According to Deloitte’s latest report “Global CFO Signals: CFO Sentiment Q2 2015 – Staying focused; remaining vigilant,” the continuation of low energy prices is impacting both optimism and risk appetite in the Middle East.
With oil at US$53 a barrel at the time of the survey, CFO optimism fell to one of its lowest levels in recent years, with only a net 26 percent across the Middle East reporting positive prospects for their company. That is down from 47 percent in the previous survey, which was conducted just before the fall in oil prices.
According to Deloitte’s report, which includes results of the second-quarter 2015 CFO surveys from Deloitte CFO Programs across the Americas, Middle East, Europe and Asia-Pacific, risk appetite in the Middle East curbed, with only 33 percent of CFOs believing it is a good time to take greater risk onto the balance sheet. For now, the favored strategies are cost reduction and improving internal economics. However, CFOs are optimistic about at least one thing: they expect oil prices to be higher in a year.
“In response to challenging market conditions and decreased risk appetite, Middle East CFOs appear to have concentrated their efforts toward performing as financial stewards and operators of their organisations rather than as strategists or catalysts,” explains James Babb, Partner and CFO Program leader at Deloitte Middle East. “The pivot is evident as high-priority business strategies over the next 12 months aim to protect and preserve the organisation’s financial position via cost reduction (net 86 percent), organic growth (net 73 percent) and increased cash flow (net 66 percent).”