PwC COVID CFO Survey: A long road to recovery, but Irish businesses are preparing with confidence for the ‘new norm’

Some of the key findings in the latest PwC CFO Pulse survey conducted last week include:

• Over a quarter of Irish finance leaders expect revenues to drop by 25% or more; less than one in five are ‘very confident’ in identifying new revenue opportunities

• Over a quarter of Irish finance leaders believe it will take more than a year for their businesses to recover from the pandemic – longer than any for other country participating in the survey

• New ways set to remain a permanent feature of working, with 78% of respondents confirming greater remote working and work flexibility will be in their future plans

• There is more to do on building and retaining critical skills – Ireland lags global peers

• More Irish finance leaders confident about providing a safe working environment for their people compared to global peers

• Companies are accelerating plans to return safely to the workplace:  88% plan to reconfigure work sites, up from 76% a month ago; 72% plan to change safety requirements, up from 59% last month

This survey, an ongoing poll of nearly 1,000 global financial leaders including Ireland, helps to identify the business and economic impact of COVID-19 and how businesses are adjusting.

Irish companies expect deeper cuts to revenue and profits compared to global counterparts

76% of Ireland’s finance leaders expect a decrease in their company’s revenues and profits this year as a result of COVID-19 (Global: 80%).  Of this, over a quarter (28%)  expect this decrease to be 25% or more.  Fewer global companies (20%) expect this level of revenue and profit reduction.   Despite the pandemic, 15% of Irish companies either expect no impact on revenues and/or profits or expect an increase.

Less than one in five (17%) are ‘very confident’ when it comes to identifying new revenue opportunities when they return to the workplace and is significantly behind global expectations (27%).

Key strategies to rebuild revenue streams, according to the survey, are new, enhanced or repurposed products or services (67%) and changing pricing strategies/payment terms (64%).  Irish companies though expect to have a keener focus on pricing strategies compared to global companies (48%).  35% will enter new geographic markets and just 22% will focus on upskilling and acquiring new talent.

More Irish companies than in any other country believe it will take more than a year to recover

According to the survey, more Irish finance leaders believe that it will take more than a year to recover from the pandemic than in any other country participating in the survey. Over a quarter (26%) now believe that if COVID-19 were to end today, it would take their business more than a year to get back to ‘business as usual’, up from 17% two months ago and just 11% globally.  A further 40% believe it will take between one and six months compared to 50% globally.

David McGee, Strategy & Markets Partner, PwC Ireland, concluded: “Companies are clearly concerned about a new wave of infection and the impact on their financial position.  There is a need to remain focused on adjusting to this new normal, protecting your people and re-engaging your customers while at the same time pursuing new revenue streams through product and service innovation. Companies need to continue to do their scenario planning, and in particular, now in light of a no-deal Brexit on the cards.”

New ways set to remain a permanent feature of working

There is evidence to suggest that some aspects of the current situation will make business better in the long run and therefore may be here to stay. Respondents confirmed that these included: greater remote working and work flexibility (78%), better resilience (68%), leaner operations (49%), automation and technology investments (43%) and new ways to serve customers (42%).

Ciara Fallon, Director, People & Organisation, PwC Ireland, said: “There is no doubt that the workplace of the future will be a very different place, but it is likely to change for the better.  The survey confirms that some organisations will look to capture the unanticipated benefits of working through the pandemic and make positive changes to adapt their ways of working.  One-fifth of respondents reported not having enough people to do critical work, however, the crisis also highlighted some vulnerabilities in the workforce.  The survey suggests companies really need to focus on strengthening critical skills, building new skillsets for the future and supporting employee well-being and resilience.” 

Irish businesses ‘very confident’ in providing a safe working environment but not so confident on building and retaining critical skills for the future

A significant proportion of responding Irish finance leaders are ‘very confident’ when it comes to their ability to provide a safe working environment (Ireland: 80%; Global: 74%), meeting customers’ safety expectations (Ireland: 83%; Global:79%) and providing a clear response and shut-down protocols if there is a second wave of infection (Ireland: 77%; Global: 71%).

But the survey reveals that Irish businesses have more to do when it comes to building and retaining critical skills and they lag global peers. Just one in two (51%) are ‘very confident’ about retaining critical skills (Global: 56%).  Less than half (41%) are ‘very confident’ about building skills for the future (Global: 45%) and just 43% are ‘very confident’ when it comes to managing employee well-being (54%).

Working on-site will not be the same with plans accelerating

Irish finance leaders are much more concerned about the impact of the pandemic on their workforce (28%) than global peers (13%).

With lockdown easing, companies are accelerating their plans to be safe as they transition back to on-site working:  88% of respondents now plan to reconfigure worksites to promote physical distancing compared to 76% a month ago; 72% now plan to change workplace safety requirements (wearing masks, offering testing to workers etc), up from 59% last month; and over a quarter (28%) now plan to reduce their real-estate footprint, up from 12% a month ago.

Temporary furloughs and staff layoffs expected to ease

Nearly six out of ten (58%) Irish respondents reported to be expecting either temporary furloughs (35%) or staff layoffs (23%) in the month ahead but this figure is down from 65% two months ago. At the same time, one in five (20%) still expect to have insufficient people to accomplish critical work in the month ahead.   Over a third (35%) expect productivity losses due to lack of remote working capabilities, down from 61% two months ago.

Cancelling planned investments has become less of a focus

Implementing cost containment initiatives (88%) remains the single key financial action Irish organisations are considering as a result of COVID-19. At the same time, cancelling planned investment (facilities, operations, capital expenditure etc) has become less of a focus (59%) now compared to a month ago (73%).  Much fewer respondents currently report to be cutting investment in their workforce (32%) compared to last month (57%). Nearly a third (30%) remain focused on changing their financing plans.

Garrett Cronin, Consulting Partner, PwC Ireland, said: “With lockdown easing, Irish businesses who have got through the immediate crisis are thinking about what they need to do to survive and thrive moving forward.  Businesses are focused on re-igniting their operations, bringing their people back, but to a workplace that is fundamentally changed. They are confident that they can keep their people and customers safe and are less concerned about productivity losses due to remote working capabilities. They are beginning to focus on the long term and maintaining critical investments.  It will also be very important to rebuild supply chains, pricing strategies and markets in the months ahead.”

Irish businesses most concerned about a fresh outbreak of COVID-19 when they re-open – more concerned than global peers  

Despite a high level of confidence in safeguarding their people, the top concern with respect to returning to the workplace and operating in a changing business environment, according to the survey, is the possibility of a new wave of COVID-19 infections (67%), higher than global concerns (58%).  Other concerns are the impacts of a global economic recession (64%) and financial/profitability impacts (42%).