of this year is further strengtheninghave continued to improve faster than initially

CFOs now see the cost of new credit as being lower than at any time since the CFO survey started. For the first time since the launch of the survey, more CFOs have rated bank borrowing as being “cheap” rather than “costly”.

The credit crunch seems to have come to an end as well: perceptions of credit availability rose sharply in the third quarterWith interest seen as being at very low levels andincreasingly available, corporate demand for credit is starting to rise. The attractiveness of bank borrowing is still at its highest level since the start of the survey.

Optimization of corporate financing

The downturn period witnessed significant changes in the balance sheets with corporates running higher levels of cash and liquid reserves and relying more on equity and corporate bonds finance. As a consequence of better credit conditions, the attractiveness of bank borrowings as a source for corporate financing augmented.

The general outlook for the future cost of capital stays is optimistic. Half of the CFO’s expect a limited increase in the Cost of capital (WACC) over the next 5 years, due to an augmentation of the long term interest ratesand equity are expected to be available in the future.

M&A

M&A expectations have been bullish for the past 18 months, and remain strong. In the third quarter, also expectations on private equity activity marked a significant increase. bullish expectations have not yet translated into a very active M&A market.


Optimism confirmed by good results

Higher confidence and good actuals

Financial optimism decreased somewhat as compared to the Belgian CFOs almost

unanimously expect sluggish but albeit sustained recovery of the he actual financial As in the previous

quarter, 40% of CFOs report having outperformed their company The proportion of CFOs expecting declining cash flows

rowing optimism the survey has reported since the first quarter of 2010 has translated in good company results. Demand for products and services have started to accelerate in the third quarter for 1/3 of the surveyed organisations. For the

ce the launch of the survey the expectations on the timing of accelerated demand for products and services did not

At present, the majority of CFO’s expect the acceleration in demand before or in the second half of 2011.

Contrary to CFO expectations as reported in the 2009 editions of this study, the financial repair that had started slowly in the beginning of this year is further strengthening. Credit conditions have continued to improve faster than initially anticipated.

CFOs now see the cost of new credit as being lower than at any For the first time since the

launch of the survey, more CFOs have rated bank borrowing as

seems to have come to an end as well: perceptions of credit availability rose sharply in the third quarter. With interest seen as being at very low levels and credit

corporate demand for credit is starting to s of bank borrowing is still at its highest

Optimization of corporate financing

The downturn period witnessed significant changes in the balance sheets with corporates running higher levels of cash

nd relying more on equity and corporate As a consequence of better credit conditions, the

attractiveness of bank borrowings as a source for corporate

The general outlook for the future cost of capital stays is Half of the CFO’s expect a limited increase in

the Cost of capital (WACC) over the next 5 years, due to an augmentation of the long term interest rates. Both debt and equity are expected to be available in the future.

llish for the past 18 months, and In the third quarter, also expectations on private

. Until now, these bullish expectations have not yet translated into a very active

Highlights from the 3rd Quarter Belgium CFO Survey:

• The growing optimism the survey has reported since the first quarter of 2010 remains strong and has translated into good financial results. More than 80% of CFOs report the actual financial results of their organizatiare on budget. 40% have exceeded expectations.

• The demand for product and services started to accelerate last quarter for a third of the surveyed organizations. For the first time since the launch of the survey, expectations related to the timing of deacceleration have not been pushed backwards in time.

• The financial repair which started slowly in the beginning of this year has further strengthened. Contrary to what CFOs expected in the 2009 editions of the CFO survey, credit is widely available and bank borrowing is a very attractive source of financing.

• The outlook for corporate financing in the coming years is positive, with a majority of CFOs expecting a stable and relatively low cost of capital, and an increasing availability of equity capital.

• Expansion and growth are high on the agenda of the surveyed CFOs, with 35% of CFO’s considering an acquisition or merger. Although expectations on M&A activity have been bullish for 18 months already, cheap financing and strong cash positions might finatransactions.

• CFO confidence in domestic politics has plummeted in the last quarter, with the political standstill seen as a missed opportunity. 80% see room for government to stimulate the economy. Two third of surveyed CFOs report the political uncertainty will impact their business negatively.

• Coming out of the recession, the role of the CFOs shifts from operator and steward (guiding their organisations through the turbulence) towards strategist and catalyst roles, influencing the company’s oveinstilling a financial mindset to execution and riskthroughout the business.

That might change. More than half of the CFOs expect their organization to be engaged in corporate activity in the next 12 months. Expansion and growth are high on the agenda of the surveyed CFOs: 40% are considering an acquisition or merger, while 10% are looking into strategic alliances.

Debt is cheap and with better than expected company results, many organisations are building up strong cash posiCFOs that are considering corporate activity report they plan to finance their transactions by means of existing debt facility, new bank loans or existing cash or operating cash flow.

Going forward

So overall, the good news from this quarter’s surveCFO confidence remains strong and that actual results are overall in line – or even better – than expectedare looking for growth opportunities, and the necessary financing is again available and attractive


om the 3rd Quarter Belgium

The growing optimism the survey has reported since the first quarter of 2010 remains strong and has translated into good financial results. More than 80% of CFOs report the actual financial results of their organizations are on budget. 40% have exceeded expectations.

The demand for product and services started to accelerate last quarter for a third of the surveyed organizations. For the first time since the launch of the survey, expectations related to the timing of demand acceleration have not been pushed backwards in time.

The financial repair which started slowly in the beginning of this year has further strengthened. Contrary to what CFOs expected in the 2009 editions of the CFO survey,

d bank borrowing is a very

The outlook for corporate financing in the coming years is positive, with a majority of CFOs expecting a stable and relatively low cost of capital, and an increasing availability

Expansion and growth are high on the agenda of the surveyed CFOs, with 35% of CFO’s considering an acquisition or merger. Although expectations on M&A activity have been bullish for 18 months already, cheap financing and strong cash positions might finally boost

CFO confidence in domestic politics has plummeted in the last quarter, with the political standstill seen as a missed opportunity. 80% see room for government to stimulate the economy. Two third of surveyed CFOs

uncertainty will impact their business

Coming out of the recession, the role of the CFOs shifts from operator and steward (guiding their organisations through the turbulence) towards strategist and catalyst roles, influencing the company’s overall direction and instilling a financial mindset to execution and risk-taking

More than half of the CFOs expect their organization to be engaged in corporate activity in the next 12

owth are high on the agenda of the surveyed CFOs: 40% are considering an acquisition or merger, while 10% are looking into strategic alliances.

Debt is cheap and with better than expected company results, many organisations are building up strong cash positions. CFOs that are considering corporate activity report they plan to finance their transactions by means of existing debt facility, new bank loans or existing cash or operating cash flow.

So overall, the good news from this quarter’s survey is that CFO confidence remains strong and that actual results are

than expected. Many CFO’s are looking for growth opportunities, and the necessary financing is again available and attractive.


Netherlands

Change in funding preferences

Financial outlook

Financial optimism among CFOs recovered this third quarter, returning to the level of 2010 Q1. The cash flow outlook of CFOs for the next 12 months increased, although the expected increase is relatively modest.

Optimism of CFO’s, about the financial prospects for their company, has recovered this quarter since the level dropped significantly in Q2. Remarkable is the break between the Dutch and the UK figures. Dutch CFO’s are far more optimistic about their prospects.

CFO optimism about their free cash flow expectations has also recovered in comparison to last quarter. 80% of CFOs expect their free cash flow to increase over the next 12 months. 55% expect an increase of 1% - 10%.

Risk

The risk appetite remains at the same level for the fourth consecutive quarter. Given the current market circumstances, CFOs have no interest in taking more risk on their balance sheet than one year ago. About one-quarter of CFOs consider now to be a good time for more risk taking on the balance sheetothers appear to be awaiting better times.

Almost half of the CFOs continued to reduce theirrisks over the last twelve months. The number of CFOs who raised their balance sheet risk over the past year has decreasedsubstantially. Risk control remains a priority.

Funding

According to the CFOs, funding has become less costly in comparison to the last quarter. Almost half of the CFOs consider funding to be easily available. This is due in part to interest rates remaining low and some banks lowering their surcharge.

The attractiveness of equity as a favourable source of funding dropped below bank borrowing for the first time since this survey started. Corporate debt remains the favoured source of funding. 60% of the CFOs are likely to issue debt over the next twelve months. Refinancing of current debt positions does contribute to this, because three-quarters of CFOs expect to refinance (parts of) current debt positions over the next three years.

M&A

The outlook of CFOs for mergers and acquisitions is still very positive, but expectations about its growth are slightly down in comparison to the last quarters. The CFOs’ expectations for Private Equity activity also decreased slightly

CFOs’ valuations of equity in general and of theirhave also not changed much since last quarterequity in general and equity of their own company as undervalued.

Dutch corporate activity is still low with a moderatedeals and low transaction values on averageequity activity increased since last quarter according to figures.


in funding preferences

Financial optimism among CFOs recovered this third quarter, The cash flow outlook of CFOs

for the next 12 months increased, although the expected

Optimism of CFO’s, about the financial prospects for their company, has recovered this quarter since the level dropped significantly in Q2. Remarkable is the break between the Dutch and the UK figures. Dutch CFO’s are far more optimistic about

CFO optimism about their free cash flow expectations has also recovered in comparison to last quarter. 80% of CFOs expect their free cash flow to increase over the next 12 months. 55%

the same level for the fourth . Given the current market circumstances,

CFOs have no interest in taking more risk on their balance sheet quarter of CFOs consider now to

n the balance sheet. The

Almost half of the CFOs continued to reduce their balance sheet The number of CFOs who

risk over the past year has decreased

According to the CFOs, funding has become less costly in Almost half of the CFOs

This is due in part to ing low and some banks lowering their

The attractiveness of equity as a favourable source of funding dropped below bank borrowing for the first time since this survey started. Corporate debt remains the favoured source of funding.

FOs are likely to issue debt over the next twelve months. Refinancing of current debt positions does contribute to

quarters of CFOs expect to refinance (parts of) current debt positions over the next three years.

s for mergers and acquisitions is still very positive, but expectations about its growth are slightly down in

The CFOs’ expectations for slightly.

ral and of their own company quarter. Most CFOs rate

their own company as

Dutch corporate activity is still low with a moderate number of on average. However, private quarter according to market

Highlights from the 3rd Quarter Switzerland CFO Survey:

• CFO optimism about their financial prospects has recovered from a dip in Q2.

• 80% of the CFOs expect their company’s cash flow to increase over the next 12 months.

• Corporate debt is perceived as the most attractive source of funding.

• For the first time, since this survey started, bank borrowing is favoured over equity as a funding source.

• 60% of the CFOs expect to arrange new funding over the next 12 months.

• Three-quarters of the CFOs will refinance (parts of) current debt positions over the next three years.

• The level of risk appetite remains unchanged for the fourth consecutive quarter; one-quarter now a good time to take more risk on the balance sheet.

• The outlook for M&A remains high over the next 12 months, but expectations slightly dropped since the last quarter.


Highlights from the 3rd Quarter Switzerland

CFO optimism about their financial prospects has

pect their company’s cash flow to

Corporate debt is perceived as the most attractive source

For the first time, since this survey started, bank borrowing is favoured over equity as a funding source.

CFOs expect to arrange new funding over the

quarters of the CFOs will refinance (parts of) current debt positions over the next three years.

The level of risk appetite remains unchanged for the quarter of CFOs consider

now a good time to take more risk on the balance sheet.

he outlook for M&A remains high over the next 12 months, but expectations slightly dropped since the last


Switzerland

More appetite for risk

Stable economic outlook and cautious financial prospects

The last survey, conducted in June 2010, reported a decline in confidence amongst CFOs. Various macroeconomic events influenced the mood of the CFOs and led to deterioration in levels of optimism.

Increasing concern about growth across the industrial world has led to a new wave of pessimism during the last three monthsDespite this increasingly negative sentiment Swiss CFOs are optimistic about their future prospects.

After a drop in optimism in Q2, the CFOs’ opinion of the Swiss economy has stabilised and a majority is positive about economic development in the next 12 monthsprobability of a “double dip”, an average of only 20% believes this to be a realistic scenario.

Financial confidence rebounded after the steep decline last quarter. The level of confidence amongst CFOs is consistent with the cautious mood in financial markets and the concerns about renewed global economic weakness that would also affect Switzerland.

One of this quarter’s special questions concerned the most important issues on CFOs’ agendas for the next 12 monthsinteresting that “growth” was voted top, showing that many believe in a continued recovery. However, the fact that more defensive priorities (cost, cash flow and risk control) are also considered crucial shows that CFOs are hedging their strategies against a potential downside.

Responses to the question about current highshowed that macro – not financial – risks dominate the minCFOs. In particular, a strong Swiss Franc is still seen as a big threat to their own businesses.

Attractive credit conditions and increasing appetite for risk

Enthusiasm for bank borrowing and corporate bonds as a source of finance is at a high, stable level. Credit conditions are further improving and a majority rate credit as available and cheap.

The corporate sector in Switzerland is seen as correctly leveraged by 86% of CFOs. Corporates have further detheir balance sheets but to a much lesser extent than in the last three quarters. The process of deleveraging seems to be overInstead, an increased appetite to risk can be observed and a shift in attitude towards higher gearing which is a clear sign of rising optimism.


More appetite for risk

and cautious

The last survey, conducted in June 2010, reported a decline in Various macroeconomic events

influenced the mood of the CFOs and led to deterioration in

Increasing concern about growth across the industrial world has led to a new wave of pessimism during the last three months. Despite this increasingly negative sentiment Swiss CFOs are

2, the CFOs’ opinion of the Swiss economy has stabilised and a majority is positive about economic development in the next 12 months. Asked about the probability of a “double dip”, an average of only 20% believes

confidence rebounded after the steep decline last The level of confidence amongst CFOs is consistent

with the cautious mood in financial markets and the concerns about renewed global economic weakness that would also affect

his quarter’s special questions concerned the most important issues on CFOs’ agendas for the next 12 months. It is interesting that “growth” was voted top, showing that many

However, the fact that more s (cost, cash flow and risk control) are also

considered crucial shows that CFOs are hedging their strategies

Responses to the question about current high-impact risks risks dominate the minds of

In particular, a strong Swiss Franc is still seen as a big

Attractive credit conditions and increasing

Enthusiasm for bank borrowing and corporate bonds as a source Credit conditions are further

improving and a majority rate credit as available and cheap.

The corporate sector in Switzerland is seen as correctly Corporates have further de-risked

lesser extent than in the last The process of deleveraging seems to be over.

Instead, an increased appetite to risk can be observed and a shift in attitude towards higher gearing which is a clear sign of

Highlights from the 3rd Quarter Switzerland CFO Survey:

• Economic optimism among CFOs is broadly unchanged in the third quarter. 65% judge the economic outlook for Switzerland over the next 12 months to be positive

• Financial optimism regarding their own business has risen slightly.

• Growth is currently CFOs’ top priority but some defensive strategies such as cost, cash flow and risk management are still considered to be very important

• Exchange rate risk is seen as a highmacroeconomic risk.

• Credit conditions continue to be seen as very attractiveCFO sentiment about credit availability is at its highest level since the CFO survey began. 62% describe credit as cheap.

• The process of deleveraging seems to be overappetite has risen and CFOs on balance leverage for the first time this year.

Raising credit demand

CFOs are becoming much less “anti” debtdemand for new credit to increase over the next year18% anticipate a decrease in demand. 98% expect their abilto service their debt-levels to increase or stay the same over the next three years.

The last three quarters have been a period of volatilityhave now found new optimism after the decline in confidence last quarter. What emerges from this quartthey are looking for opportunities such as growth and at the same time hedging against a possible setback because of continued uncertainties on a macroeconomic level


om the 3rd Quarter Switzerland

Economic optimism among CFOs is broadly unchanged 65% judge the economic outlook for

Switzerland over the next 12 months to be positive.

Financial optimism regarding their own business has

Growth is currently CFOs’ top priority but some defensive strategies such as cost, cash flow and risk management are still considered to be very important.

Exchange rate risk is seen as a high-impact

continue to be seen as very attractive. CFO sentiment about credit availability is at its highest

62% describe credit

he process of deleveraging seems to be over. Risk appetite has risen and CFOs on balance plan to raise

CFOs are becoming much less “anti” debt. 38% expect their demand for new credit to increase over the next year. Only

98% expect their ability levels to increase or stay the same over

The last three quarters have been a period of volatility. CFOs have now found new optimism after the decline in confidence

What emerges from this quarter’s survey is that they are looking for opportunities such as growth and at the same time hedging against a possible setback because of continued uncertainties on a macroeconomic level


The Middle East

Resilience for growth

The results of the third quarter survey indicate that despite the rising geopolitical tensions, the region is moving forward with plans for growth and optimism remains high. GDP growth is expected to continue and increase into 2011 supported by strong spending from the regions’ governments in terms of infrastructure development, underpinned by resilient oil prices which have increased over the past year into the $80 range.

CFO optimism remains high

Middle East CFOs are very optimistic compared to CFOs in the West. Optimism among Middle East CFOs edged down slightly, with respondents reporting greater optimism dropping from 55% in Q1 2010 to 52% in Q3 2010. However, this is quite high compared to the general level of optimism among CFOs of western countries such as the UK and North America.

More than three quarters of CFOs expect demand for their companies’ products to accelerate by the end of 2011.

Strategies aimed at cost control have reduced in importance

CFOs have become markedly less risk averse over the last year. A net balance of 43% think now is a good time to take greater risk onto their balance sheets, compared to 36% in Q1 2010 and 27% in Q3 2009.

Companies are not planning to reduce spending and investment as aggressively as they did in the previous quarters. 73% of the respondents plan to reduce discretionary spending in the latest survey, compared to 90% in the Q1 survey. Only 58% now plan to reduce capital spending, compared to 67% in the Q1 survey.


CFOs have become much more positive about debt levels. Only a net balance of 29% of CFOs now think Middle Eastern companies are overleveraged compared to 42% in Q1 2010. A net of 70% of CFOs expect their ability to service their companies’ debt to improve over the next three years, with the same percentage believing the availability of debt capital will increase over the next 5 years.

Despite a slight fall, Bank borrowing continues to be the most attractive source of financing for CFOs. A net balance of 41% rate bank borrowing as attractive, compared to 28% for equity issuance and 26% for corporate bond issuance. There has also been a sharp rise in the attractiveness of corporate bond issuance, from net 10% to net 26%.

A majority of the CFOs are planning to take on more debt. Two thirds of CFOs plan to raise financial leverage over the next 12 months, and are likely to issue debt or arrange new facilities over the next 12 months. A net of 35% of CFOs expect an increase in debt on their balance sheets over the next three years.

Market outlook – Increase in M&A activity expected

A large proportion of CFOs consider commercial real estate to be overvalued. However, the balance taking this view has

Highlights from the 3rd Quarter Middle East CFO Survey:

• Optimism among Middle East CFOs edged down slightly; however, this is considerably higher than the sentiments of CFOs in western countries.

• 78% of CFOs expect demand for their companies’ products to accelerate by the end of 2011.

• CFOs are now significantly less risk averse than any time in the past year. A net balance of 43% think now is a good time to take greater risk onto their balance sheets, compared to 36% in Q1 2010 and 27% in Q3 2009

• Companies are not planning to reduce spending and investment as aggressively as they did in the previous quarters.

• CFOs have become much more positive about current debt levels and their debt repayment ability.

• Despite a slight fall, Bank borrowing continues to be the most attractive source of financing for CFOs.

• A majority of the CFOs are planning to take on more debt. Two thirds of CFOs plan to raise financial leverage over the next 12 months and are likely to issue debt or arrange new facilities over the next 12 months.

• The majority of CFOs are positive on M&A and private equity activity in the next 12 months, but this majority has shrunk since last year.

• Market risk and operational risks are of the highest concern for CFOs. These risks are largely managed by Chief Risk Officers who report to CEOs.

fallen in the last year from 51% to 42%. In contrast, there are now more CFOs who think equities and government bonds are overvalued.

The majority of CFOs are positive on M&A and private equity activity in the next 12 months, but this majority is smaller compared to one year ago. 61% of CFOs now expect M&A activity to increase in the next 12 months, compared to 71% one year ago. The proportion of CFOs expecting private equity activity to increase in the next 12 months fell sharply from 70% to 49%. Almost a quarter of the respondents are considering M&A activity over the next 12 months, with 23% considering a strategic alliance and 21% considering a joint venture.

Understanding Risk in the Region

Risk categories which currently concern CFOs the most are market risks (39%), followed by operational, strategic, and financial risks.

52% of the survey respondents indicated that risk management is led by Chief Risk Officers who report to CEOs, while 37% report that CFOs have this responsibility.


Australia

The long haul to recovery?

Confidence up but CFOs concerned about economic recovery

The Deloitte CFO Survey has found that CFOs are more optimistic about the financial prospects of their companies than they were three months ago (55% compared to 40% in Q2).

While confidence has risen compared to last quarter, CFOs are less optimistic about the overall pace of economic recovery in the medium term. A majority (64%) expect a slow and possibly erratic return to growth. There has also been a significant downward shift to 16% (from 28% last quarter) in the number of CFOs who expect a quick or ‘V-shaped’ recovery

A key contributing factor to CFOs’ views about the pace of economic recovery is the sense that many of the risks to which their businesses are exposed are outside their direct controlThe survey revealed that 9 of the top 10 greatest risks seen by CFOs are external to their business. The highest nominated risk among CFOs was economic recovery, cited by 25% of respondents. This risk was followed by performance, change, the possibility of an economic slow-down in China, increasing sovereign risk, the impact of a minority government, and concern over increasing interest rates.

Asked to name what they believed should be the top economic priority for the new government, a third (33%) selected tax reform. CFOs identified the Mineral Resource Rent Tax, corporate tax levels and arrangements to establish a price for carbon. Other economic priorities identified were managing the budget by returning to surplus and reducing government debt (15%) and ensuring a stable economic recovery (14%)was also strong recognition of the need for the government to focus on infrastructure spending (15%).

M&A on the rise

The optimism around M&A activity over the next year this quarter with 94% expecting an increase in M&A levelsis particularly interesting is that 43% of CFOs say that their company was either ‘extremely likely’ or ‘somewhat likely’ to undertake an acquisition in the next 6 monthsindicates the possibility of a strong uplift in the level of M&A activity in the new year.

The lack of suitable targets (41%) is one of the main hindrances to undertaking an acquisition, followed by the pricing expectations of vendors (32%). When considering acquisitions, the top three priorities for CFOs were alignment with strategy (92%), the impact on EPS (64%) and the impact on cash flows (39%). Revenue (6%) and market share (5%) were the lowest ranked priorities.

Financial strategies and views on

The expected rise in M&A is further supported with 61% of respondents forecasting an increased demand for credit in the next 12 months. CFOs remain upbeat about their companies’ cash flow prospects. 74% were confident that their cash flow will increase in the coming year, further reinforcing their plans to raise gearing levels. Since Q4 2009, there has been little change in the percentage of CFOs who plan to reduce gearing levelsThere is a growing expectation that gearing levels will increase, potentially to fuel increasing aspirations for growththese positive signs, 60% of CFOs said now is not a good time to take greater risk onto their balance sheets


o recovery?

Confidence up but CFOs concerned about

The Deloitte CFO Survey has found that CFOs are more optimistic about the financial prospects of their companies than they were three months ago (55% compared to 40% in Q2).

confidence has risen compared to last quarter, CFOs are less optimistic about the overall pace of economic recovery in

A majority (64%) expect a slow and possibly There has also been a significant

to 16% (from 28% last quarter) in the number of shaped’ recovery.

A key contributing factor to CFOs’ views about the pace of economic recovery is the sense that many of the risks to which

ide their direct control. The survey revealed that 9 of the top 10 greatest risks seen by

The highest nominated risk among CFOs was economic recovery, cited by 25% of

This risk was followed by performance, regulatory down in China,

increasing sovereign risk, the impact of a minority government,

Asked to name what they believed should be the top economic ew government, a third (33%) selected tax

CFOs identified the Mineral Resource Rent Tax, corporate tax levels and arrangements to establish a price for

Other economic priorities identified were managing the d reducing government debt

(15%) and ensuring a stable economic recovery (14%). There was also strong recognition of the need for the government to

The optimism around M&A activity over the next year continues this quarter with 94% expecting an increase in M&A levels. What is particularly interesting is that 43% of CFOs say that their company was either ‘extremely likely’ or ‘somewhat likely’ to undertake an acquisition in the next 6 months. This response indicates the possibility of a strong uplift in the level of M&A

The lack of suitable targets (41%) is one of the main hindrances to undertaking an acquisition, followed by the pricing

idering acquisitions, the top three priorities for CFOs were alignment with strategy (92%), the impact on EPS (64%) and the impact on cash flows

Revenue (6%) and market share (5%) were the lowest

Financial strategies and views on funding

The expected rise in M&A is further supported with 61% of respondents forecasting an increased demand for credit in the

CFOs remain upbeat about their companies’ 74% were confident that their cash flow will

ease in the coming year, further reinforcing their plans to Since Q4 2009, there has been little change

in the percentage of CFOs who plan to reduce gearing levels. There is a growing expectation that gearing levels will increase,

fuel increasing aspirations for growth. Despite these positive signs, 60% of CFOs said now is not a good time to take greater risk onto their balance sheets.

Highlights from the 3rd Quarter CFO Survey:

• 55% of CFOs are more optimistic about their financial prospects than they were three months ago (40% in Q2)

• A slow return to growth is expected by the majority of CFOs (64%). Fewer expect a V-shaped economic recovery; more now see a ‘bathtub’ shape

• 9 out of the top 10 risks are seen as external and beyond CFOs’ control.

• A third of CFOs believe tax reform should be the newly elected government’s top economic priority

• 94% of CFOs expect M&A levels to increase over the next year.

• 43% of CFOs said it is likely they will undertake an acquisition in the next 6 months.

• 61% of CFOs expect demand for credit to rise over the next 12 months and 49% aim to increase their level of gearing.

• Most CFOs are upbeat about their companies’ cash flow prospects.

• 60% of CFOs said it was not a good time greater risk onto their balance sheet.

The percentage of CFOs who believe credit is costly has almost returned to levels recorded in 2009views on arranging new credit or issuing debt continue to be positive, and this quarter’s survey saw a marked rise in the number of CFOs who said they were likely to do so.

The future of capital: a longer term perspective

In our Australian survey for Q3 2010, the majority of CFOs expect to increase their total balance sheet debtfinancial optimism is reflected in the finding that 77% expect their ability to service debt to increase over the next three years, 38% significantly so. Only 1% said that their capacity to service debt would decline. Where CFOs suggested that theywould reduce debt in the future, using cash reserves rather than selling assets or raising equity was the preferred option.


ighlights from the 3rd Quarter Australia

c about their financial prospects than they were three months ago (40% in Q2).

A slow return to growth is expected by the majority of shaped economic

recovery; more now see a ‘bathtub’ shape.

as external and beyond

A third of CFOs believe tax reform should be the newly elected government’s top economic priority.

94% of CFOs expect M&A levels to increase over the

43% of CFOs said it is likely they will undertake an

61% of CFOs expect demand for credit to rise over the next 12 months and 49% aim to increase their level of

Most CFOs are upbeat about their companies’ cash flow

0% of CFOs said it was not a good time to be taking greater risk onto their balance sheet.

The percentage of CFOs who believe credit is costly has almost returned to levels recorded in 2009. Regardless, their views on arranging new credit or issuing debt continue to be

quarter’s survey saw a marked rise in the number of CFOs who said they were likely to do so.

The future of capital: a longer term

In our Australian survey for Q3 2010, the majority of CFOs expect to increase their total balance sheet debt. Growing financial optimism is reflected in the finding that 77% expect their ability to service debt to increase over the next three

Only 1% said that their capacity to Where CFOs suggested that they

would reduce debt in the future, using cash reserves rather than selling assets or raising equity was the preferred option.


South Korea

Optimism in a time of ambiguity

CFOs of top South Korean companies are predominantly optimistic about their companies’ prospects despite considerable change and uncertainty on government policies and currency exchange rates. This is particularly evident in the impact of governmental policy during the economic recession, which resulted in more negative than positive opinion. North American CFOs had a similar negative outlook towards the impact of governmental policy.

Across industries, CFOs are projecting substantial growth in both revenues and earnings (16% and 23%, respectively on average), while costs are expected to be held to a 4-6% increase. This substantial growth of performance would enable companies to invest more aggressively, resulting in increases in dividends, capital spending and domestic employment (6%, 17% and 7%, respectively on average). The optimism in South Korea is similar to North American results, but stands in contrast to Europe, where sovereign debt turmoil is substantially disrupting economies and capital markets.

Over 50% of CFOs believe that one of their top challenges is ensuring an appropriate level of involvement in strategic decision-making by either participating directly or providing information indirectly to decision makers; however, due to the economic uncertainty, over 40% of CFOs place a larger emphasis on ‘ensuring funding, liquidity, and acceptable costs of capital’. 54% of CFOs believe debt will increase over the next three years, but 72% also believe that the ability to service debt will increase, resulting in an overall view that the level of debt will be manageable.

Over 60% of CFOs believe that ‘major change initiative (e.g., M&A)’ is a leading cause of job stress, while about 50% of CFOs were in agreement that ‘an insufficient support staff (e.g., shortage of number)’ is a concern. Additionally, there is agreement that significant time must be devoted to support decision-making processes, one of the key capabilities of the ‘strategist’ role.

Some CFOs from varying industries have shown different opinions regarding their challenges. Over 50% of CFOs in the manufacturing and construction industries indicated that ‘foreign competition’ is their top industry challenge, while over 50% of CFOs from other industries believe it is ‘industry regulation/legislation’.

Consumer, retail and services industry CFOs have more pessimistic views about their industry prospects.

Highlights from the 3rd Quarter South Korea Survey:

• There is a general consensus of optimism amongst CFOs regarding their companies’ prospects but they are cautious of the potential impact of government policies and changes in currency exchange rates.

• The outlook for company performance is generally optimistic, with both revenues and earnings expected to increase.

• There is consensus amongst CFOs that their finance organizations need to be more involved in strategic decisions; but over 40% of them place a larger focus on funding and liquidity management.

• The changing business environment (e.g., M&A) is the top job stress for over 60% of CFOs.

• The challenges of CFOs vary by industry; over 50% of CFOs in the manufacturing and construction industries believe that competition with foreign companies is their top challenge, while over 50% of CFOs in other industries indicated that it is industry regulation/legislation.


Deloitte CFO Surveys

About Deloitte CFO Surveys

Seventeen Deloitte member firms have launched CFO Surveys in the past few years. The objective of the surveys is to collect CFOs’ opinions on a range of areas including economic outlook, financial markets, business trends, their organizations, and CFO careers. The focus of each member firm’s survey may vary.

Outlined below are the member firms that currently conduct CFO surveys and their frequency. Click on the country name to be directed to latest survey results where available.

Region Country Frequency

Europe, Middle East and Africa

Belgium Quarterly

Denmark* Bi-annual

Ireland Quarterly

Israel* Quarterly

Middle East Bi-annual

Netherlands Quarterly

South Africa Annual

Spain Bi-annual

Sweden* Bi-annual

Switzerland Quarterly

United Kingdom Quarterly

Americas North America (Canada, Mexico, United States)

Quarterly

Asia Pacific Australia Quarterly

South Korea Annual

Japan (foreign companies only)* Quarterly

*Contact the Global CFO Program for further information, email [email protected]

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This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively the “Deloitte Network”) is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.

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