Senior finance executives from around the world report growing optimism about economic recovery but are proceeding with caution, investing in categories that will boost growth such as sales and product development while selectively increasing discretionary spending in areas like marketing and technology. At the same time, companies continue to closely manage the bottom line and maintain the strong financial discipline that was prompted by the recession.

These findings were released recently in the third annual American Express/CFO Research Global Business & Spending Monitor, a survey of 479 senior finance executives from the United States, Europe, Canada, Mexico, Asia, and Australia.

"We're seeing a significant shift to a more positive outlook among finance executives as companies have moved from simply surviving the present to investing in growth for the future," Gunther Bright, senior vice president, Global Client Group at American Express. "At the same time, the experience of the recession set the stage for a newfound and long-term focus on financial discipline and management rigor."

Optimism Propels Renewed Focus on Growth

Executives worldwide report a more positive economic outlook, indicating that a sustained recovery is taking hold. Nearly three-quarters of all respondents (71%) anticipate economic expansion for their countries over the next 12 months, while only 10% expect contraction. This is the highest percentage of respondents indicating that they expect economic expansion in their countries in the three years the American Express/CFO Research study has been fielded.

A small majority (56%) said they expected expansion in 2008 and only 18% in 2009. The brightest outlook for economic recovery comes from Asia -- 87% of executives from Hong Kong, 82% from Singapore, and 78% from India expect growth in the year ahead. Executives in the large industrialized countries have a more measured perspective; 71% of executives in the United Kingdom, 66% in Germany, and 64% in the United States say they anticipate growth in the next 12 months.

Eight out of ten respondents have seen or expect to see a sustained increase in demand for their companies' products and/or services in 2010. Twenty percent of respondents say their companies have already experienced an increase in demand and 47% expect an increase in the second or third quarters of this year.

As the economic outlook brightens, a majority of respondents (67%) say their companies plan to maintain or increase capital spending compared to last year. Nearly two-thirds plan to increase headcount in the next 12 months.

Seeking Efficiency, Maintaining Discipline

As the world economy recovers, finance executives report a continued focus on financial discipline and protecting the bottom line, even as their companies look to capitalize on increasing demand. A large majority of respondents (85%) expect that over the long term their companies will focus closely on cost control and 80% expect their companies will maintain a long-term focus on their core operations. At the same time, survey results suggest that companies will take relatively conservative risk postures: only 38% of respondents agree that their companies will tolerate high risks in pursuit of high returns in the long term.

When asked to look ahead over the next two years, most executives expect their companies' recession-driven management rigor to remain in place in critical finance areas, such as cash and working capital management discipline (79%); focus on profitability (72%); balance sheet scrutiny (70%); administrative discipline (69%); and project and investment ROI requirements (69%).
 

To help maintain this discipline, executives plan to invest in process improvements -- 44% of respondents say they will invest more to improve production by streamlining manufacturing or upgrading technology systems, and 42% will invest more to improve administrative processes such as finance, accounts payable, and procurement.

Highlighting the balancing act that finance executives face, one survey respondent noted his company would have a "much tighter focus on working capital management, expense control and building strategies to drive growth in down markets." Another respondent remarked that "the recession has caused my company to look at processes differently with the goal of improving efficiency."