Concern about regulatory change doubles for CFOs

Concerns over the impact of further regulatory changes have more than doubled amongst chief financial officers in the last year, despite steady optimism in the financial prospects of their companies.

Tax&Compliance Jotham Lian 20 February 2018

Deloitte’s latest CFO Sentiment report found that 63 per cent of Australian CFOs have listed regulatory change and its implications at the top of their concerns, up from 29 per cent in the first half of 2017.

“Despite CFOs becoming more comfortable with uncertainty, they are still keeping an eye on a range of issues important to future business performance,” Deloitte partner, Stephen Gustafson said.

“This shift in concern is likely due to a recent flurry of regulatory activity in the financial sector, including greater powers for ASIC and APRA, the Banking Executive Accountability Regime, legislation impacting financial advisory and life insurance activities, and, of course, a royal commission which covers the financial sector more broadly.”

“While the election of US President Trump has added to the global volatility equation, CFOs felt the impact of Trump policies on their specific activities would be minimal earlier in 2017. However, recent developments, including the introduction of corporate tax cuts and escalating geopolitical tensions with North Korea, have forced some respondents off the fence, with more feeling either negatively or positively about the direction of US policy.”

However, CFO optimism continues to hold steady, with 71 per cent positive in 2018, bolstered by improved hiring conditions and a lift in both government and business investment in the Australian economy.

Conversely, a record 62 per cent of respondents were comfortable with taking on more balance sheet risk, largely supported by improved perceptions of external financial and economic certainty.

“Entering the new year, CFO sentiment remains optimistic, although slightly down from mid-2017, alongside a positive, growth-friendly economic outlook, and a lift in both government and business investment and employment,” said Mr Gustafson.

“And as far as 2018 is concerned, the outlook looks like a case of more good news to come. CFOs expect interest rates to stay where they are, they see the Australian dollar moderating, and they see a positive macroeconomic outlook supportive of business activity.

“Uncertainty, of course, remains a constant, but with these favourable economic fundamentals in place, CFOs are also pretty strident when it comes risk. More than 60 per cent are open to taking on more balance sheet risk, 13 points up on H1 2017, and another record high since our sentiment survey began.”
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