Intelligent Finance OneStream

Financial Decision-Makers Economic Outlook for 2022

This article first appeared on the OneStream blog by John O’Rourke

This article was previously published by Financial Executives International (FEI) on Nov. 30, 2021

With the COVID-19 pandemic continuing to impact the global economy in late 2021, what are Finance executives thinking about and planning for in 2022 and beyond?  When will companies return to normal growth?  Will the inflation rates we are seeing subside? What are companies’ return to office strategies and what technologies are they investing in?

These and other topics focused on the Hanover Research Financial Decision-Makers Outlook Survey for October 2021, sponsored by OneStream Software. Read on to learn how the COVID-19 pandemic has impacted organizations, plans for returning to the office, talent management strategies, ESG readiness, and other planned technology investments.

Taking the Pulse of Financial Decision-Makers

The past 18+ months since the COVID-19 pandemic broke out have been challenging for everyone, but especially for global enterprises as they sought to navigate through the initial disruption and economic volatility that has ensued as a result.  The world is clearly in a better place in late 2021 compared to where it was in March of 2020, but there’s still a lot of uncertainty ahead.

Given that most organizations are now planning for 2022, we thought this would be a good time to survey financial decision-makers to get their outlook on the recovery, the impact of inflation, return to the office plans, talent management, ESG programs, and technology investments.

The survey was conducted in September – October of 2021.  The results are based on responses from 249 financial decision-makers in North America, in small, mid-sized, and larger enterprises across all industries. The following is a summary of the key findings of the survey.  A full copy of the report is also available for download here.

Economic Headwinds Take Their Toll

Some organizations have grown since the start of the pandemic, but most have stagnated or shrunk. While four out of ten organizations surveyed indicate they have grown, less than a third (30%) of organizations have shrunk while another third (31%) are still stagnated since COVID 19 struck. Of those growing, almost three-quarters (70%) are experiencing growth equivalent to pre-pandemic rates. Most of the organizations that shrunk or stagnated expect to return to pre-COVID growth in 2022 or later. (see figure 1)

Impact on Company Growth
Figure 1 – COVID-19 Impact on Company Growth

According to the survey, COVID 19 resurgence has had a severe impact on businesses, namely higher operating costs, increased dependence on remote work, and delayed return to the office (RTO).  In fact, three-quarters of companies had to delay their RTO plans by a year or less.

Most companies have instituted vaccine tracking (78%) and almost two-thirds are mandating vaccines if employees wish to return to the workplace (60%). Financial decision-makers do expect some negative outcomes of vaccine tracking/mandates, including employee resignations (46%), feelings of being monitored among employees (43%), and difficulty hiring (41%).  However, they also believe this helps make employees feel safer and more likely to return to office.

Focus on Hiring and Retaining Talent

The “Great Resignation” is causing a high level of concern for financial leaders. Many are worried about employee turnover (45%), inability to meet business demands (41%), and difficulty recruiting and retaining technical talent (40%).  Training current employees and increasing benefits are the most common steps organizations are taking to address the talent shortage. To address the talent shortage, more than half of organizations surveyed are training current employees and improving benefits (see figure 2).

Management Strategies
Figure 2 – Talent Management Strategies

Inflation Expected to Continue

Two-thirds of financial leaders surveyed agree the inflation rate will increase by the end of 2022. However, they are split on when it will stabilize, with almost half (47%) speculating 2022 and 46% expecting stabilization to come later.  A high percentage of financial decision-makers are highly concerned about the impact of the inflation rate on their operating costs (82%), and revenue (80%). To prepare, 47% said they are increasing prices, 46% are adopting new technologies, 37% are renegotiating supplier contracts and 37% reducing operational costs (see figure 3).

Impact on Organizations
Figure 3 – Inflation Impact on Organizations

Environmental and Social Policies Getting More Attention

Nearly all organizations are working towards integrating environmental, social, and governance (ESG) programs into their business strategy. On the social side, 71% of CFOs surveyed place the most importance on improving workplace diversity while 65% are focused on closing the gender gap.

According to finance leaders, two-thirds of organizations are at least somewhat prepared for ESG reporting changes. Particularly, 47% said they have raised transparency, 41% implemented new ESG policies, and 38% and increased oversight.  Larger companies are significantly more likely to indicate they are somewhat or fully prepared for a potential ESG reporting change. They are also more likely to form ESG teams internally as part of the preparation. (see figure 4)

Impact on Organizations
Figure 4 – Response to ESG Mandates

Analytics and Machine Learning to the Rescue

Compared to pre-pandemic usage, the majority of companies have increased investment in data analysis tools, most notably machine learning (ML) at 62% and cloud-based planning tools at 63%.   Unsurprisingly, they also used more of these tools during this period.

Nearly all organizations are currently using machine learning or have a plan to do so.  Over two-thirds of those surveyed report setting aside more than 10% of their IT budget for investment in ML platforms. Three-quarters of financial leaders anticipate their company will increase ML usage throughout 2022.  Nearly all organizations have already adopted or are planning to investigate an AutoML solution. Intelligent process automation (45%) and data center optimization (44%) are the priority use cases for ML technology. (see figure 5)

Machine Learning Usage
Figure 5 – Machine Learning Usage and Adoption Plans

Learn More

The Financial Decision-Makers Outlook survey of October 2021 provided a helpful snapshot of what Finance executives are thinking about and planning for as they enter 2022.  It’s encouraging to see the positive economic outlook for 2022, however, most organizations are clearly incorporating continued inflation into their plans and strategies for next year.

Attracting and retaining talent as organizations continue to support remote work is clearly a challenge and area of focus, as is implementing more formal ESG programs. And all of the market buzz around analytics and machine learning is clearly coming to fruition in the form of increasing adoption.

To learn more, download the full report here.