A new survey from Deloitte has revealed Irish CFO's biggest concern, with the number one issue at hand scoring above the likes of the economy and climate change.
Attracting and retaining skilled talent is the biggest risk facing firms in the coming year, according to an overwhelming majority of chief financial officers responding to the Deloitte survey.
Some 96% of Irish CFOs agreed that keeping talent was the biggest risk they faced, overtaking the economic outlook (85%) and geopolitical risks (59%), which ranked as the top two threats earlier this year.
Cyber risk (76%) and supply chain logistics (68%) round out the top five concerns, but just 37% of CFOs see climate change as a risk over the next 12 months.
A total of 1,151 CFOs based in 15 countries, including 75 senior finance executives in Ireland across sectors such as tourism, construction, retail, manufacturing, healthcare, and transport, answered the survey.
In Association with
Seven in 10 (72%) CFOs believe that upskilling their workforce is one of the biggest investment opportunities for the year ahead, and to attract and retain the right talent, businesses are taking another look at their working strategies and policies.
Some 85% of CFOs are focused on rolling out flexible working patterns, while 69% are reviewing total reward offerings. 68% are investing in wellbeing and assistance programmes, and 59% are investing in sustainability measures.
Commenting on the results of the survey and feedback from clients, Daniel Gaffney, partner at Deloitte Ireland, said: “It’s clear from the survey findings that retaining and attracting the right, skilled talent is the biggest challenge for organisations now, despite a tightening in recruitment.
"It’s not about scale– it’s about ensuring businesses have the right talent, skillset and expertise to navigate more uncertain terrain.”
Colin Forbes, partner and head of global employer services at Deloitte Ireland, added: “From a tax perspective, Finance Bill 2022 had a number of welcome measures to help support employee attraction and retention with the extension of SARP (Special Assignee Relief Programme) relief and the Key Employee Engagement Programme (KEEP), a tax efficient share option scheme - which may give businesses an additional competitive edge when attracting and retaining employees.”
The survey also found that Irish CFOs (61%) believe there to be less economic and financial uncertainty than their European counterparts (81%), although significant concerns remain.
Just 32% of CFOs are forecasting an increase in revenue over the next 12 months down from 61% six months ago.
As a result, CFOs are prioritising efforts to reduce operational expenditure (78%), reviewing supply chain efficiencies (75%) and investing in digitisation and tech transformation (64%).
Furthermore, 72% of CFOs are focusing on organic growth rather than expanding by acquisition (22%), and when it comes to inflation, the majority of CFOs in Ireland expect rates to remain above 8% for the next 12 months.
As inflation levels remain high over a prolonged period, CFOs are reviewing strategies to mitigate the risk: 93% will increase energy efficiency or reduce use, and 89% will increase investment to reduce costs (eg labour or energy savings).
Similarly, 89% will improve cash flow management, 85% will pass on costs to customers, 78% will increase product/service differentiation, 75% will absorb inflation by reducing margins, 64% will focus on higher margin markets/products/services, 60% will reduce investment, and 56% will reduce staff costs, including hours or headcount.
“As inflation rates remain higher for longer, the means for CFOs to absorb costs on top of additional costs will become more challenging”, Gaffney said.
“In turn, with the cost of debt rising and risk appetite waning, organic growth has become more of a focus over M&A activity. While this may be the right decision in the shorter term, CFOs need to look at longer term investments to mitigate risks as inflation sustains.
"M&A activity and continuing to invest in digital technologies may be essential to survive in the longer term."
When it comes to sustainability challenges, CFOs are most concerned about adapting the future of finance operating model to deliver sustainability reporting (51%), and the capacity to deliver on the amount of current and upstream sustainability reporting requirements (45%).
Irish CFOs also cited the current capability of finance teams to deal with sustainability matters (43%), and the Irish legislative framework on environmental taxes (39%).
Speaking at the Deloitte Financial Reporting Plus conference on Tuesday, Mike Hartwell, head of audit and assurance at Deloitte Ireland, said: “We know many companies are grappling with sustainability reporting with investors placing increasing focus on company disclosures.
"Our conference today is focused on supporting CFOs get the fundamentals of reporting right and adopting the appropriate methodology to reflect sustainability and climate risk in their numbers.
“While the economic environment remains uncertain, the climate crisis is existential, and companies have a vital role to play in mitigating the risks. This includes investing in technology and reviewing their own business practices but also ensuring transparent disclosure on the risk of climate change to a business’s bottom line.”
(Pic: Getty Images)
