PwC’s COVID-19 CFO Pulse Survey · Middle East, and an impressive 65% in KSA, are also planning...

PwC’s COVID-19 CFO Pulse Survey

pwc.com/me/covid19-cfo-pulse This survey is biweekly. See our latest results here.

Middle East findings — 28 April 2020

Globally, we understand that every business is different, which is why we are closely tracking the sentiment and priorities of CFOs as they navigate the unprecedented disruption that COVID-19 has on their businesses.

Here, we reveal the findings from our second CFO Pulse Survey, where 96 finance leaders from across the Middle East provided their views in a survey conducted during the week of 19 April, part of a wider global survey of 871 CFOs across 24 territories.

This data was compiled prior to various governments across the region easing restrictions; it will be interesting to see the change in sentiment over the forthcoming weeks. We will continue to assess regional CFO sentiment and priorities on a biweekly basis.

Top Middle East findings

Returning to ‘business as usual’ pulls further awayThere’s been a shift for Middle East CFOs, with the majority (54%) now expecting recovery to ‘business as usual’ to take more than three months.

PwC’s COVID-19 CFO Pulse Survey | 2

Starting to transition back to onsite workProtective measures, such as changes in workplace safety measures, are top of mind for CFOs globally. 52% of the executives in the Middle East, and an impressive 65% in KSA, are also planning to accelerate automation and new ways of working.

Concern remains high - with increased unease around a potential global recessionThe financial impact of COVID-19 remains the primary concern – 72% of Middle East CFOs ranked it as one of their top three concerns. Unease around a potential global recession has grown significantly – especially in the UAE (82% from 58%).

Supply chain changesDeveloping alternate sourcing options and changing contractual terms are the main priorities for changes in supply chain strategy. Middle East CFOs seem far less likely to want to understand the financial and operational health of their suppliers than globally (38% vs 50%), but more likely to improve risk-protection measures.

Workforces are likely to be reducedCost cutting is still front of mind and workforce investment is the most likely to be cut in the Middle East – 46% of executives in the region expect layoffs compared to 33% globally.

Concern remains high - with increased unease around a potential global recession

It is of little surprise that COVID-19 is still a significant concern for CFOs around the world. In line with the global average, 71% of CFOs in the region believe the pandemic has the potential to significantly impact business operations, and is causing them great concern. The number of KSA finance leaders in this bracket now appears to be slightly higher than the global average – whereas this proportion was far lower (55%) during the previous survey period, two weeks prior.

At a Middle East level, the financial impact of COVID-19 remains CFOs’ primary concern, with the potential for global recession placing second. The level of unease around a potential global recession does seem to have increased however, with this now being the primary concern for those in the UAE. Concerns around this in KSA are seemingly much lower. With the UAE’s comparatively higher dependence on the global economy - via travel, tourism, commerce and trade - this is to be expected.


Fig. 1: What is your company's current level of concern related to COVID-19?

Concern about reduced consumption due to decreasing consumer confidence has overtaken supply chain disruptions to sit at third place for the region as a whole. This is particularly true of those in the UAE – likely to be reflective of the high proportion of businesses in the retail and hospitality sectors. KSA is less concerned about this, and has a higher focus on supply chain disruption.

Since our last survey, there has been a slight increase in the number of Middle East CFOs expecting to see a decrease in revenue or profits. Previously, finance leaders in KSA appeared less pessimistic than their global and regional counterparts, with only 67% expecting a decrease in revenue or profits. This has now jumped to 81%, aligning Saudi CFOs with their peers.

Source: PwC, COVID-19 CFO Pulse, 28 April, 2020All territories: 871, Middle East 96, UAE 34, KSA 26

Fig. 2: What are your top three concerns with respect to COVID-19?


All territories

Middle East

UAE

KSA

Fig. 3: What impact do you expect on your company’s revenue and/or profits as a result of COVID-19?


Decrease revenue and/or profits

It is difficult to assess at this point

We do not expect any impact to revenue and/or profits

Increase revenue and/or profits


Cost cutting: workforce is the prime targetWith cash flow still a key priority for organisations, Middle East CFOs are continuing to consider implementing cost containment measures, and deferring or cancelling planned investments. Of those considering deferring or cancelling investments, facilities and general CapEx remain the most likely casualties – in line with the global average.

Contrary to the global approach however, the region appears to be significantly more likely to defer or cancel investment into the workforce (fig. 4).

Fig. 4: You mentioned your company is considering deferring or canceling planned investments as a result of COVID-19. Which of the following investment types are being considered in that regard?


On a global level, separation of staff (layoffs), is the fourth most likely course of action that CFOs expect to take in the coming months. However, in the Middle East, this is the second most likely approach (fig. 5). There are particular concerns in KSA around the lack of remote working capabilities resulting in productivity loss, although as we’ll see later, when looking at returning to onsite work, Saudi finance leaders are more likely than their global and regional counterparts to accelerate new ways of working (fig. 9).

It is reassuring to see, though, that R&D spend in the region looks more likely to be protected both in comparison to the global average, and the results from two weeks prior. Digital transformation and cybersecurity also remain important investments.

All territories

Middle East

Source: PwC, COVID-19 CFO Pulse, 28 April, 2020All territories: 575, Middle East 67

Fig. 5: As a result of COVID-19, which of the following does your company expect to occur in the next month?


All territories

Middle East

UAE

KSA

Fig. 6: How is COVID-19 affecting your M&A strategy?


Restarting M&A activity

As the COVID-19 situation continues to evolve, CFOs remain divided as to how it's affecting their M&A strategy. Looking to the Middle East as a whole, the majority of CFOs either seem undecided or are expecting no change in their plans. Globally, there has been an increase in CFOs remaining committed to delivering upon their original M&A strategy.

When we focus on the UAE CFOs, their appetite for M&A has become clearer, but more divided - compared to our prior survey period. We have seen an increase in both those putting a halt on their M&A plans, but also those interested in emerging deal opportunities.


Fig. 7: As a result of COVID-19, in which of the following areas are you planning changes to your supply chain strategy? Please select the 3 most pressing areas.


Protecting supply chains

In line with all responding territories, 54% of Middle East CFOs are considering changing their supply chain strategy to include alternative sourcing options. Meanwhile, 50% of UAE CFOs are planning to change their contractual terms to help provide further flexibility and protection to their business.

Middle East CFOs see a greater need to improve risk protection measures, but seem less likely to be concerned about the financial and operational health of their suppliers compared to all other territories.

All territories Middle East UAE KSA


Returning to ‘business as usual’ pulls further away

With the dramatic oil price moves and the International Monetary Fund (IMF) projecting a deep recession with sharp economic contractions on the horizon, it seems only natural that the recovery sentiment is less optimistic.

Accordingly, we have seen a shift amongst Middle East CFOs, with 54% now believing it will take three months or more to return to business as usual, an increase from 44% when we asked the same question two weeks prior. In the UAE, 41% of UAE CFOs believe recovery timelines will be three to six months, rising from 19%. That said, KSA CFOs still remain optimistic. With active screening measures announced in the Kingdom, a majority (54%) are hopeful to return to business as usual in three months or less.

Fig. 8: If COVID-19 were to end today, how long would you estimate it would take for your company to get back to ‘business as usual’?


Transitioning back to onsite work

Despite the shift in timelines, CFOs are actively planning for a return to onsite working. It’s not surprising that changes in workplace safety measures, such as requiring workers to wear masks and offering testing, are top of mind for executives globally.

As a region, the Middle East is less likely than the global average to reconfigure work sites to promote physical distancing, but individually, the UAE and KSA are more likely to do so. Middle East CFOs, except those in KSA, are also less likely to consider remote working as a permanent option.


Fig. 9: Which of the following is your company planning to implement once you start to transition back to on-site work?

In line with our previous pulse survey, the appetite for accelerating digital innovation remains strong, particularly in KSA where 65% of executives are planning to accelerate automation and new ways of working.

In the UAE, CFOs are especially focused on protective measures – almost eight out of 10 executives are planning to update workplace safety measures and half are looking at reconfiguring work sites to promote physical distancing or changing shifts to reduce exposure.

All territories Middle EastUAEKSA


With governments across the region easing some restrictions since this data was gathered, in line with the beginning of Ramadan, it will be interesting to see what impact this will have on CFO sentiment in the coming weeks.

About the survey

To help identify the business and economic impact of COVID-19, PwC Middle East is conducting a biweekly survey of finance leaders in the region.

Of the 96 surveyed for the report during the week of April 19, 2020, respondents were from a cross-section of industries and were based in the UAE (34), KSA (26), Oman (12), Egypt (9), Jordan (3), Lebanon (3), Kuwait (3), Bahrain (2), Palestine (2) and Qatar (2). Individual country comparisons are provided for sample sizes of over 30 respondents; KSA data has been provided for indicative purposes only.

The survey was carried out as part of a global initiative across the PwC network, which surveyed 871 finance leaders across 24 countries. Read the global analysis here.

This is the second Middle East report in the series, with the previous results released on 14 April.

https://www.pwc.com/cfopulse

https://www.pwc.com/m1/en/publications/covid-19/pwc-middle-east-covid-19-cfo-pulse-survey-14-april.html

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Established in the Middle East for 40 years, PwC has 22 offices across 12 countries in the region with around 5,600 people. (www.pwc.com/me).

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

© 2020 PwC. All rights reservedThis survey is biweekly. See our latest results here.

For views of finance executives around the globe, see the global report covering the same period.

Get in touch

Stephen AndersonMiddle East Strategy and Markets [email protected]

Adnan ZaidiMiddle East Entrepreneurial and Private Business [email protected]

Manoj ShahFS Finance Function [email protected]

Mo Farzadi Business Restructuring Services [email protected]

Dr Bashar El-JawhariSupply Chain Resilience [email protected]

http://www.pwc.com/me

https://www.pwc.com/cfopulse

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