Survey Says: Upbeat CFOs Strutting Their Risk Management Stuff

The nation’s chief finance officers have adopted a more positive outlook about the economic environment and future business opportunities, according to a recent CFO Survey conducted by TD Bank. Middle-Market Executive recently spoke with Fred Graziano, head of Regional Commercial Banking for TD Bank, about the survey’s findings.

MME: This survey appears to reveal that CFO optimism has climbed upward along with the ability of firms to manage risk …

Graziano: Yes, since the downturn, they have really positioned themselves when it comes to having more liquidity and looking at their own internal risk management practices and actually adding staff. If you go back to 2008 and 2009, a lot of what we heard was concern about financing — and now this is the last thing they worry about. And this is telling. It’s not even on their radar. And real loan demand is still pretty low. What we’re seeing is that a lot of the growth that banks are experiencing is from maturities, so customers are going out looking for a better opportunity and a better pricing opportunity. What you see happening is that banks are stealing each other’s business.

MME: How has the adoption of risk management best practices varied according to the size of companies?

Graziano: When it comes to corporates, we looked at it from the revenue side. You find that the larger corporates are doing more in the area of risk management, but the middle-market firms are also stepping up. What’s clear is that all businesses learned from the downturn. The one thing that businesses have recognized is that they have to manage their own risk, and this will ultimately better position their firm and better position their balance sheet. Another interesting thing, which is something that banks do as well, is that the CFOs took a look at their vendors and the types of risks that their vendors may be up against when they service them.

MME: The survey revealed how CFOs have greater visibility these days into their cash position. Is this enhanced cash management likely to change behaviors?

Graziano: A few years ago, firms were holding on to cash because they didn’t feel comfortable about the economy. Now, what we’re seeing is that firms are pretty comfortable, and they don’t necessarily feel as though things are going to get worse. Meanwhile, what CFOs have done is position their firms so that they can absorb things better. There’s a sense that the economic recovery is more resilient and not vulnerable to shocks, and while there is still uncertainty, say, with the Affordable Care Act and maybe the government shutdown, for the most part, if a CFO is focused and asking how to manage the business in this type of environment, he or she will discover that they are better positioned to take on a little more risk.