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This article was first published in the September 2017 international edition of Accounting and Business magazine.

In its June CFO Global Business Outlook, Duke University paints a picture of uncertainty, caution and ultimately confusion among finance leaders. Of the 750 CFOs worldwide who completed the survey, 40% indicated that uncertainty is currently higher than normal, and of those who feel less sure about the business climate in 2017 than they did in 2016, 60% will not be pushing investments through as planned. 

According to John Graham, professor of finance at Duke’s Fuqua School of Business and the director of the survey, one in four companies can be expected to delay or cancel investment plans. ‘That’s enough to significantly dampen growth,’ he points out.

For those US companies taking a wait-and-see approach, 27.6% said that president Trump’s direction on the North American Free Trade Agreement (NAFTA) is the main issue. It is followed by uncertainty around the corporation tax rate for C-corporations (most publicly listed companies), the income tax rate for pass-through businesses (those whose income and losses feature on their shareholders’ tax returns), and the proposed border adjustment tax for imports into the US. 

Not surprisingly, US manufacturing and retail/wholesale CFOs are the most worried about changes to NAFTA, the border adjustment tax and tariffs that would see input prices rise. By comparison, European CFOs postponing near-term investment plans are more concerned about growth prospects in the region (39.2%) and changing regulatory policy (35.4%).  

As to how CFOs will respond to the business climate in the US and elsewhere, the most common strategy is to ‘stay the course’ – no sudden movements, and the maintenance of strategies put in place at the outset of the year. To this end, it will be essential for CFOs to focus on core business strengths, along with understanding the aspects of the business within their control – namely, spending and investment/cost reduction. Agility will become more important, supported by an intensified focus on risk, scenario analysis and hedging. Also, particularly in the US, cash is king once again, and staying liquid the order of the day. 

Managing tax complexity will be inspiring many CFOs to re-evaluate the role of the tax function and tax planning across the board. In the next 12 months, new challenges around compliance, process and data requirements will force many CFOs to overhaul the tax function while evaluating the role of big data and artificial intelligence in tax planning. 

System improvements will be made to ensure a seamless flow of information between business units, functions and managers, and CFOs will be looking to adopt best practices in integration, automation and internal control to help reduce tax risk and integrate the tax function across the company. Stay tuned for an upcoming feature in Accounting and Business on what CFOs need to know about transforming their tax function in an uncertain environment. 

In its June CFO Global Business Outlook, Duke University paints a picture of uncertainty, caution and ultimately confusion among finance leaders. Of the 750 CFOs worldwide who completed the survey, 40% indicated that uncertainty is currently higher than normal, and of those who feel less sure about the business climate in 2017 than they did in 2016, 60% will not be pushing investments through as planned. 

According to John Graham, professor of finance at Duke’s Fuqua School of Business and the director of the survey, one in four companies can be expected to delay or cancel investment plans. ‘That’s enough to significantly dampen growth,’ he points out.

For those US companies taking a wait-and-see approach, 27.6% said that president Trump’s direction on the North American Free Trade Agreement (NAFTA) is the main issue. It is followed by uncertainty around the corporation tax rate for C-corporations (most publicly listed companies), the income tax rate for pass-through businesses (those whose income and losses feature on their shareholders’ tax returns), and the proposed border adjustment tax for imports into the US. 

Not surprisingly, US manufacturing and retail/wholesale CFOs are the most worried about changes to NAFTA, the border adjustment tax and tariffs that would see input prices rise. By comparison, European CFOs postponing near-term investment plans are more concerned about growth prospects in the region (39.2%) and changing regulatory policy (35.4%).  

As to how CFOs will respond to the business climate in the US and elsewhere, the most common strategy is to ‘stay the course’ – no sudden movements, and the maintenance of strategies put in place at the outset of the year. To this end, it will be essential for CFOs to focus on core business strengths, along with understanding the aspects of the business within their control – namely, spending and investment/cost reduction. Agility will become more important, supported by an intensified focus on risk, scenario analysis and hedging. Also, particularly in the US, cash is king once again, and staying liquid the order of the day. 

Managing tax complexity will be inspiring many CFOs to re-evaluate the role of the tax function and tax planning across the board. In the next 12 months, new challenges around compliance, process and data requirements will force many CFOs to overhaul the tax function while evaluating the role of big data and artificial intelligence in tax planning. 

System improvements will be made to ensure a seamless flow of information between business units, functions and managers, and CFOs will be looking to adopt best practices in integration, automation and internal control to help reduce tax risk and integrate the tax function across the company. Stay tuned for an upcoming feature in Accounting and Business on what CFOs need to know about transforming their tax function in an uncertain environment. 

Ramona Dzinkowski is a Canadian economist and editor-in-chief of the Sustainable Accounting Review