Financial Executives Lower Economic Expectations

While companies hinted at waning optimism in 2019, COVID-19’s impact on almost every aspect of business operations led to a significantly more negative organizational outlook, according to the 2020 Treasury Perspectives survey, released today by Strategic Treasurer and TD Bank. The survey, in its third year, was fielded from April 20 to July 10 at the onset of COVID-19 restrictions and polled bank and corporate respondents across a range of categories, including technology use, economic outlook, credit access and regulation.

The majority of survey respondents anticipate 2020 will end on a significant economic downturn, with 81% expecting gross domestic product (GDP) contraction. This economic concern is solidified by the mere 14% of respondents who have a more positive outlook for their organization in 2020. However, there are some bright spots on the horizon as 46% forecast some level of GDP restoration and 44% expect their sales to increase by the end of 2021.

The rapid move to a remote work environment has also created a positive catalyst for the adoption of new and established technologies, including artificial intelligence (AI), machine learning (ML), robotic process automation (RPA) and application programming interface (API) as corporations adjust to a new normal. The majority of respondents (80%) are excited about these technological changes, with use of APIs expected to reach 69% adoption within the next two years and AI or Predictive Analytics incorporation nearly doubling to 47% by 2022.

Other key findings from the 2020 Treasury Perspectives Survey include:

COMPANIES SCALE UP THEIR FRAUD DEFENSES: Cyber fraud remains a top global economic concern and was identified as such by 62% of respondents, only to be surpassed by the global health pandemic’s impact on customer supply chain (82%).To combat potential fraud exposure, which has significantly increased in this remote work environment, firms have bolstered their fraud defenses by adopting multi-factor authentication (MFA), encryption and monitoring software/anomalous behavior detection/tracking. Concerns about accounts payable fraud grew in 2020, with 82% of organizations identifying it as the most susceptible group as compared to 67% in 2019, while treasury and payroll fraud concerns subsided from 53% in 2019 to 46% in 2020.

CORPORATES LIMIT EXCESS EXPENDITURES: Despite this challenging economic environment, 48% of corporates report they are in a stable stage and 35% are in a growth stage. However, corporates plan to hold on tightly to excess funds due to ever-changing COVID-19-related restrictions and the virus’ unpredictable trajectory. Thirty-two percent plan to hold onto excess cash for future financial investments, 29% for capital expenditures and 28% for debt repayment. Very few plan to use these funds for acquisitions (16%) and 17% do not anticipate having any excess cash.

COMPANIES PREPARE FOR FUTURE UNCERTAINTY: In light of the COVID-19 pandemic, corporates have enhanced their emergency preparedness planning. Half of corporate respondents noted they updated their plans within the last year. The key focus areas of these plans include remote work (87%), business continuity (86%) and online meeting availability (83%). While emergency preparedness continues to be crucial in this ever-evolving economic environment, there is still room for improvement. On a 5-point scale, only 15% of corporate respondents gave their organization the top “extremely prepared” rating for pandemic preparedness.

The 2020 Treasury Perspectives Survey was sponsored by TD Bank and conducted by Strategic Treasurer. A copy of the in-depth survey analysis is available here. There were approximately 340 respondents to this year’s survey who were primarily treasury and cash managers with North American based operations.