Indian CFOs shortening planning horizon in response to increased market volatility

INDORE, India - June 11, 2013 - PRLog -- Indian CFOs shortening planning horizon in response to increased market volatility  American Express CFO Research Global Business and Spending Monitor

·         58% are likely to tap into their cash reserves over the next year, primarily for R&D, capital expenditures and paying down debt

·         63% expect business travel spending to increase in 2013, mainly to meet with customers

·         78% of Indian CFOs are optimistic about their country’s economic expansion over the next year

·         88% of Indian CFOs choose India as the top country for sourcing, distribution, production and other business activities

India, June 07, 2013: Increased market volatility has led a significant number of Indian finance executives to realign and shorten their company’s planning horizon, according to the sixth annual American Express/CFO Research Global Business and Spending Monitor, a survey of 519 senior finance executives in the U.S., Europe, Canada, Latin America, Asia, and Australia.56% of Indian CFOs agree they have shortened their planning horizon in the past two years and a significant 75% are likely to do so over the next year. The survey also reveals that Indian respondents (34%) are most likely among their counterparts in the Asia-Pacific region to exercise tight control over their spending and investment to preserve their profitability over the next year.

“In the face of market uncertainties, as more and more companies shorten their planning horizon and closely watch spending to maximize profitability, senior finance executives are speaking to us increasingly about effective solutions to manage and optimize their spending. Companies using effective expense management solutions can ensure cost policy and process adherence as well as significant savings, directly impacting their bottom line,” says Manoj Adlakha, General Manager and Vice President, Global Corporate Payments, American Express India.

Majority to dip into cash reserves

Compared to 2012, a significant number of Indian CFOs are looking at tapping into their cash reserves over the next year. Up from 32% in 2012, 58% of Indian respondents are looking at spending down their cash reserves, behind only China (65%). 53% say they are likely to deploy them to increase spending on research and development and capital spending followed by a slightly lower percentage of 52% who will use them to pay down debts. 48% will use their cash reserves to expand operating activities and headcount, and 47% will spend down cash to fund ongoing operations.

Business travel spending to increase

63% of Indian CFOs say that they are likely to increase spending on business travel in 2013. The largest share (56%), expect to increase spending on travel to meet with current or potential customers, a sentiment shared by CFOs worldwide.

“Companies will continue to spend on business travel, both domestic and international, with a view of market expansion. With T&E expenses accounting for the second-largest area of spend for most corporations, there is a need for companies to look at effective tools to manage expenses efficiently and drive optimum savings, resulting in operating advantages,” says Manoj Adlakha.

Barriers to growth

50% of respondents in the United States, 57% in Spain and 56% in Hong Kong express concern about political uncertainty and gridlock having a negative effect on their countries’ economic growth prospects. Fewer respondents in India (38%) see these as barriers to their country’s economic growth.

Large groups of respondents in India (44%) and in the United States (45%)—more than in any other country—feel that the cost of complying with government regulations has increased substantially over the past five years. 31% in India and 30% in the United States expect it to increase substantially over the next year.

Optimistic Future

The American Express/CFO Research Global Business and Spending Monitor also found that respondents in India (78%) continue to be very optimistic about their country’s economic expansion prospects, though this has dropped from 86% recorded last year.

India also emerged as the top country of choice among 88% respondents in India looking at expanding sourcing, distribution, production, outsourcing and other global business activities, followed by China (41%) and Brazil (28%).

Mixed views on growth from domestic sales versus exports

31% of Indian CFOs are looking at increasing sales within their domestic markets, while 56% will seek growth through exports. By contrast, 53% of respondents in the United States are focusing on increasing sales within their domestic market, and only 15% will seek growth through exports.

Modest spending and investment

75% of Indian CFOs are likely to increase real spending and investment by 10% or more over the next year. Worldwide, too, finance executives say their companies will favor “modest spending and investment” that balances top-line growth with profitability in the coming year.

Across the population of respondents, survey results indicate that companies plan to invest more in expanding market access, followed closely by improving production-process efficiency and new product/service development. 69% of Indian CFOs plan to invest more in expanding market access, while 68% plan to invest in developing products and services and 58% are looking at spending more on business and professional services.  

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