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Business Wire 14-Feb-2019 9:00 AM
Speed of Analysis, Updated Deal Pipelines and Countercyclical Investment Are Keys to Benefiting From Next Downturn
CFOs seeking to bolster their organizations' recession preparedness should start by assessing their deal pipelines, testing the speed of their team's financial analysis and ensuring their balance sheets can support countercyclical investments, according to Gartner, Inc.
The Gartner report titled, "Recession Watch 2019: Corporate Recession Readiness in 9 Charts," shows that while the largest organizations are well-capitalized for the next downturn, many small and midsized companies have become overleveraged, setting the stage for potential "fire sales" on future assets.
"Significant ongoing policy uncertainty has distorted many traditional indicators of an oncoming recession, such as the yield curve," said Tim Raiswell, research vice president at Gartner. "A more practical question for CFOs to ask is how well-prepared their own, and other, companies are to face a recession today; our analysis suggests that this answer varies drastically between larger and smaller companies and industry leaders and their less profitable peers."
Next Recession to Accelerate Profitability Declines
A future recession will exacerbate the declining profitability already witnessed across all industries. This will be particularly acute among small companies, which have fallen behind their larger peers. Smaller companies have become dramatically less liquid and taken on historically high levels of debt, according to Gartner's analysis of S&P sectors covering large, midsized and small companies.
Among larger companies, there is an increasing divergence between industry winners and losers as the profitable low-hanging fruit from an extended run of growth have been picked, forcing CFOs to invest in projects with less clear-cut business cases.
"As the economic cycle has matured, the level of competition has risen. With that comes the temptation to fund more growth projects, but fewer of these will be winners," said Mr. Raiswell. "It's imperative that CFOs have a clear picture of their return on investments to ensure they are on the profitable side of an accelerating trend separating winners from losers."
Recession Preparedness Checklist
In analyzing their organization's recession preparedness, Gartner recommends that CFOs focus on:
Gartner clients can get more details in Recession Watch 2019: Corporate Recession Readiness in 9 Charts. Non clients can learn more in Tools to Achieve Efficient Growth.
About Gartner CFO & Finance Executive Conference
CFOs and senior finance executives seeking to learn more from Gartner research insights on the trends that will shape finance, company performance and personal leadership are invited to attend the Gartner CFO & Finance Executive Conference from June 10 – 11 in Washington, D.C. Follow news and updates for the conference on Twitter at #GartnerFinance.
About Gartner for Finance Leaders
Gartner for Finance Leaders supports senior finance executives with their most critical priorities. Gartner offers a unique breadth and depth of content to support clients' individual success and deliver on key initiatives that cut across finance functions to drive business impact. Learn more at https://www.gartner.com/en/finance/finance-leaders.
About Gartner
Gartner, Inc. (NYSE:IT), is the world's leading research and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advice and tools to achieve their mission-critical priorities today and build the successful organizations of tomorrow.
Our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions on the issues that matter most. We are a trusted advisor and objective resource for more than 15,000 organizations in more than 100 countries — across all major functions, in every industry and enterprise size.
To learn more about how we help decision makers fuel the future of business, visit gartner.com.
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