The level of optimism of Czech CFOs has slightly decreased after peaking last year. According to CFOs’ predictions, GDP will grow by 2.3% on average (0.2 percentage point less than in 2018). The overwhelming majority (98%) believes that employee costs will grow again this year. The majority (73%) of CFOs in the Czech Republic admit that their team has been prepared for the implementation of artificial intelligence only partially or not at all. This is the outcome of the 10th annual Deloitte CFO Survey 2019.
This year’s survey focused on the economic outlook, the labour market, the business environment or the incoming technology trends, such as automation and artificial intelligence. “Since 2016, we have witnessed an ongoing growth and strengthening of CFOs’ confidence. This year, the expectations concerning future development of the Czech business and economy largely correspond to last year’s results; however, the level of optimism has slightly decreased,” says Ladislav Šauer, Deloitte Audit Partner.
Most CFOs (56%) expect the economy to grow, ranging between 1.6% and 2.5%. Compared to last year, the proportion of those expecting faster growth (2.6%–3.5%) decreased from 31% to 22%. The current problems with the lack of labour will continue this year. More than half of CFOs stated that the unemployment rate would remain low. Nine out of 10 CFOs expect the price level to grow.
“The price level growth will be influenced by two factors – the growing increase in salaries that many firms will have to reflect in their prices, and the growth of CO2 emission allowance prices, which increase the prices of electricity and heat. The strengthening Czech crown should have an opposite effect, decreasing the import prices,” comments David Marek, Deloitte Chief Economist.
2019 risk factors: growing salaries and lack of human resources
Economic uncertainty is a problem for only one fifth of Czech firms but in the Central European region, more than one third of firms are pessimistic. Nearly all CFOs expect labour costs to grow this year – half expect a slight increase and 48% reckon there will be considerable growth. According to 67% of respondents, the greatest risk for Czech companies is the shortage of qualified labour. On the contrary, the risks related to regulation, tax and instability of business environment do not raise the same concerns in the Czech Republic as they do elsewhere in Europe.
In 2019, CFOs plan to take lower risks than last year. In the last three years, the risk appetite decreased in total from 45% in 2017 to this year’s 31%.
Despite the interest rate growth, half of CFOs agreed that a bank loan is attractive for their companies. On the contrary, equity financing has slumped from 30% to 19% year on year. Nearly half of CFOs in the Czech Republic expect an unchanged volume of mergers and acquisitions.
“The overall trend shows a slight decrease in optimism relating to mergers and acquisitions, which may reflect the expected slow-down of the economic growth and strengthening of company focus on organic growth, internal processes and their optimisation,” says Roman Lux, Assistant Director at Deloitte Financial Advisory Services.
Artificial intelligence is a novelty and challenge for firms
Up to 73% of CFOs in the survey admit that their function is not prepared enough or at all for the implementation of artificial intelligence. Less than one tenth feel ready. More than one third of CFOs consider the introduction of artificial intelligence to be irrelevant while 31% of respondents have the opposite opinion. The most suitable areas to introduce artificial intelligence are payroll (39%), financial planning and analytics (18%), and controlling (17%) in respondents’ opinion. Firms predominantly use artificial intelligence to perform routine activities (32%).
“Automation of routine financial processes continues to be the top priority in the digitalisation of financial function, which was confirmed by more than 70% of respondents. We expect that the available technological solutions and demonstrable experience with a positive impact on business will result in a wider deployment of automation than today. We estimate that within two to five years, investment priorities will slowly move to advanced data and predictive analytics. This will drive a change in the competence structure of financial teams that will include fewer accountants and more data analysts,” says Marek Kouřil, Director at Deloitte Consulting.
A mere one fifth of respondent firms use advanced tools of artificial intelligence today. One fifth of CFOs believe that a portion of employees will be replaced entirely due to new technologies within ten years.
Still a good economic outlook
More than three quarters of CFOs perceive the outlook of their companies as being optimistic. Over 60% anticipate growth in revenues. Restructuring is the most frequently indicated priority in CFOs’ strategies in Central Europe this year. However, this has no longer been a priority for Czech CFOs.
“In the Czech Republic, we are likely to be past that stage and CFOs search priorities more in acquisitions, research and development and introduction of new products,” says Jiří Sauer, Director at Deloitte Audit.
An increase in headcount is planned by 12 percentage points fewer CFOs than last year. Relevant technical skills (56%) and necessary work experience (50%) are two of the most difficult features to be found in potential employees. Lack of employees is most frequently (59%) addressed by firms through more attractive remuneration.
About the survey
Nearly seven hundred CFOs from 17 countries of Central Europe, including the Czech Republic, participated in the Deloitte CFO Survey 2019.
For the results of the Deloitte CFO Survey 2019 click here.