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Report: 25% of big companies have no CFO succession plan in place

Written on Jun 28, 2024

Large companies are ensconced in a mindset of risk aversion, with only a quarter of finance chiefs polled in Deloitte’s latest quarterly CFO Signals survey saying now is a good time to take risks. 

And yet, in a result Deloitte calls “surprising,” 25% of the 200 survey participants — all from North American companies with more than $1 billion in annual revenue and queried in early May — said there is no formal succession plan in place for their role. That’s a clear risk, considering the large and growing influence of CFOs. 

Deloitte devoted much of its research report to the topic. Among the companies where a CFO succession plan is in place, 29% of participants said their CEO has the primary responsibility for the creation and upkeep of the succession plan. 

Other frequent holders of that responsibility, depending on the company, included the chief human resources officer, board of directors, special succession planning committee and audit committee. 

Asked to identify what should be the top priority when creating a framework for a succession plan, 27% (the leading response) suggested creating a CFO role profile with success criteria to measure against. 

When it came to what CFOs look for in a successor candidate, it was clear that traditional finance experience and capabilities are no longer the top drivers. The top two responses were operational experience and familiarity with new technologies, while things like accounting skills, capital-raising expertise and FP&A skills rank lower than they did several years ago. 

CFOs were also asked what actions they were taking to prepare possible internal successors to take over the role, to which they gave predictable responses. The leading ones were placing them in managerial training programs, working with them to create developmental or transition plans, and mentoring or coaching them. 

Meanwhile, whether by nature or design, finance chiefs at large companies tend to be skeptics. And so, although economic signs continue to be relatively stable, considerably less than half of the survey participants indicated they are optimistic about their companies’ financial prospects. 

But just as many are pessimistic, one of several ways in which CFOs are evenly divided at present. 

Four in 10 (39%) survey respondents expressed optimism for their companies’ financial prospects, while 38% were pessimistic. A solid majority (61%) of the full survey base cited the economy — including indicators like growth and consumer demand — as among their top three external risks, trailed by geopolitics, cybersecurity and inflation (50%, 50% and 49%, respectively). 

Also, 38% considered U.S. equity markets to be undervalued, despite an impressive run-up in stock prices so far this year, while a similar 34% viewed them as overvalued. And a vast majority of CFOs were unenthusiastic about either debt or equity financing, with only 18% and 15%, respectively, favoring those approaches. 

As recently as late 2021, around 90% of CFOs were feeling positive about debt funding and more than 50% about equity funding. High interest rates have changed those feelings. 

However, there was something most CFOs did agree on: Now is not a great time to take risks. Only 26% of the survey participants, all from North America and with companies with annual revenue of more than $1 billion, favored a risk-taking approach. 

That compared to a two-year average of 36%, and along with a disdain for risk displayed during the height of the pandemic in 2020, it’s the lowest level of risk appetite for CFOs in many years. 

In addition to the external risks, the top internal risk was thought to be GenAI adoption, with several others close behind. 

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