Optimism of chief financial officers (CFO) is wavering, according to a recent study by Deloitte entitled "Q4 2011 Global CFO Signals Report". Conducted on a semi-annual basis for the past two years in the Middle Eastern region, the latest report said the decline in CFO optimism is tied to the continued social upheaval and conflict which the Middle East has witnessed since 2011, coupled with uncertainty and risk aversion in business dealings. The Deloitte survey also showed that decline in CFO positive sentiment is further reflected in expectations for operating cash flow to be generated in the coming 12 months, where only 47 percent of CFOs surveyed in the Middle East expect operating cash flows to increase, down from 82 percent in the previous year. "While CFO optimism in the Middle East has declined, the economic fundamentals of the region remain strong, relative to other parts of the world. It is the prospect of unexpected events or 'Black Swans' which weigh heavily on the minds of CFOs at the moment," said James Babb, CFO program leader at Deloitte in the Middle East. "CFOs in the region would do well to assess the events of the past year and to focus more time in their roles as strategists and catalysts for their organizations in this time of uncertainty," he added. A net 68 percent of CFOs in the Middle East reported an above average level of financial and economic uncertainty facing their business. Findings also showed that 46 percent of them do not believe now is a good time to be taking greater risk onto their balance sheets which is up from a net 5 percent in Q1 2011. In addition, the survey noted that expectations regarding the levels of M&A activity reached a two year survey low. A net 40 percent of CFOs reported an expected increase in M&A over the coming 12 months down from a net 63 percent in Q1 and a net 82 percent in Q3 2009. It further said bank borrowings, equity and external debt sources of funding have each declined in attractiveness between Q4 and Q1 among CFOs in the Middle East. Bank borrowings were viewed as attractive by a net 45 percent (Q1 68 percent) followed by equity with a net 11 percent (Q1 38 percent) and corporate debt 29 percent (Q1 61percent). Regarding cost and availability of credit, 20 percent of CFOs view new credit as costly, down from a net 58 percent in Q1. While cost may have improved, new credit availability has become more difficult to secure according to 48 percent of CFOS compared to 23 percent in Q1.
