96% of Irish CFOs say that retaining and attracting skilled talent is one of the biggest risks they face in the coming year, overtaking economic outlook (85%) and geopolitical risks (59%) – which ranked as the top two risks earlier this year. Cyber risk (76%) and supply chain logistics (68%) round out the top five concerns. Just 37% of CFOs see climate change as a risk over the next 12 months.
The Deloitte CFO bi-annual Europe-wide survey benchmarks the sentiment of 1,151 CFOs based in 15 countries. The survey heard from 75 senior finance executives in Irish businesses across multiple sectors including tourism, construction, retail, manufacturing, healthcare, and transport. The Irish findings of the survey launch today at Deloitte’s Annual Reporting Plus Conference taking place in the Convention Centre Dublin.
Upskilling workforces & attracting the right talent
Despite the increasingly uncertain economic signals, seven in 10 (72%) CFOs believe that upskilling their workforce is one of the biggest investment opportunities for the year ahead. To attract and retain the right talent, businesses are re-looking at their working strategies and policies with 85% of CFOs focused on rolling out flexible working patterns, 69% reviewing total reward offering, 68% investing in wellbeing and assistance programmes and 59% are investing in sustainability initiatives such as measures to reduce carbon footprint.
Commenting on the results of the survey and feedback from clients, Daniel Gaffney, Partner, 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.”
Speaking from a tax perspective, Colin Forbes, Partner and Head of Global Employer Services, Deloitte Ireland said: “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.”
Business confidence wanes with driving efficiencies the focus for tackling risk
The external environment is an area of increasing concern for these leaders. While Irish CFOs perceive there to be less economic and financial uncertainty than their European counterparts (81% vs 61%), significant concerns still remain.
Just 32% of CFOs are forecasting an increase in revenue over the next 12 months – down from 61% six months ago. As CFOs look towards 2023, they are responding to uncertainty by prioritising efforts to reduce OPEX (78%), reviewing supply chain efficiencies (75%) and investing in digitisation and tech transformation (64%). 73% of CFOs are focusing on organic growth rather than expanding by acquisition (22%). When it comes to inflation, the majority of CFOs in Ireland expect rates to remain over 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
— 89% will increase investment to reduce costs (e.g. labour or energy savings)
— 89% will improve cash flow management
— 85% will pass on costs to customers
— 78% will increase product/service differentiation
— 75% absorb inflation by reducing margins
— 64% will focus on higher margin markets/products/services
— 60% will reduce investment
— 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,” he concluded.
Delivering sustainability reporting biggest concern on the climate change agenda
Despite the fact 59% of companies believe investing in sustainability initiatives may help address their biggest risk of attracting and retaining talent, just two in five (37%) CFOs noted climate change as a risk to their business in the next 12 months. Furthermore, three in 10 (31%) acknowledged the risk of complex or uncertain tax rules. When it comes to sustainability challenges, CFOs are most concerned about:
— Adapting the future of finance operating model to deliver sustainability reporting (51%)
— The capacity to deliver on the amount of current (and upstream) sustainability reporting requirements (45%)
— The current capability of finance teams to deal with sustainability matters (43%)
— The Irish legislative framework on environmental taxes (39%)
Speaking at the Deloitte Financial Reporting Plus conference today, 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.”