Business environment outlook

• After a period of high inflation, expectations are for lower inflation, with respondents anticipating an average fall of more than one point in both domestic and Eurozone inflation. The average expected level of inflation in the CE region stands at 2.9%, down from 6.1% last year. CFOs tend to expect higher inflation rates than those anticipated by macro-economists.

• CFOs continue to see uncertainty as the new normal and do not see this as the right time to take any unnecessary risks: results in previous years have been similar. The companies that are most willing to take risks are those in the Financial Services sector. Regardless of sector or country, companies from across the CE region expect to face numerous business challenges, making management less willing to take risk-laden business decisions.

• The availability of skilled professionals, geopolitical tensions and reduced demand are expected to be the most significant sources of risk to business development. A shortage of skilled professionals is more acute in sectors that are more oriented towards the domestic market (such as Construction, Financial Services, Energy etc), and is more visible among domestic businesses. Although foreign subsidiaries also have problems with a shortage of skilled professionals, they are much more concerned than home-based entities about a fall in foreign demand. When comparing recent editions of this survey, one can observe a slow return to the risk structure that was in place before the war in Ukraine.

• CFOs see internal financing and equity as the most attractive funding sources, while corporate debt is perceived negatively. Perceptions of bank borrowing have improved when compared to the views expressed in previous surveys, rising from negative to neutral.
  

Company growth outlook

•  The share of CFOs in the CE region who feel more optimistic than six months ago stands at 34% (vs 36% last year). Levels of optimism remain significantly below those seen before the war in Ukraine and the recent rapid increase in inflation.

• Revenues will continue to grow according to 58% of those surveyed, slightly down from 61% in the 2024 report but the same as the reported in 2023. CFOs from the Financial Services and Life Sciences sectors are the most optimistic about revenue growth in their industries. The most pessimistic are those from the Public and Energy, Utilities, Mining sectors.

• According to 30% of surveyed CFOs, operating margins will increase (compared with 35% reported in 2024). Only 27% of those surveyed expect them to decrease (against 28% in the 2024 report and 42% in 2022).

• 36% of respondents believe that CAPEX will increase, compared to 39% in the 2024 report and 36% in 2023. In contrast, 27% of CFOs tell us their companies are expecting a decrease. About half of CFOs expect the most significant increases in capital expenditure to be in the Energy, Utilities, Mining and Financial Services sectors.

• 33% of CFOs predict that the levels of employment in their companies will increase in the next 12 months, compared to 32% in the last two reports. Employee numbers will fall according to 22% of respondents, consistent with the 22% in the 2024 report and 20% in 2022.

• Lower costs and higher growth (organic and in existing markets) remain the most important corporate-strategy focus areas for the year ahead. The next most frequently selected options were digitalisation, decreasing OPEX and the launch of new products/services.

Geopolitical risks – their likelihood and severity

•  Central Europe’s CFOs see unpredictable surges in inflation, an expansion of Russia’s invasion of Ukraine and a rise in the prevalence of ransomware and cyber-attacks as the biggest risks they face.

• Lesser risks, in their view, include an increase in protectionism (identified by 40% of CFOs), conflicts other than Ukraine, political factors and the risk of technology decoupling between China and Western economies.

• Risk 1: inflation. With the recent inflationary surge fresh in their memories, CFOs across all sectors regard this as a threat. Expectations of severity covered a wide range, with those from the Construction sector typifying the response by spreading their answers almost evenly between all levels from ‘Most Severe’ to ‘Least severe’.

• When it came to countries, CFOs from Albania, Estonia and Slovenia were the least concerned about inflationary pressure, while those from Hungary, Poland and Slovakia were the most concerned.

• Risk 2: the further expansion of Russia’s war in Ukraine. Most CFOs see an expansion of this war as likely to happen, although perceptions appear to depend significantly on the country of residence. In Lithuania, all respondents saw it as ‘Likely’ or ‘Very likely’, while those from countries bordering Ukraine (Poland and Romania) and the Baltic States also saw it as a relatively high risk. Those in Hungary and Serbia, meanwhile, see it on average as unlikely.

• CFOs were also split regarding the likely impact of such an expansion on their business activities, with those from the Energy, Utilities, Mining and Financial Services sectors holding the most negative views. When it comes to geography, as might be expected those furthest from the conflict, such as Albania and Serbia, see the lowest risk.

• Risk 3: increased ransomware and cyber-attacks. Over two-thirds of respondents saw these as more likely to happen, with more than 20% viewing them as highly likely. While this message was largely consistent across sectors, there were distinct differences when it came to the anticipated severity of attacks. While respondents from Construction, Life Science and Manufacturing companies expect severity to be low, those from the Public, Financial Services, Technology, Media, Communications, and Business & Professional Services sectors all anticipate an at least severe impact.

• Respondents expect geopolitics to have an impact on their strategic goals, with just 5% thinking otherwise; those from Hungary are the most sceptical, while those from Bosnia and Latvia are the most concerned. Just 2% of our respondents do nothing to keep informed about geopolitical threats, while 83% keep informed to by monitoring economic and political news. Nearly half aim to address issues as they arise.

Changing role of the CFO

• When we asked CFOs about whether their role on the board of directors had grown over the last five years, 64% said that it had, including 22% who felt this had been significant. Just 2% said their roles had diminished. Key areas of increased responsibility include risk management (63%) and digital transformation (57.1%).

• Other areas where CFOs report an increase in responsibilities include data governance, process governance, IT and strategy & business development. While responsibility for ESG has grown significantly, with a 51.5% increase driven by new EU regulations, a surprising high 14.3% of respondents said they had never had responsibility for this area.

• While there is little difference across countries, respondents from Poland felt their role had increased the most. When it comes sectoral differences, 20% of CFOs from the Public Sector report a decline in their areas of responsibility.

• The ability to effect positive change was an important or very important factor in supporting their own resilience for 93% of CFOs. Real-time communication and having a sense of purpose came in second and third places as the key factors in supporting their resilience.