New regulations represent the most profound threat to performance in the post-downturn environment, while once-imminent threats such as access to funding have faded noticeably, says a new study.
American Express conducted its third annual "Global Business & Spending Monitor" survey to see how the priorities of senior finance executives from five regions across the globe are changing as they adapt to today's reconfigured economic landscape.
Senior financial executives expect mergers and acquisitions to accelerate rapidly over the next year, suggesting a spark in hiring could be on tap. Nearly three-quarters of those polled are anticipating economic expansion over the next 12 months, the highest level since the spring of 2008, the survey found.
"There are two factors that point in the same direction for growth," said Robert Clarkson, vice president and general manager for American Express, in an interview Thursday with Business Finance. "On one hand, you have cheap cash, so the debt rate is historically low. And there's also a sense of general optimism, so companies see great opportunity to invest for future growth."
Indeed, in the U.S., 79 percent of executives predicted strong economic expansion, with that number even higher globally. In Argentina, for example, 89 percent of finance executives expect growth in the coming year, followed by India (87 percent), Mexico (84 percent), Germany (83 percent) and Singapore (81 percent).
This change in attitude is a stark contrast from the poll's finding from a year ago. One of the most notable shifts, says Clarkson, is found in the executives' approaches to growth.
A year ago, most companies were hoarding cash out of fear of availability to capital. In the new study, 65 percent of executives said they are experiencing strong cash flow and were ready to increase capital spending.
Clarkson said the results point to a shift away from personnel reduction and getting by with increased efficiency.
"That model can only last for so long," said Clarkson. "You can only become so efficient before it begins to drag on your ability to grow and invest. We're seeing more of a push toward growth-oriented initiatives."
Sixty-nine percent of finance executives polled listed aggressive M&A activity over the next twelve months, while 68 percent said it would go toward expanding operating activities and headcount, and 65 percent said it would increase capital spending. Lessons from the global economic roller coast of recent years presented itself, as finance executives said they would be more cautious in their approaches to investment:
- 76 percent will conduct more rigorous due diligence of M&A opportunities.
- 71 percent will require a detailed business case to increase spending on headcount and operating activities.
- 70 percent will analyze capital investments more fully.
"That dark cloud that we saw so much of from last year has really started to subside," said Clarkson. "Now optimism is sort of serving as the gas pedal that propels economies both in the short, medium and long term. You're not seeing that rainy day mentality anymore. That means all avenues of business are pointed toward growth and that's a very good sign."