Payment and credit defaults: CFOs rate these risks as particularly high

The pandemic continues to set the pace. Whether in terms of the economic outlook or corporate risks, Swiss CFOs still seem to see the short- and longer-term development of the pandemic as the main factor in their planning. In terms of the economy, they do expect a rapid recovery compared with the spring. Nevertheless, a relative majority of 42% assess the economic outlook for Switzerland over the next twelve months negatively. Only 28% have positive expectations and 30% are neutral. The survey was conducted in September, i.e. before the current case numbers had shot up again.

Payment and credit defaults as a risk

However, economic expectations have clearly improved. In the spring, a full 96% of the CFOs surveyed after the introduction of the Corona measures still expected a negative development of the economy for the coming twelve months. "Our survey shows that the precarious situation of spring has eased for many companies," explains Michael Grampp, Chief Economist at Deloitte Switzerland. "However, the situation remains unstable, as can be seen in the latest pandemic developments. The steeply rising infection figures in Europe are unsettling many people. Much now depends on further political reactions - this applies to Switzerland as well as to our major sales markets."

The federal government's aid measures were able to stabilize the economic situation in Switzerland. In particular, short-time work and the rapidly disbursed Corona loans enabled companies to navigate through the crisis to some extent. "It is clear: The government aid measures were absolutely necessary at the beginning of the crisis," says Michael Grampp. "However, the longer such measures remain in place, the greater the risk of negative side effects. Companies that do not generate profit or create value should not be kept alive artificially on a permanent basis, otherwise there is a risk of zombification of the economy," Michael Grampp continues.

Return to pre-crisis levels still a long way off

More than half (54%) of the CFOs surveyed say that the financial situation of their companies has clearly improved compared to three months ago. In June of this year, just over two-thirds (67%) believed the outlook was poor and only 9% believed their situation would improve. "This significant turnaround is very encouraging," explains Alessandro Miolo, Managing Partner for Audit & Assurance at Deloitte Switzerland. "The Swiss economy seems to be stabilizing a lot faster than after the euro crisis or the franc shock."

As far as the growth outlook for the next twelve months is concerned, the CFOs surveyed are more cautious: only 36% are planning for growth and 29% are expecting a decline. Major differences can be seen in the details. While sales recover the most with an increase of 51%, there is only a slight increase in margins (increase of 21%) and employee numbers (increase of 1%) and the figures remain clearly in negative territory.

CFOs are less optimistic than they were three months ago about their revenues: "In the summer, CFOs were even more optimistic and assumed that the majority of their companies would already be generating revenues at pre-crisis levels again in the first quarter of 2021," says Alessandro Miolo. "Now, most CFOs don't expect revenues to fully recover until the third quarter of 2021, a full six months later."

Digitalization push catapults cyber security to the top

For the first time since the CFO survey began over ten years ago, Swiss CFOs cite payment and credit defaults as a significant risk for their companies and rank it as one of the top three risks. "The fact that payment and credit defaults are seen as one of the biggest risks clearly shows: CFOs take this risk very seriously. There is a risk that credit defaults could also affect banks," says Alessandro Miolo. "For the moment, payment difficulties can still go unnoticed, as government aid measures help bridge the gap," Miolo continues.

The pandemic is still the number one risk, followed by weak demand, which is also related to the pandemic. The biggest jump on the list is visible in the topic of cyber security. The risk identified in the Spring CFO survey predicted Digitization push during the pandemic has led to more people working from home, but this is increased the risk of cyberattacks. "CFOs have recognized that the flow of data into the home office needs to be better secured," explains Alessandro Miolo. "Companies are now required to take targeted measures to ensure that the home office does not become a gateway for cybercriminals. This includes, among other things, better training of employees and targeted investments in more secure IT solutions," says Miolo.

Reduction of employees and office space

As expected, many companies have imposed new cost-cutting measures on themselves. These are already very advanced at most companies. Most of the companies (85%) have mainly reduced spending on business travel or marketing, followed by a reduction in overtime and vacation balances (70%). As is very often the case during a crisis, many of the companies surveyed are planning to reduce headcount - 33% of respondents have already implemented this.

The situation with office space was also evaluated. 31% of the respondents are looking into what office space they will need in the future and 17% have already made changes. "More employees are working in home offices and this will continue in the future," says Alessandro Miolo. "On the one hand, companies can realize savings on office space as a result. On the other hand, more space will be needed to ensure spacing and to use the existing space differently. For example, there will be more space for sharing and meeting and less space for classic desks."

Source: Deloitte