What Financial Executives Should Expect In The Last Months Of 2023

Blog post

Omar Choucair, CFO, Trintech, has spent 20+ years leading financial and administrative organizations for public and private companies.

The first half of 2023 was a rocky one for the U.S. economy. From continued inflation and rising interest rates to unexpected bank failures and everything in between, the U.S. economy was under duress. Still, according to a new report from PwC, only 17% of executives anticipate a recession in the next six months, down from 35% in 2022.

While the worst could be behind us, we might also not be out of the woods quite yet, given the continued elevated inflation rates and the cautious approach many executives are taking related to investing in their businesses. As a result, it’s critical to examine what we learned during the bumpy start of the year and apply those lessons to what we expect to see for the rest of 2023 and in 2024.

If there has been one major theme for 2023 thus far, it’s that accessing traditional banking and institutional credit is the underpinning of the U.S. economy. This year has reinforced that the U.S. dollar continues to drive the global economy, and the ability of banks and credit unions to provide critical access to U.S. companies will dictate how the next several months play out.

As CFOs finalize second-half performance and begin analyzing calendar year 2024, there are three questions most organizations are looking to answer to ensure they are ready for what promises to be an active end of the year.

1. What will the lending environment look like?

A solid banking industry drives the U.S. economy. With the turbulence from the first half of the year behind us, finance executives will keep a close eye on how banks and financial institutions will operate over the next few months.

As of this writing, the Fed has hiked rates 11 times in the past 18 months in an effort to curb inflation, and banks are expected to tighten credit standards for all types of loans for the rest of the year.

Financial professionals have mixed opinions about the rest of the year, especially in North America, where confidence in the economy has grown by nearly 40 points in the past year. All told, Deloitte found that only about a third of North America’s CFOs believe now is a good time to be taking greater risks, and roughly the same number believe the economy will be better next year.

Accordingly, financial executives will need to keep a close eye on any shifts in the Fed’s policy as management plans for the end of the year and, ultimately, 2024 as well.

2. Will the M&A environment start to heat up?

With concerns of a global recession, the M&A market continues to be relatively slow. However, several indicators point to an increase in activity in the coming months, including several M&A transactions announced in July and August.

Treasury Secretary Janet Yellen recently spoke about how she anticipates more bank mergers to take place “as higher interest rates and recent banking turmoil are making it more expensive for them to hang on to depositors.” As we see the M&A market showing signs of life in bankinghealthcare and tech (including our company’s recent deal), many CFOs are ensuring their books are in order and all financial processes are streamlined to ensure a smooth and efficient sales process as the right opportunity presents itself.

Many industry professional experts believe 2024 will see a significant uptick in M&A, given the dearth of deals for the past 18 to 24 months.

3. Will AI really disrupt the ongoing digital transformation of financial services?

While generative AI is likely not going to replace accounting departments any time soon, there have been a number of interesting use cases in the industry that we’ve seen this year. This makes it even more necessary for organizations to continue converting inefficient manual processes to more modern digital applications and then determine whether additional benefits could be derived from AI applications.

Generative AI is a powerful innovation, but companies that have rushed to find ways to implement it into organizational processes have found that it’s rarely a simple plug-and-play endeavor. CFOs should engage with trusted professionals to ensure an efficient game plan with AI capabilities is thought out to identify short-term and long-term goals.

As Michael Kelly, partner and management consulting consultant at Ernst & Young told CFO Dive recently, “If you aren’t kind of employing and deploying some of these new tools and capabilities, you’re going have a hard time either trying to attract the folks or even better retain them, because they all want these great, fabulous experiences going forward.” If organizations truly want to take advantage of the power of AI, they will first likely need to make sure they’ve updated legacy technology with a more modern digital infrastructure that can scale with AI advancements.

CFOs are often the nerve center of the organization and, as a result, should champion investment in technology and key personnel with the right skill set to leverage that technology.

As companies review the impact of markets, interest rates, competition, technology and other mounting challenges, CEOs and boards increasingly rely on the Office of the CFO to intake and analyze all these variables. With companies looking to finish the year strong, it will be critical to leverage the expertise and insights from the Office of the CFO to ensure their organizations can efficiently and accurately report financial performance and key performance indicators. They will also need to lean on their CFOs to properly plan and forecast financial performance to best position their organization for what promises to be an active 2024.