Deloitte CFO Survey: The CFO’s View of The Digital Future

Economic Outlook
The new autumn edition shows that almost half of Dutch CFOs (47 percent) have become more pessimistic about economic prospects in the past six months, while less than a third (26 percent) have become more optimistic. This pessimism is understandable due to various geopolitical uncertainties resulting from the war in Ukraine, tensions between the US and China, and the recent conflict in the Gaza Strip, among others. Inflation, interest rates, and other macroeconomic factors also play a role.
Although not all companies are equally pessimistic. Banking, insurance, and private equity are doing well, with companies holding more positive sentiments and showing a strong willingness to invest. Some sectors, such as retail and fashion, face significant challenges and CFOs there experience a sense of gloom. They emphasize the importance of cost control and risk management.

Sustainability as a Priority
Overall, CFOs consider sustainability a high priority, with 40 percent viewing it as a top priority. Sustainability is important from both a value and compliance perspective, although the majority, nearly 60 percent of CFOs, regard value creation as the primary motivator for their sustainability strategy. Additionally, many expect upcoming elections and potential stricter regulations to exert pressure for accelerating their sustainability strategy.
The technology and energy sectors seem to prioritize value in their approach to sustainability. On the other hand, the automotive, education, culture, and sports sectors are more compliance driven. The research also indicates that there is not always a complete alignment between the sustainability priorities of companies and those of regulators. Value-driven companies often perceive regulations as very negative, whereas compliance-driven companies expect it to have more positive effects.

Not Fully Prepared Yet
Despite the high priority placed on sustainability, many organizations are not fully prepared for the regulations regarding sustainability goals and reporting requirements. In fact, half of the respondents indicate that they are not prepared at all or only to a limited extent for the impact that the Corporate Sustainability Reporting Directive (CSRD) and other sustainability regulations will have on their organization. Compared to the previous edition of the survey, the range of responses is wider. The percentage of companies that are not prepared at all for the whole spectrum of upcoming sustainability rules and laws has increased from 16 to 21 percent, and the percentage that is somewhat prepared has increased from 23 to 30 percent. The number of companies that are (almost) prepared has also risen from 17 to 28 percent. On the other hand, the percentage that is reasonably prepared has decreased from 45 percent to 20 percent. This polarization may be due to CFOs believing that sustainability should be a top priority and have therefore thoroughly assessed how 'compliant' their organization is. Consequently, they are less likely to respond that they are 'reasonably prepared' - an answer which can typically indicate a lack of clarity about the true status.

Digital Skills
CFOs face the challenge of integrating technological developments, such as artificial intelligence, into the financial function. They acknowledge the importance of digitization and are willing to invest in digital transformation.
However, many CFOs believe that their organization is not yet digitally mature. Small companies seem to perform best in this regard, with 22 percent of smaller companies indicating that they are highly digitally mature, more than twice the percentage of larger companies. When broken down by sector, the healthcare, public sector, and business and professional services industries are the most digitally mature. Surprisingly, financial service providers exhibit a low level of digitalization.
The importance of digitization does grow. Not only is digitization considered essential for gaining insights that reduce supply chain risks, but cyber risks are also among the two most urgent risks on the CFO's agenda. Therefore, it is not surprising that digital expertise is a key skill companies are currently seeking in their hiring.

AI (still) underutilized Strategically
Artificial intelligence (AI) could be the most significant technological development of our time. On average, CFOs allocate 16 percent of their budget to AI. For smaller companies with revenues up to 100 million euros, this figure rises to 20.9 percent. Financial leaders are convinced that the proper use of AI can provide a competitive advantage for their companies.
Remarkably, despite these high expectations for AI, only four percent of Dutch CFOs regularly use artificial intelligence for strategic decision-making (meaning in more than half of the cases). However, CFOs anticipate a strong surge in the use of AI in decision-making processes over the next five years. More than half (57 percent) of Dutch CFOs expect that AI will also play a much more strategically important role in their companies.

Discrepancy
The general conclusion is that CFOs are aware of what is needed to prepare their companies for the future, but they find it challenging to act upon that knowledge.
This discrepancy arises concerning both sustainability and digitization, the two themes that CFOs consider essential. Regarding sustainability, they often intend to implement a value-driven sustainability strategy but are generally unprepared for CSRD and related laws and regulations. A similar situation exists with digitization. CFOs overwhelmingly recognize the importance of digitalization, especially AI. Nevertheless, only a minority of organizations are genuinely digitally mature, and the potential of AI remains untapped.
In both cases, CFOs have much ground to cover to align the importance they attach to these issues with their actual preparedness.

This essay was published in Management Scope 10, 2023. The Dutch part of the survey is based on the responses of 171 participants from late August to late September 2024. Published in Management Scope 10 2023.