The confidence level of chief financial officers over the overall financial and macro-economic conditions in the country reached an all-time low for the October-December quarter, says a report.
According to the Dun and Bradstreet Composite CFO Optimism Index report based on the survey of over 350 respondents, the confidence in financial and macro-economic conditions has declined.
The Dun & Bradstreet Composite CFO Optimism Index showed a decline of 8.4 per cent on a year-on-year basis to 98.1 during Q4 2020, bringing the Index to a record low.
The index has, however, registered an increase of 32.1 per cent on a quarter-on-quarter basis and the risk perception still remains high amongst respondents.
As per the report, the pace of contraction in GDP has slowed down considerably during Q2 FY21. "Economic activities are firming up. The GDP is expected to register a modest positive growth in Q3 FY21 or Q4 2020," the report said.
The survey further noted that the share of respondents who have seen an increase in their operating margin/ profitability during Q4 2020 has been higher than the pre-COVID-19 scenario in Q4 2019.
"Nevertheless, risk is not abated, and risk perception remains high amongst respondents. Only 18 per cent of CFOs surveyed expect an increase in the risk appetite in the current scenario and this is the lowest reading since the index was instituted in Q2 2012," said Arun Singh, Global Chief Economist, Dun & Bradstreet.
Businesses are still foreseeing financial risk on their balance sheet and this can be attributed to various factors including high inflationary pressures and supply side risks, he said.
"Consequently, CFOs are expected to focus on managing their cash flows and undertake an effective recovery system. Our survey reveals that for 58 per cent of CFO respondents, cash flow management would be the topmost priority and 63 per cent indicated that they will use an effective recovery system as the risk management tool during the next six months," Singh said.