CFOs had hoped to gain a much-needed respite once the election was over and a fiscal cliff deal had been reached; unfortunately, it was not to be.
While the current deal required both Democrats and Republicans to make concessions, it failed to deal with what is known as the sequester, merely postponing the series of automatic cuts in federal spending for two months — and that’s just one of three serious financial decisions still on the docket for this year (the debt ceiling and federal government budget being the others), which makes it likely that economic uncertainty will continue in the US throughout 2013.
Unfortunately, the world market isn’t fairing much better, according to “Global Risks 2013,” by the World Economic Forum (WEF).
Potential Digital Dangers for CFOs
WEF also mentioned some concern over recent “digital wildfires,” such as the rise in oil prices in July 2012 when a Twitter user impersonating the Russian Interior Minister tweeted that Bashar Assad, Syria’s President, had been killed or injured. Another example would be when a Google earnings report was leaked, causing NASDAQ to halt trading its shares in October.
CFO Magazine seems to believe these concerns are slightly overblown, contrasting them with rumors that were quickly caught and quelled when they were revealed to be untrue.
Also a concern are emerging marketplaces; in fact, the Eurasia Group, reported in “Top Risks 2013”, that the worst risks now come from the emerging world.
A Transition from Saving to Spending
That said, there is one study that shows some hope for the U.S. economy. The Association for Financial Professionals (AFP) has reported that 28% of financial executives are planning to dip into their cash resources in the first quarter — more than the 23% who are planning to add to their savings, which hasn’t happened since January 2011.
AFP president and CEO, Jim Kaitz, told CFO Magazine that, although some are spending on acquisitions, which is good for the economy, more are planning to pay down debt, buy back shares and issue dividends.
However, as we projected late last year, certain industries are still seeing substantial infusions of cash from VC Funding, especially the tech industry, and startups are also finding alternative sources of cash for the early days. That means there is hope yet that the U.S. will see some economic recovery in 2013 — only time will tell.