Dive Brief:
- According to a recent survey conducted by BDO, nearly half of CFOs are prioritizing the protection of their company supply chains in 2025, particularly in light of potential new tariffs threatened by the Trump administration on a wide variety of imports.
- Eskander Yavar, national advisory managing principal at BDO, emphasized that supply chain planning is a critical focus for businesses even without the looming tariff threats, as he discussed findings from the survey of 500 CFOs, both in the U.S. and internationally.
- Approximately 49% of CFOs aim to incorporate a financial perspective into their supply chain strategies this year, responding to the challenges posed by geopolitical tensions, extreme weather events, and labor shortages, among other factors, as noted by Yavar in an email response to inquiries.
Dive Insight:
Recently, President Donald Trump announced intentions to impose a 25% tariff on imports of cars, pharmaceuticals, and semiconductors, with the implementation expected as early as April 5. However, he did not specify the countries that would be affected by these new duties.
During a press conference, Trump stated, “It’ll be 25% and higher and it’ll go very substantially higher over the course of a year, but we want to give them time to come in because, as you know, when they come into the United States and they have their plant or factory here, there is no tariff.”
On February 13, Trump signed an executive order that imposes reciprocal tariffs on all current and prospective trade partners. He also established a 10% tariff on imports from China and plans to introduce 25% import duties on goods from Canada and Mexico, which was publicly announced on March 4.
Yavar noted that CFOs are likely feeling more apprehensive about cost pressures resulting from these new tariffs compared to the sentiments recorded in November, when BDO initially conducted its survey. Nonetheless, he highlighted that “CFOs remain optimistic about growth overall.”
In fact, 72% of CFOs anticipate an increase in revenue in 2025 compared to the previous year, with 52% projecting growth in profitability. These insights are drawn from the BDO survey.
The ongoing fourth-quarter earnings season has reinforced this optimistic outlook, as companies within the Standard & Poor’s 500 index have reported earnings that surpass expectations, according to data from FactSet.
As of now, S&P 500 companies have recorded a remarkable 16.9% increase in earnings for the fourth quarter of 2024, with 77% of the companies reporting results thus far. This growth rate not only reflects the actual results released by these companies but also includes estimated figures for those yet to report.
FactSet Senior Earnings Analyst John Butters remarked that if the 16.9% growth rate holds, it would represent the highest year-over-year earnings growth reported by the S&P index since the fourth quarter of 2021.
In terms of profitability expectations, 18% of CFOs predict that their profitability will grow between 10% and 25% in 2025, while 34% foresee a more modest increase between 1% and 9%. The BDO survey, which included responses from 81% of CFOs working at companies with U.S. headquarters, also found that 38% of financial executives expect no change in profitability.
Strategic Implications for CFOs:
The potential for new tariffs and the ongoing uncertainties surrounding supply chains are compelling CFOs to take a more proactive approach in their strategic planning. The findings from the BDO survey indicate a clear intent among financial leaders to integrate a financial perspective into supply chain considerations, recognizing that the implications of geopolitical tensions and other external factors can significantly impact operational effectiveness and financial outcomes.
As organizations navigate these complexities, the role of the CFO will be paramount in not only safeguarding the supply chain but also in ensuring that financial strategies are aligned with broader corporate objectives. By focusing on adaptability and resilience, CFOs can help their organizations mitigate risks associated with supply chain disruptions while capitalizing on opportunities for growth.
Moreover, this shift towards a more financially integrated supply chain strategy underscores the necessity for CFOs to foster collaboration across departments, including operations, procurement, and risk management. Such collaboration can lead to more informed decision-making and enhance the organization’s ability to respond swiftly to changes in the market environment.
In conclusion, as CFOs brace for the potential impacts of new tariffs and other challenges affecting supply chains, their commitment to strategic financial planning will be crucial in navigating the complexities of 2025 and beyond. The optimistic revenue and profitability projections evident in the BDO survey further indicate that with the right strategies in place, organizations can thrive even in uncertain times.