Finance leaders are on the corporate front line, helping their companies navigate a health and economic crisis whose duration is uncertain. PwC’s biweekly CFO survey tracks how these executives view a COVID-19 world — and the actions they are taking to respond.

This survey, the third since emergency lockdowns took effect in the US, reflects the views of 313 US finance leaders during the week of April 6. It was a week when unemployment claims surged — totaling 16.8 million since mid-March — and focus turned to the emergency loan program for small businesses as a part of the $2+ trillion coronavirus relief bill, says PwC. 

Key findings include:

• Focus is on financial impact: This is the top concern as businesses shift to managing through a liquidity crunch and recession.
• Time to recover lengthens: Just one in five finance leaders now expects their company to bounce back within a month after the crisis ends.
• Clampdown on costs continues: More CFOs anticipate workforce reductions, with 26% of respondents anticipating layoffs in the coming month.
• Stimulus impact is assessed: Half of respondents are preparing to opt in to government relief programs.

What’s on the CFO agenda as the COVID-19 crisis evolves:

Realities of managing through a downturn are settling in

Financial impacts of COVID-19, including on liquidity and capital resources, rate as the top concern. Businesses are actively dealing with the effects of a sharp drop in economic activity and are assessing the lasting effect on recovery scenarios. There is little doubt that the US economy has downshifted into recession after a month of partial shutdown. Economists are revising forecasts for second quarter US GDP, with projections from the Conference Board for a contraction in the US economy in 2020 between 3.6% and 7.4%.

Preparing for a longer business recovery

Hopes that the outbreak will dissipate quickly are receding. Only one in five respondents now believes they’ll be back to business as usual within a month once the outbreak ends. In contrast, during the week of March 9, as “shelter-in-place” orders started taking hold in the US, 66% of US and Mexico respondents estimated that their companies could recover within a month.

Finance leaders continue to evaluate ways to pull back discretionary spending. Processes are being put in place to tighten approvals for new spending — even among businesses that are well-capitalized. Cost management is also extending into investment programs as revenue expectations adjust: 67% of US leaders surveyed say they are considering deferring or canceling planned investments. Survey findings show that companies are also exploring a range of financing options, including government loans.

Half (49%) of finance leaders surveyed say their company plans to take advantage of various government relief programs, most notably the $2+ trillion stimulus package that includes loans, loan guarantees, grants, assistance payments, contracts and tax incentives. Among the leaders who expect to make use of these measures, 81% expect to defer tax payments, which again points to the importance of managing cash and liquidity through the crisis.

More layoffs anticipated

In an indication of mounting cost pressures on companies, 26% of finance leaders say their company expects layoffs over the next month, and 41% expect furloughs. This marks a significant change. Two weeks ago, only 16% of leaders in the US and Mexico expected layoffs, while 44% expected furloughs. Separation of the workforce, or layoffs, is typically considered a means of last resort. 

Findings show labor supply constraints, too. Close to half (46%) of executives anticipate that a lack of remote work capabilities will lead to productivity loss, and 19% expect insufficient staffing to result in an inability to accomplish critical work.

Taking a wait-and-see approach to M&A

Respondents who are considering taking financial actions as a result of COVID-19 report that they’re more likely to consider cost-containing measures or to defer or cancel investments than to change their company's M&A strategy. Moreover, 34% of finance executives report that COVID-19 has not affected their M&A strategy and another 22% say it’s too difficult to assess right now.

Supply chain enters new stage with China starting to come back online

Companies are working to mitigate the immediate effects of the crisis on their supply chains as they sort through the risks and operations issues they identified in the first stage of the crisis. Thirty-nine percent of US respondents also say they are evaluating their supply chain to improve its resistance to future disruption. Many are starting to model recovery scenarios to ensure they have the right set of options to match supply and demand. 

The impacts of the pandemic on financial reporting are becoming more apparent: Just 13% of US respondents say it’s currently difficult to assess what changes, if any, will need to be made to disclosures. This marks a decrease from survey findings two weeks ago, when 24% of finance leaders said the same.

Consumer-facing companies brace for a long recovery

Consumer-facing companies have been among the hardest hit — as mandated stay-at-home orders combined with economic uncertainty have brought consumer spending to a halt for all but essential products and services. In fact, more (50%) consumer markets (CM) CFOs listed a decrease in consumer confidence leading to reduced spending as a top-three concern versus 39% in all sectors. CM CFOs report a higher level of concern than other industries, with 83% citing "significant impact and is causing us great concern," versus 74% overall. They also anticipate it taking longer to get back to “business as usual” when COVID-19 ends, with 33% saying they expect it will take 6 months or more, compared to 18% across all sectors.

As a result, CM CFOs say they are far more likely to consider deferring or canceling planned investments (85%) compared to 67% across all sectors. They are also more likely to take advantage of government programs such as the CARES Act (63%) versus 49% across all sectors. Almost all of them — 97% — say they are planning on or considering tax deferral options, compared to 81% across all sectors. They’re also more likely (24%) to seek economic relief from government programs at the state and local level than others (14% overall).

CM CFOs expect to encounter a variety of workforce challenges over the coming month, including insufficient staffing in subsectors that provide essential goods and services (37% versus 19% across all sectors). At the same time, they are planning to furlough or layoff other workers due to lack of demand in certain subsectors, such as retail, travel, transportation and hospitality: 57% anticipate furloughs, versus 41% across all sectors. And 30% anticipate layoffs, in line with the 26% for all companies.

US industrial products (IP) companies are struggling on several fronts, including reduced demand, supply chain bottlenecks, production slowdowns (or even shutdowns), and workforce payroll and safety issues. The immediate consequences appear grim, with 81% of sector CFOs expecting decreases in revenue and/or profits. Meanwhile, IP companies are aggressively trying to preserve cash liquidity, with 87% taking cost-containment measures and 67% canceling or deferring investments.

The pervasive cost-cutting is not leaving workers unscathed. In the next month, 59% of IP CFOs expect temporary furloughs (versus 41% across all sectors), and 36% expect layoffs (versus 26% for all sectors). When asked how long it would take for their businesses to return to business as usual if COVID-19 were to end today, 41% of IP execs predict it will take from three to 12 months.

Financial services braces for lower revenues, but keeps focus on investment

COVID-19’s economic effects, including low interest rates and strained financial markets, are starting to hit the bottom line of many financial institutions. Almost all (92%) of the FS CFOs surveyed now expect their revenues and/or profits to decline this year; higher than results across all industries (81%). But the FS industry seems to have an eye on the future: Only 55% are considering deferring or canceling planned investments as a result of this crisis, compared to 67% of all sectors. 

Technology, media and telecommunications (TMT) companies are powering the shelter-in-place economy, as consumers seek information, entertainment and solace online, often while working or studying remotely. Regardless, TMT CFOs are exercising caution. They are more likely to be considering implementing cost-containment measures (93%) compared to 82% across all sectors. 

TMT companies also intend to cut spending where the impact will matter less in the short term. R&D has always been front and center for TMT companies, as have worker protections. Of those that said they're considering deferring or canceling planned investments, more (36%) of TMT CFOs said they're considering deferring or canceling R&D than those in all sectors (27%). Their flexible, resilient business models are designed to pivot back when it's time to boost investment again.