Cautious Executives are Preparing for an Economic Downturn, TD Bank Survey Reveals
Among downturn preparers, a majority are considering investment strategies to manage looming headwinds
Jun 26, 2019, 12:44 ET
CHERRY HILL, N.J., June 26, 2019 /PRNewswire/ -- When it comes to preparing for the future, U.S. businesses are acting with caution. Although 83 percent of respondents have an overall positive outlook on the future of the economy, more than half (58 percent) are preparing for an economic downturn, according to a newly released Corporate Finance Survey of 300 financial decision-makers conducted by TD Bank, America's Most Convenient Bank®.
The survey examined CFOs, treasurers and other financial professionals' perspectives on the economy, business environment, geopolitical trends and growth plans to better understand challenges and opportunities in the market.
The top actions respondents are taking to prepare for a downturn are:
- Developing investment strategies (49 percent),
- Cutting back expenses (39 percent)
- Working on reducing debt levels (34 percent)
- Monitoring cash flow (34 percent)
Among those preparing for a downturn, those who are optimistic about the U.S. economy in the long term are more likely to develop an investment strategy, with 58 percent preparing to invest compared to 36 percent of pessimistic finance professionals.
"CFOs, treasurers and financial decision-makers should monitor economic uncertainty," said Stephen Foley, Head of Corporate Banking at TD Bank. "With headwinds on the horizon in the form of changing tariffs and trade policies and potential inflationary pressures, finance professionals should act now and work with a financial partner to determine viable debt and cash flow plans."
Tariffs and Trade Policies Will Impact Business and Financial Decision Making
Executives feel positive about the health of their own business. Ninety-four percent report they are optimistic about the future and consider the health of their business "excellent" or "good". Despite their confident outlook, finance professionals acknowledge that geopolitical factors will impact their business this year.
The top factors that will impact their financial decision-making are:
- Tariffs and trade policies (35 percent)
- Interest rates (34 percent)
- Consumer confidence (34 percent).
Finance executives acknowledge the challenges of tariffs and trade policies more than non-executives: 42 percent believe it will impact their financial decision-making this year compared with 22 percent of non-finance executives.
The Business Community is Focused on Growth and Innovation
When assessing their business priorities for the next year, finance professionals are focused on growth and innovation. According to the survey, the top two business priorities next year are investment in technology and innovation (45 percent) and expansion into new markets (44 percent). More specifically, finance professionals report their business plans this year include technological upgrades (39 percent), launching new products (39 percent) and leveraging disruptive technology (35 percent).
For many businesses, growth plans and innovation will create internal challenges and put pressure on finances. Thirty-nine percent consider the ability to achieve growth as a major internal challenge, and this number rises (48 percent) among larger corporations (businesses with revenues exceeding $500 million).
Private companies are challenged by technology more often than public companies, with 43 percent citing technology challenges pressured finances compared with 28 percent of public companies.
"Among finance professionals the mindset is growth and optimism," said Foley. "As they determine their strategies to achieve growth in a strong economy, they'll still need to allocate capital to invest back into their business. Financial decision-makers now find themselves contending with a competitive business environment where a consistent model for achieving growth is paramount."
Funding for Growth Plans
Finance professionals currently utilize equity financing (23 percent) and retained earnings (23 percent) as their primary sources for capital spend. Supply chain financing (39 percent) and accounts receivable securitization (37 percent) were the top picks for supplemental funding sources.
"Securitization and supply chain financing are a great way for companies to maximize working capital. While the economy is strong, it's the perfect time to evaluate your bank loans and speak with your financial partner who can bring deep industry expertise and product capabilities that support you through every business cycle," said Foley.
Finance professionals want a strong relationship with their financial partner. Over one-third of respondents consider a "good relationship" most important when selecting a financial partner (37 percent). Respondents also cite stability of the partner (30 percent), deep industry knowledge (29 percent) and availability of capital (28 percent) as important factors when selecting a financial partner.
A whitepaper, "Guarded Optimism Prevails as Executives Chart the Future," providing more details and analysis on the findings is available here.
Survey Methodology:
Research company Maru/Matchbox conducted the survey among a nationally representative sample of executive financial decision makers. The online fieldwork occurred between May 1st and May 8th, 2019. In total, 300 completes were gathered in the U.S. Margin of Error on a random sample of this size is +/- 5.66% percent.
About TD Bank, America's Most Convenient Bank®
TD Bank, America's Most Convenient Bank, is one of the 10 largest banks in the U.S., providing more than 9 million customers with a full range of retail, small business and commercial banking products and services at more than 1,200 convenient locations throughout the Northeast, Mid-Atlantic, Metro D.C., the Carolinas and Florida. In addition, TD Bank and its subsidiaries offer customized private banking and wealth management services through TD Wealth®, and vehicle financing and dealer commercial services through TD Auto Finance. TD Bank is headquartered in Cherry Hill, N.J. To learn more, visit www.td.com/us. Find TD Bank on Facebook at www.facebook.com/TDBank and on Twitter at www.twitter.com/TDBank_US.
TD Bank, America's Most Convenient Bank, is a member of TD Bank Group and a subsidiary of The Toronto-Dominion Bank of Toronto, Canada, a top 10 financial services company in North America. The Toronto-Dominion Bank trades on the New York and Toronto stock exchanges under the ticker symbol "TD". To learn more, visit www.td.com/us.
SOURCE TD Bank
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