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10 things for CFOs to worry about in 2012

Peter Bartram | Nov. 15, 2011
Sovereign debt crises won't go away.

1. Sovereign debt crises won't go away

Greece, Ireland, Portugal, Italy, Belgium, Spain -- even France. The sovereign debt crisis will not go away in 2012, despite the efforts of the European Union's leaders to draw a line under it.

"Debt is now a serious measure and will spook the rating agencies as well as the markets," notes Stephen Archer, a business analyst and director at Spring Partnerships, a strategy development consultancy.

After Greece, other countries -- including Ireland, Portugal and Spain -- may come under pressure from voters to ask for debt reduction rather than face years of austerity measures, predicts Dr Robin Gowers, senior lecturer in economics at Anglia Ruskin University. As a result, CFOs will need to factor a range of scenarios into their forward planning.

2. The euro will face more threats

CFOs of companies that do business in Europe will have to continue to factor in the possible exit of economies from the euro -- or the possible creation of a two-speed euro for strong and weak countries.

"The sovereign debt crisis has become a major threat to the real economy," says Geraint Johnes, professor of economics at Lancaster University Management School.

"If an orderly exit of some economies from the euro cannot be negotiated, then fiscal integration that goes substantially beyond the existing proposals is needed."

3. Growth will be hard to find

There may be some bright spots in the UK economy in 2012, but they will be hard to find. With all the uncertainty, growth estimates are being constantly revised -- usually downwards -- but there are now few economists who predict UK growth outside the range of zero to 1 percent in 2012.

Most European economies will fare little better. Asia will continue to grow at rates which are more modest than in the past, but stratospheric by Europe's current standards.

"Only the very brave will be investing for growth," says Eric Hutchinson, chief financial officer of Spirent Communications, a FTSE-250 network technology company.

4. Markets will remain unstable

Expect a year of yo-yoing prices and indices as nervous dealers react to every piece of good or bad economic news with exaggerated optimism or pessimism. CFOs will need to raise their game in investor relations to ensure that investors understand that their company's fundamentals remain strong despite febrile market sentiment.

"I doubt either bulls or bears will be in control in 2012," says Graham Gordon, partner and head of wealth management at chartered accountants Moore and Smalley.

Don't bet on the FTSE 100 rising much above 5500 for most of 2012, adds Archer.

5. Expect the pound to have a difficult year

 

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