When CFOs’ Worries Are FinServ’s Worries, Too

From China’s slowing economic growth, to the strengthening U.S. dollar, to a host of other geopolitical phenomena impacting the global economy, corporate CFOs have a lot to keep their eyes on.

In Canada, new analysis from American Express found that the slew of factors outside national borders has chief financial officers in the country focusing their growth plans domestically.

Canadian CFOs, the company’s research found this month, hold “guarded optimism” about this year, with some anxieties about exposure to overseas risk and confidence at home impacted by politics and wavering oil prices.

The American Express/CFO Research Global Business & Spending Monitor report may have lifted the curtain on how Canadian CFOs are feeling in today’s market climate, but that doesn’t mean corporate financial executives will be reacting to those sentiments based on mere emotion.

“I haven’t met an emotional CFO yet,” joked Paul Parisi, VP and GM of American Express Canada’s global corporate payments unit, in a recent interview with PYMNTS.

Rather, the CFO makes decisions grounded in fact, not in gut instinct. Parisi took us through the findings of American Express Canada’s latest research and explored how the facts of foreign and domestic events will not only shape CFOs’ next moves but how the financial services industry can shape itself around what corporate money managers will need in 2016.

Staying Local

According to American Express Canada, nearly half of the CFOs surveyed (47 percent) said they plan to focus on domestic markets amid political and economic uncertainty overseas.

“There’s an implication that the exposure they might have appears to be more international than it would be in domestic markets,” Parisi explained. “They’re kind of hunkering into the Canadian environment, where they feel more comfortable about stability.”

The Canadian CFO is less optimistic that their counterparts in other markets; for instance, 63 percent of those surveyed said they are anticipating modest or substantial economic expansion this year, compared to 73 percent that said the same in the U.S.

Still, Parisi said, the anticipation of growth this year — while not as prevalent as the global average — is still strong.

“To see that people are still growing, or want to grow, was still a good finding for us,” he noted.

Money Management 

According to Parisi, some of the biggest implications of the research for the financial services industry are how CFOs are protecting profits and accessing working capital.

The report found a 30 percent increase in the number of CFOs that said they plan to tighten their spending and investment ventures to remain profitable compared to last year — the largest year-to-year increase on the globe.

Two-thirds said prioritizing cash flow is more important than it was in 2015. This, Parisi explained, means financial services firms like American Express will have to follow suit with how they meet CFOs’ needs.

“We’re already working with corporations on how to consider renegotiating contracts with vendors, to have different payment terms, to help with payment processing,” the executive said, discussing the ways American Express would respond to these conclusions.

Parisi also pointed to the 30 percent decline in the number of CFOs citing the availability of working capital as the top factor to promote corporate growth. This, he noted, is also shaping how American Express and the FinServ sector are linking corporations to working capital.

Sourcing Talent 

American Express may not be in the business of recruiting talent for its corporate clients, but that doesn’t mean workforce trends are off its radar, said Parisi.

The research explored these trends and found that 70 percent of businesses in Canada plan to fill their need for specialized workers by sourcing temporary or contract workers this year. The majority (60 percent) said that these non-full-time employees are likely to play a key role in their corporations over the next two years.

Parisi admitted that, while he cannot draw conclusions about what this means in terms of how temporary staff will impact money management, keeping employment habits on the radar is key for financial services firms.

“Attracting and retaining talent are some of the things we talk to clients about when we talk about some of the services we provide,” he said. Hiring strategies can have a major influence on corporate cash management and touch upon several aspects of CFOs’ operations, Parisi added.

Corporate expense management, procurement cards, prepaid cards and other spend management solutions must all be targeted towards companies with the understanding of how employees will use these tools and the types of employees that will use them, too.

Growing Sophistication

When exploring the ways corporate CFOs will respond to local and international shifts in the economic and political climate, Parisi said that the FinServ sector must keep in mind that mid-market businesses aren’t what they used to be.

“In the past, people used to refer to these mid-markets as mom-and-pop organizations,” he said. “And they’re certainly not.”

Mid-market businesses now have greater access to tools once only offered to large conglomerates. That makes them more agile and knowledgeable than they used to be, and FinServ companies like American Express must recognize that, Parisi explained.

“In my experience, I’ve seen the sophistication of the mid-market become far greater than in the past,” he said. “They have access to information, they’re utilizing all of the tools that are available to the big companies and they’re able to reduce their exposures a lot quicker.”

This year, American Express Canada’s research suggests that the CFO is proactively avoiding exposure to risks from overseas. In focusing on domestic growth, these businesses will shift the way they manage cash, source capital, find talent and ultimately create a roadmap of growth; understanding these trends will be paramount as FinServ players draw up their own game plans for 2016, too.