Senior Finance Executives’ Views on the Financial Turmoil (September 2008)
Transcript of Senior Finance Executives’ Views on the Financial Turmoil (September 2008)
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Senior Financ e Ex ec ut ives
V iew s on t he Cur rent Financ ia l Turm oi l
September 2008
2008 Towers Perrin
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Contents
This presentation contains responses from 125 senior finance executives whoparticipated in a Towers Perrin-sponsored CFO Research Services study inSeptember 2008
Please direct comments and questions on this presentation to:
Prakash Shimpi
Enterprise Risk Management Practice Leader
(212) 309-3956
[email protected] T. Finegan
Principal, Enterprise Risk Management Practice
(212) 309-3550
David N. Suchsland
Principal, Retirement Risk Solutions Practice
(215) 246-7558
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Q1. In your op in ion, how muc h, i f any , have recent events ( inc lud ing
the Fannie Mae/Freddie Mac ba i lout , the c o l lapse of Lehman Brothers ,
the sa le o f Merr i l l Lynch, the AIG ba ilout , and the i r c onsequences)
changed your company s f i nanc ia l p rospec t s over the nex t 12 mont hs?
Percentage of respondents
2%3%
4%
7%
22%
33%
19%
7%
4%
0%
10%
20%
30%
40%
Substantial benefit 1 2 3 4 No effect 5 6 7 8 Substantial harm 9
Source: CFO Research Services survey, September 2008
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Q2. Have recent events made you more o r
less concerned about the fo l low ing issues a t your c ompany?
Note: Percentages may not total 100%, due to rounding.
My company's. . .
3%
9%
13%
17%
17%
21%
21%
23%
31%
28%
34%
27%
23%
42%
52%
50%
39%
34%
38%
23%
26%
26%
24%
13%
18%
19%
15%
15%
7%
5%
4%
6%
7%
5%
11%
27%
28%
27%
7%
6%
5%
1%
2%
2%
2%
2%
1%
1%
1%
9%
6%
4%
11%
14%
0% 20% 40% 60% 80% 100%
Long-term viability
Market capitalization
Pension plan asset allocation
Ability to access equity financing
Relationships with its bankers
Ability to carry out strategic plans (acquisitions)
Risk management practices
Ability to access short-term financing (commercial paper,lines of credit)
Ability to access long-term debt financing (bond issues)
Substantially more concerned Somewhat more concerned No opinion
Somewhat less concerned Substantially less concerned Does not apply
Percentage of respondents
Source: CFO Research Services survey, September 2008
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Q3. Which o f t he fo llow ing
s ta t ements most c lose ly descr ibes your v iew s?
The recent financial turmoil represents a. . .
Long-term disruption to the global
economy
Short-term disruption to the global
economy
Long-term disruption confined mostly
to the U.S. economy
Short-term disruption confined mostlyto the U.S. economy
42%
43%
9%
6%
0% 10% 20% 30% 40% 50%
Percentage of respondents
Source: CFO Research Services survey, September 2008
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Q4. In your op inion, is your c ompany l i ke ly to m ake c hanges in
t he fol low ing areas as a resul t o f t he cur ren t f inanc ia l t u rmo i l?
My company's. . .
83%
74%
59%
58%
56%
51%
51%
50%
17%
26%
42%
42%
44%
49%
49%
50%
0% 20% 40% 60% 80% 100%
Incentive compensation practices
Relationships with suppliers andcustomers
Level of employee engagement with riskmanagement activities
Level of board engagement with riskmanagement policies, processes, and
Short-term operating budgets
Cash management practices
Long-term investment plans
Relationships with banks
Likely to change
Not likely to changeNote: Percentages may not total 100%, due to rounding.
Percentage of respondents
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Q5. Would you be surpr ised by a large-sc a le governm ent
ba i lou t o f any o f t he fo l low ing en t i t ies in t he near fu tu re?
86%
48%
38%
15%
52%
62%
0% 20% 40% 60% 80% 100%
Another major
financial institution
The U.S. auto industry
One or more U.S. airlines
Yes
No
Note: Percentages may not total 100%, due to rounding.
Percentage of respondents
Source: CFO Research Services survey, September 2008
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Q6. In your op in ion , how muc h have the
fo llow ing i t ems c on t r ibu ted t o t he cu r rent f i nanc ia l c r i s i s?
Note: Percentages may not total 100%, due to rounding.
Percentage of respondents
24%
28%
44%
46%
50%
57%
59%
62%
25%
37%
30%
40%
30%
29%
29%
31%
37%
23%
20%
13%
17%
12%
11%
4%
12%
13%
6%
1%
2%
2%
0%
2%
0% 20% 40% 60% 80% 100%
Fair value ("mark-to-market") accounting
requirements
Deregulation of the banking industry
Incentive compensation practices in the
financial services sector
Irresponsible homebuyers
Predatory lending practices
Financial market speculators
Increased complexity of financial instruments
Risk management practices at banks and other
financial institutions
Major contribution Some contribution Minor contribution Not sure
Source: CFO Research Services survey, September 2008
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Q7. To w ha t ex t en t do you ag ree
or d isag ree w i th t he fol low ing s ta temen ts?
Note: Percentages may not total 100%, due to rounding.
Percentage of respondents
5% 22%
27% 6%
26%
26%
14%
14%26%
33%
0% 20% 40% 60% 80% 100%
Principles-based accounting methods under
IFRS would have provided better protectionagainst excesses in the financial servicesindustry than rules-based accounting
methods under U.S. GAAP
The current financial turmoil is evidence
that Sarbanes-Oxley has failed to bringtransparency to the markets
Strongly agree Somewhat agree No opinion Somewhat disagree Strongly disagree
Source: CFO Research Services survey, September 2008
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Q8. In your op in ion , how l i ke ly is i t t ha t t he mark e t fo r
c red i t p rotec t ion ins t rumen ts such as CDOs and CDSs w i l l rev ive
(as, for exam ple, t he mark et for junk bonds rev ived af ter i t c o l lapsed)?
Percentage of respondents
14%
8%
18%
46%
14%
0% 10% 20% 30% 40% 50%
Not sure
Very unlikely
Somewhat unlikely
Somewhat likely
Very likely
Source: CFO Research Services survey, September 2008
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Q9. In your op in ion , w i l l t he conso l ida t ion
among f inanc ia l serv ic es com pan ies spur red by t he
cur ren t c r is is benef it o r harm t he i r U.S. corpora te c us tom ers?
4%
23%
59%
14%
0% 10% 20% 30% 40% 50% 60%
No opinion
Neither benefit nor harm
Harm
Benefit
Percentage of respondents
Source: CFO Research Services survey, September 2008
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Q10. What is your t i t le?
Percentage of respondents
6%
2%
3%
4%
12%
13%
15%
45%
0% 10% 20% 30% 40% 50%
Other senior finance titles
CEO, President, or Managing Director
EVP or SVP of Finance
Treasurer
Controller
Director Of Finance
VP of Finance
Chief Financial Officer
Source: CFO Research Services survey, September 2008
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Q11. What w ere your f i rm s w or ldw ide
revenues in i t s most recent f i sca l year?
16%
23%
14%
8%
12%
27%
0% 10% 20% 30% 40% 50%
$5B+
$1B $5B
$500M $1B
$250M $500M
$100M $250M
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Q12. What is your organizat ion s pr im ary bus iness?
Other
Aerospace/Defense
Media/Entertainment/Travel/Leisure
Pharmaceuticals/Biotechnology/Life sciences
Transportation/Warehousing
Chemicals/Energy/Utilities
Construction
Food/Beverages/Consumer packaged goods
Public sector/Nonprofit
Telecommunications
Hardware/Software/Networking
Health care
Wholesale/Retail trade
Business/Professional services
Auto/Industrial/Manufacturing
Financial services/Real estate/Insurance
3%
1%1%
2%
2%
3%
3%
3%
4%
5%
7%
9%
9%11%
11%
26%
0% 10% 20% 30%
Percentage of respondents
Source: CFO Research Services survey, September 2008