Business View Magazine - September 2015

8 Business View - September 2015 Business View - September 2015 9 Opening Lines Economic uncertainties in the U.S. keeping CFOs up at night Congressional dysfunction around tax reform hindering aggressive growth The nation’s finance chiefs are relatively optimistic about the future, but remain cautious in the face of domestic uncertainties like Congressional inaction on tax reform. This is according to the latest edition of Grant Thornton LLP’s CFO Survey, which reflects the insights of more than 900 chief financial officers and other senior financial More than half (55 percent) of CFOs say uncer- tainty in the U.S. economy is a major concern that could impact their businesses’ growth in the next 12 months. This is despite the fact that most CFOs expect the U.S. economy overall to remain the same (49 percent) or improve (43 percent) in the next 12 months, suggesting that factors other than the overall health of the economy are presenting a barrier to growth. “While the U.S. economy has stabilized, our data suggest that uncertainty related to other econom- ic factors is making strategic planning difficult for financial executives,” said Randy Robason, Grant Thornton’s national managing partner of Tax Ser- vices. “CFOs are looking to Washington, regulators and the Federal Reserve for answers and getting nothing but indecision.” Business leaders’ concern over these economic un- certainties appears to have increased significantly since earlier this year. In May 2015, only net 22 per- cent of U.S. business leaders saw economic uncer- tainty as a major constraint on their ability to grow in the coming year, according to the Grant Thornton International Business Report. Particularly frustrating for CFOs is the dysfunction in Congress over a bill to extend more than 50 pop- ular tax provisions that expired at the end of 2014. When Congress returns from August recess next week, it remains to be seen whether it will revisit the bill and allow the use of these tax benefits on 2015 filings. • More than a third (37 percent) of executives are acting as though the extension will not occur • Twenty-six percent are assuming some amount of risk that it will not occur, and are planning accord- ingly • Just 9 percent of CFOs assume fully that the ex- tension will occur • Especially striking is the fact that more than half (51 percent) of companies that actually use the pro- visions are doing all their planning with the assump- tion that the extension will not occur. “In past years, negotiations over the tax extenders bill dragged on into December – this is very trouble- some and creates major headaches for U.S. busi- nesses,” said Mel Schwarz, partner and director of tax legislative affairs in Grant Thornton’s Washing- ton National Tax Office. “Lawmakers need to agree on at least a two-year retroactive extension of near- ly all the provisions, with a one-year extension as an absolute fallback.” Cybersecurity is also a major source of worry for financial leaders, especially in light of recent high- profile cyberattacks on major U.S. companies. When considering what the most significant cyber risks they face are, nearly half (44 percent) of CFOs say the most significant risks are the unknown risks, and a majority (57 percent) say it is the po- tential for undetected breaches. Interestingly, more public companies (47 percent) fear they are at risk of reputation loss compared to private companies (31 percent). Regulatory and compliance burdens also top the list of concerns for finance chiefs. Nearly half (45 per- cent) of CFOs say that increasing costs of compli- ance present the biggest challenge to growth, and nearly a third (31 percent) say that keeping up with the volume and complexity of regulations is their number-one challenge. Amidst the overall economic and political uncer- tainty, financial executives are averse to riskier growth strategies. The vast majority of companies (80 percent) say they plan to pursue growth strate- gies in existing markets, and only 11 percent plan to expand into international markets. Most CFOs (54 percent) plan to fund growth in the coming year by leveraging existing cash reserves, while 47 percent say they will use debt financing. While the survey also suggests that the recent en-