Senior Finance Executives’ Views on the Financial Turmoil (September 2008)

8/9/2019 Senior Finance Executives Views on the Financial Turmoil (September 2008)

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Senior Financ e Ex ec ut ives

V iew s on t he Cur rent Financ ia l Turm oi l

September 2008

2008 Towers Perrin


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1 2008 Towers Perrin

Contents

This presentation contains responses from 125 senior finance executives whoparticipated in a Towers Perrin-sponsored CFO Research Services study inSeptember 2008

Please direct comments and questions on this presentation to:

Prakash Shimpi

Enterprise Risk Management Practice Leader

(212) 309-3956

[email protected] T. Finegan

Principal, Enterprise Risk Management Practice

(212) 309-3550

[email protected]

David N. Suchsland

Principal, Retirement Risk Solutions Practice

(215) 246-7558

[email protected]


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Q1. In your op in ion, how muc h, i f any , have recent events ( inc lud ing

the Fannie Mae/Freddie Mac ba i lout , the c o l lapse of Lehman Brothers ,

the sa le o f Merr i l l Lynch, the AIG ba ilout , and the i r c onsequences)

changed your company s f i nanc ia l p rospec t s over the nex t 12 mont hs?

Percentage of respondents

2%3%

4%

7%

22%

33%

19%

7%

4%

0%

10%

20%

30%

40%

Substantial benefit 1 2 3 4 No effect 5 6 7 8 Substantial harm 9

Source: CFO Research Services survey, September 2008


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Q2. Have recent events made you more o r

less concerned about the fo l low ing issues a t your c ompany?

Note: Percentages may not total 100%, due to rounding.

My company's. . .

3%

9%

13%

17%

17%

21%

21%

23%

31%

28%

34%

27%

23%

42%

52%

50%

39%

34%

38%

23%

26%

26%

24%

13%

18%

19%

15%

15%

7%

5%

4%

6%

7%

5%

11%

27%

28%

27%

7%

6%

5%

1%

2%

2%

2%

2%

1%

1%

1%

9%

6%

4%

11%

14%

0% 20% 40% 60% 80% 100%

Long-term viability

Market capitalization

Pension plan asset allocation

Ability to access equity financing

Relationships with its bankers

Ability to carry out strategic plans (acquisitions)

Risk management practices

Ability to access short-term financing (commercial paper,lines of credit)

Ability to access long-term debt financing (bond issues)

Substantially more concerned Somewhat more concerned No opinion

Somewhat less concerned Substantially less concerned Does not apply




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Q3. Which o f t he fo llow ing

s ta t ements most c lose ly descr ibes your v iew s?

The recent financial turmoil represents a. . .

Long-term disruption to the global

economy

Short-term disruption to the global

economy

Long-term disruption confined mostly

to the U.S. economy

Short-term disruption confined mostlyto the U.S. economy

42%

43%

9%

6%

0% 10% 20% 30% 40% 50%




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Q4. In your op inion, is your c ompany l i ke ly to m ake c hanges in

t he fol low ing areas as a resul t o f t he cur ren t f inanc ia l t u rmo i l?

My company's. . .

83%

74%

59%

58%

56%

51%

51%

50%

17%

26%

42%

42%

44%

49%

49%

50%

0% 20% 40% 60% 80% 100%

Incentive compensation practices

Relationships with suppliers andcustomers

Level of employee engagement with riskmanagement activities

Level of board engagement with riskmanagement policies, processes, and

Short-term operating budgets

Cash management practices

Long-term investment plans

Relationships with banks

Likely to change

Not likely to changeNote: Percentages may not total 100%, due to rounding.



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Q5. Would you be surpr ised by a large-sc a le governm ent

ba i lou t o f any o f t he fo l low ing en t i t ies in t he near fu tu re?

86%

48%

38%

15%

52%

62%

0% 20% 40% 60% 80% 100%

Another major

financial institution

The U.S. auto industry

One or more U.S. airlines

Yes

No





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Q6. In your op in ion , how muc h have the

fo llow ing i t ems c on t r ibu ted t o t he cu r rent f i nanc ia l c r i s i s?



24%

28%

44%

46%

50%

57%

59%

62%

25%

37%

30%

40%

30%

29%

29%

31%

37%

23%

20%

13%

17%

12%

11%

4%

12%

13%

6%

1%

2%

2%

0%

2%

0% 20% 40% 60% 80% 100%

Fair value ("mark-to-market") accounting

requirements

Deregulation of the banking industry

Incentive compensation practices in the

financial services sector

Irresponsible homebuyers

Predatory lending practices

Financial market speculators

Increased complexity of financial instruments

Risk management practices at banks and other

financial institutions

Major contribution Some contribution Minor contribution Not sure



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Q7. To w ha t ex t en t do you ag ree

or d isag ree w i th t he fol low ing s ta temen ts?



5% 22%

27% 6%

26%

26%

14%

14%26%

33%

0% 20% 40% 60% 80% 100%

Principles-based accounting methods under

IFRS would have provided better protectionagainst excesses in the financial servicesindustry than rules-based accounting

methods under U.S. GAAP

The current financial turmoil is evidence

that Sarbanes-Oxley has failed to bringtransparency to the markets

Strongly agree Somewhat agree No opinion Somewhat disagree Strongly disagree



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Q8. In your op in ion , how l i ke ly is i t t ha t t he mark e t fo r

c red i t p rotec t ion ins t rumen ts such as CDOs and CDSs w i l l rev ive

(as, for exam ple, t he mark et for junk bonds rev ived af ter i t c o l lapsed)?


14%

8%

18%

46%

14%

0% 10% 20% 30% 40% 50%

Not sure

Very unlikely

Somewhat unlikely

Somewhat likely

Very likely



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Q9. In your op in ion , w i l l t he conso l ida t ion

among f inanc ia l serv ic es com pan ies spur red by t he

cur ren t c r is is benef it o r harm t he i r U.S. corpora te c us tom ers?

4%

23%

59%

14%

0% 10% 20% 30% 40% 50% 60%

No opinion

Neither benefit nor harm

Harm

Benefit




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Q10. What is your t i t le?


6%

2%

3%

4%

12%

13%

15%

45%

0% 10% 20% 30% 40% 50%

Other senior finance titles

CEO, President, or Managing Director

EVP or SVP of Finance

Treasurer

Controller

Director Of Finance

VP of Finance

Chief Financial Officer



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Q11. What w ere your f i rm s w or ldw ide

revenues in i t s most recent f i sca l year?

16%

23%

14%

8%

12%

27%

0% 10% 20% 30% 40% 50%

$5B+

$1B $5B

$500M $1B

$250M $500M

$100M $250M


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Q12. What is your organizat ion s pr im ary bus iness?

Other

Aerospace/Defense

Media/Entertainment/Travel/Leisure

Pharmaceuticals/Biotechnology/Life sciences

Transportation/Warehousing

Chemicals/Energy/Utilities

Construction

Food/Beverages/Consumer packaged goods

Public sector/Nonprofit

Telecommunications

Hardware/Software/Networking

Health care

Wholesale/Retail trade

Business/Professional services

Auto/Industrial/Manufacturing

Financial services/Real estate/Insurance

3%

1%1%

2%

2%

3%

3%

3%

4%

5%

7%

9%

9%11%

11%

26%

0% 10% 20% 30%



Senior Finance Executives’ Views on the Financial Turmoil (September 2008)

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