CGMA global economic forecast -insights from management accountants 3Q, 2012 Detailed survey results with regional appendices
Highlights
CGMA global economic forecast -3Q 2012 Highlights combined results, all regions CGMA Global Index (see description for detailed explanation) Index for combined results remained constant at 58 in Q3 after a sharp decline from Q1 to Q2 Optimism about global economy continues to be quite low, falling another point to 25 Domestic economy optimism declined an additional 4 points, but was offset by improvements in expected revenue and IT spending increases; organisation optimism rose 1 point from 63 to 64 Optimism and Expansion Global Economy - Overall, only 7% of respondents expressed optimism about the global economy, ranging from a high of 15% of the ROWE (Rest of World Emerging) group to a low of 4% of respondents from the RoWD (Rest of World Developed) group, Europe and Asia Domestic Economy - Concerns about domestic economies continue; The RoWD group and Asia are the most optimistic at 38% and 36%, respectively; followed by the RoWE group at 34%; US optimism declined 14% in Q3 to 22%; respondents from the UK and Europe continue to be least optimistic at 13% and 10%, respectively Organisation Optimism respondents confidence about the prospects for their own organisations is quite mixed this quarter; those in emerging economies continue to be the most optimistic (63%), and those in Europe the least optimistic (29%); optimism in Asia and the US continued to decline; the UK and RoWD group showed improvement Expansion expansion plans are also mixed in Q3; the RoWE group continues to show the most strength with 64% expecting to expand; 60% of the RoWD group now expect growth after a significant decline in Q2; roughly half of UK and European companies expect to expand 3
CGMA global economic forecast -3Q 2012 Highlights combined results, all regions (cont d) KPIs Revenue Overall expected revenue increase is 3.0%, up from 2.7% in 2Q 2012; RoWE continues to lead with 5.3% expected increase; all regions except Europe showed improvement Profits Overall expected increase is 2.4%, up from 2.0% in 2Q 2012; RoWE group leads with 3.6% expected increase; US shows further decline (3.4% to 2.7%); all other regions except Europe showed slight improvements Headcount Overall expected increase in number of employees remains essentially unchanged at.7% in 3Q 2012; Asian companies are projecting a 1.6% increase in headcount: UK headcount projections are up slightly but remain weak at.5%; European companies are expecting a 1.3% decrease down slightly from the 1.1% decline expected at Q2 Spending IT Spend Overall expected increase in IT spend is now 2.0%, up from 1.7% 2Q 2012; the RoWD group drove the improvement, now expecting a 3.6% increase in spend; European companies are projecting a.1% decline in IT spend; Other Capital Overall expected increase in other capital investment is now 1.5%, down from 1.8% 2Q 2012; UK companies are now expecting 0.8% decline in other capital spend Training Spend Overall expected increase is now 1.2%, up slightly from 1.1% 2Q 2012; European are now projecting declines in training spend of -0.6% over next 12 months; UK companies are now anticipating a 1.0% increase, after projecting reduced spending in 2Q 4
CGMA global economic forecast -3Q 2012 Highlights combined results, all regions (cont d) Inflation Inflation concerns continue to be most prominent in Asia (62%) and RoWE group (48%) Raw material and labour costs are top ranking inflation concerns; energy cost concerns are greater in the US, UK and Europe; interest rates continue to be a concern for Asian and emerging economy companies Difficulty Obtaining Finance The percentage of respondents in Europe and the UK and the US who expect financing to be more difficult next quarter increased, slightly fewer companies in Asia and emerging economies expect their financing to be more difficult Europe now appears the most challenging with slightly more than a third (34%) now expecting their financing to be more challenging; the US continues to be the least challenging with only 14% expecting more difficulty Top Challenges for Organisations Domestic economic conditions and regulatory requirements/changes, and domestic competition are now the top three challenges for companies; global economic conditions topped the list in Q2 Regulatory requirements/changes has taken on more prominence in several regions Availability of skilled personnel appears to have become less of a concern in emerging economies 5
CGMA global economic index
CGMA global economic index The CGMA global economic index is a robust measure of sentiment about the economy that is supported by the unique insights and knowledge that CEOs, CFOs, Controllers, and other Management Accounting executives have about the prospects for the global economy, their national economies and their own organisations, their expectations for revenues and profits, and their plans for spending and employment. The CGMA global economic index is the composite of the following ten indicators at equal weights: Global Economy Optimism Respondents optimism about the global economy Domestic Economy Optimism Respondents optimism about their own national economy Organisation Optimism Respondents optimism about prospects for their own organisation Expansion Plans Respondents expectations of whether their business will expand over the next 12 months Revenue - Expectations for increases or decreases in revenue over the next 12 months Profits - Expectations for increases or decreases in profits over the next 12 months Employment - Expectations for increases or decreases in headcount over the next 12 months IT Spending - Plans for IT spending over the next 12 months Other Capital Spending - Plans for capital spending over the next 12 months Training & Development - Plans for spending on employee training and development over the next 12 months Each individual component indicator is calculated by taking the percentage of respondents who indicated that their opinion or expectation is positive or increasing, and adding to that half of the percentage of respondents indicating a neutral or no-change response. A reading above 50 indicates a positive outlook with increasing activity. A reading below 50 indicates a negative outlook. 7
CGMA global index component indicators Component 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Change 2Q to 3Q Global Economic Optimism 22 37 26 25 1 Country Economic Optimism 45 55 47 43 4 Organisation Optimism 66 71 63 64 1 Expansion Plans 68 75 67 67 0 Revenue 70 76 67 70 3 Profits 65 69 63 63 0 Employment 55 61 56 55 1 IT Spend 64 70 64 67 3 Other Capital Spend 62 66 62 61 1 Training Spend 62 71 61 62 1 Composite Index 58 65 58 58 0 8
CGMA global economic index 80 70 60 50 40 66 64 61 60 58 53 45 RoWE US Asia RoWD Global UK Europe 30 20 4Q 2011 1Q 2012 2Q 2012 3Q 2012 9
CGMA global optimism 50% 40% 30% 20% 10% 0% 4Q11 1Q12 2Q12 3Q12 15% 9% 7% 6% 4% 4% 4% RoWE UK Global total US RoWD Europe Asia Please select the rating that best describes your view of the economic outlook for the global economy for the next 12 months Chart displaying percentage of Very optimistic and Optimistic responses 10
CGMA domestic optimism 80% 70% 60% 50% 40% 30% 20% 10% 38% 36% 34% 22% 21% 13% 10% RoWD Asia RoWE US Global total UK Europe 0% 4Q11 1Q12 2Q12 3Q12 Please select the rating that best describes your view of the economic outlook for the economy of the country in which you work for the next 12 months Chart displaying percentage of Very optimistic and Optimistic responses 11
CGMA organisation optimism 80% 70% 60% 50% 40% 30% 20% 63% 54% 45% 45% 39% 29% RoWE RoWD Global total UK US Asia Europe 10% 0% 4Q11 1Q12 2Q12 3Q12 Please select the rating that best describes your view of the economic prospects for your organisation over the next 12 months Chart displaying percentage of Very optimistic and Optimistic responses 12
CGMA organisation expansion 80% 70% 60% 50% 40% 64% 60% 57% 55% 54% 50% 49% RoWE RoWD US Global total Asia UK Europe 30% 20% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Please indicate whether you expect your business to expand or contract over the next 12 months. Chart displaying percentage of Expand a little and Expand a lot responses 13
CGMA organisation revenue 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 5.3% 4.3% 3.8% 3.0% 2.8% 2.7% RoWE RoWD Asia Global total US UK Europe 1.0% 0.9% 0.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please indicate the probable change for your organisation for total revenue: from increasing by more than 10% to decreasing by more than 10% Percentage displayed represents average expected change. 14
CGMA organisation profits 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 3.6% 3.3% 2.7% 2.4% 2.1% 1.7% RoWE RoWD US Global total UK Asia Europe 0.5% 0.0% 4Q11 1Q12 2Q12 3Q12 0.3% Thinking about the coming 12 months, please indicate the probable change for your organisation for total profits (net income): from increasing by more than 10% to decreasing by more than 10% Percentage displayed represents average expected change. 15
CGMA organisation headcount 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% 1.6% 1.2% 1.0% 0.9% 0.7% 0.5% -1.3% Asia RoWD US RoWE Global total UK Europe -2.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please indicate the probable change for your organisation for number of employees: from increasing by more than 10% to decreasing by more than 10% Percentage displayed represents average expected change. 16
CGMA organisation IT spending 5.0% 4.0% 3.0% 2.0% 1.0% 3.6% 3.3% 2.4% 2.0% 1.1% RoWD RoWE US Asia Global total UK Europe 0.0% -0.1% 4Q11 1Q12 2Q12 3Q12-1.0% Thinking about the coming 12 months, please indicate the probable change for your organisation for information technology budget: from increasing by more than 10% to decreasing by more than 10% Percentage displayed represents average expected change. 17
CGMA organisation other capital investment 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 3.0% 2.2% 1.5% 1.1% 1.1% 0.8% -0.8% RoWE Asia Global total RoWD US UK Europe -2.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please indicate the probable change for your organisation for other capital investment: from increasing by more than 10% to decreasing by more than 10% Percentage displayed represents average expected change. 18
CGMA organisation training and development 5.0% 4.0% 3.0% 2.0% 1.0% 2.8% 1.8% 1.5% 1.3% 1.2% 1.0% RoWE RoWD Asia US Global total UK Europe 0.0% -1.0% 4Q11 1Q12 2Q12 3Q12-0.6% Thinking about the coming 12 months, please indicate the probable change for your organisation for Skills training/staff development budget: from increasing by more than 10% to decreasing by more than 10% Percentage displayed represents average expected change. 19
CGMA risk of inflation vs. deflation 80% Inflation 25% Deflation 70% 60% 62% 20% 18% 50% 48% 15% 40% 30% 20% 10% 34% 34% 29% 21% 19% 10% 5% 12% 11% 10% 8% 7% 0% 4Q11 1Q12 2Q12 3Q12 0% 4Q11 1Q12 2Q12 3Q12 Asia RoWE Global Total US UK RoWD Europe Europe RoWD Global total UK US Asia RoWE For your business, over the next 6 months, are you more concerned about the possibility of: 20
CGMA top inflationary factors by region Region Factor - 1 Factor - 2 Factor - 3 Asia Labour costs Interest rates* Raw materials* N/A US Raw materials Labour costs Energy costs Europe Labour costs* Energy costs* N/A Interest rates UK Raw materials Energy costs Labour costs RoWD Labour costs Raw materials Energy costs Interest rates RoWE Labour costs Interest rates* Raw materials* Energy costs* Global total Raw materials Labour costs Energy costs * Indicates tie Which of the following potential inflationary factors represents the most significant risk to your business 21
Difficulty obtaining finance - those who believe obtaining finance will be more difficult in the next quarter 60% 50% 40% 30% 20% 10% 34% 31% 26% 23% 21% 20% 14% Europe Asia RoWD RoWE UK Global total US 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Do you expect it to be more or less difficult to obtain your required financing in the next quarter? 22
CGMA top challenges for organisations Region Challenge - 1 Challenge - 2 Challenge - 3 Asia Regulatory requirements/changes Currency exchange rates Domestic competition US Domestic economic conditions Domestic competition Global economic conditions Europe Financing (access/cost of capital) Regulatory requirements/changes Domestic economic conditions UK Regulatory requirements/changes Financing (access/cost of capital) Domestic political leadership RoWD Currency exchange rates Regulatory requirements/cha nges* Employee and benefits costs* N/A RoWE Regulatory requirements/changes Currency exchange rates Domestic economic conditions Global total Domestic economic conditions Regulatory requirements/changes Domestic competition Please indicate the top three challenges for your organisation 23 * Indicates tie
CGMA organisation optimism by industry 80% 70% 60% 50% 40% 30% 60% 50% 48% 46% 34% 33% Technology Manufacturing Finance and Insurance Retail and Wholesale Trade Construction 20% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Only industries with n>30 reported Chart displaying percentage of Very optimistic and Optimistic responses 24
CGMA organisation headcount by industry 4.0% 3.0% 2.9% 2.0% 1.0% 0.0% 0.8% 0.6% 0.4% Technology Manufacturing Retail Trade Finance and Insurance Banking -1.0% -1.3% -2.0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Only industries with n>30 reported Percentage displayed represents average expected change. 25
CGMA s who believe the decline in economic conditions in Eurozone negatively affecting their organisation 81% 59% 59% 51% 52% 33% US UK Europe Asia RoWD RoWE 26
CGMA s who believe the economic downturn in the Eurozone has caused their organisation to look for new markets 39% 29% 32% 30% 29% 13% US UK Europe Asia RoWD RoWE 27
Appendix - Regional breakdown Asia
CGMA global economic forecast -3Q 2012 Asia region highlights Respondents = 86 of 1179 total CGMA Global Index Asia down 7 points from Q2 2012 Asia 3Q 2012 = 61 Asia 2Q 2012 = 58 Combined regions 3Q 2012 = 58 Optimism Only 4% of respondents optimistic about global economy Respondents optimistic about domestic economies up from 31% in Q2 2012 to 36% in Q3 Just 39% currently optimistic about prospects for own company, down from 50% at Q2 2012 KPIs Revenue expectations slightly up from Q2, but lower profit and headcount expectations seen in Q2 2012 continue Spending for IT and other capital hold steady with lower Q2 levels, but training spend dropped slightly from 1.8% expected increase in Q2 to 1.5% in Q3 Inflation Asia respondents more concerned about inflation than others, 33% of respondents now cite labour costs as their top inflation concern Financing 31% expect financing to be more difficult next quarter most challenging region Challenges Regulatory requirements/changes now the top ranking challenge Top 3 Challenges = Regulatory requirements/changes, currency exchange rates, domestic economic conditions 29
CGMA optimism Asia 80% 70% 60% 50% 40% 30% 39% 36% Organisation outlook Domestic economic optimism Global economic optimism 20% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4% Chart displaying percentage of Very optimistic and Optimistic responses 30
CGMA KPIs - revenue, profit and headcount Asia 6.0% 5.0% 4.0% 3.8% 3.0% Revenue Profit Employees 2.0% 1.7% 1.6% 1.0% 0.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators Percentage displayed represents average expected change. 31
CGMA spending - IT, other capital and training Asia 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 2.4% 2.2% 1.5% IT Other capital Training 0.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators 32 Percentage displayed represents average expected change.
CGMA difficulty obtaining finance Asia 80% 70% 60% 50% 40% 30% 53% 31% About the same More difficult Less difficult 20% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4% Do you expect it to be more or less difficult to obtain your required financing in the next quarter? 33
CGMA risk of inflation vs. deflation in Asia 80% 70% 60% 62% 50% 40% 30% Inflation Deflation 20% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 8% For your business, over the next 6 months, are you more concerned about the possibility of 34
CGMA inflationary factors representing most risk Asia 60% 50% 40% 30% 20% 33% 22% 20% Labour costs Interest rates Raw material costs Energy costs Food costs 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 2% Which of the following potential inflationary factors represents the most significant risk to your business? 35
CGMA top challenges for organisations in Asia Challenge 1 Challenge 2 Challenge 3 Challenge 4 Challenge 5 Challenge 6 Challenge 7 Challenge 8 Challenge 9 Challenge 10 4Q11 1Q12 2Q12 3Q12 Global economic conditions Domestic economic conditions Availability of skilled personnel Domestic competition Stagnant/declining markets Regulatory requirements/changes Currency exchange rates Inflation Developing new products/services/marke ts Employee and benefit costs Global economic conditions Inflation Availability of skilled personnel (T3) Employee and benefit costs (T3) Energy costs Domestic competition Developing new products/services/market s (T7) Financing (access/cost of capital) (T7) Stagnant/declining markets (T9) Changing customer preferences (T9) Global economic conditions Domestic economic conditions (T2) Regulatory requirements (T2) Currency exchanges rates Inflation Availability of skilled personnel (T6) Financing(access/cost of capital) (T6) Developing new products/services/market s Materials/supplies/ equipment costs (T8) Domestic competition Regulatory requirements Currency exchanges rates Domestic competition Domestic economic conditions (T4) Employee and benefit costs (T4) Global economic conditions (T6) Domestic political leadership (T6) Staff turnover Financing(access/cost of capital) (T9) Energy costs (T9) Please indicate the top three challenges for your organisation (T(Number)) indicates tied position and the number of position tied in 36
Appendix - Regional breakdown US
CGMA global economic forecast -3Q 2012 US region highlights Respondents = 510 of 1179 total CGMA Global Index US constant at 64 US 3Q 2012 = 64 US 2Q 2012 = 64 Combined regions 3Q 2012 =58 Optimism Only 6% of respondents optimistic about global economy Respondents optimistic about domestic economy down from 36% in 2Q 2012 to 22% in 3Q 2012 Respondents currently optimistic about prospects for own company, now 50% (51% in 2Q) KPIs Revenue, profit and headcount expectations all down slightly from 2Q 2012 levels IT spending down.8% from 2Q 2012; spending for other capital and training also down Inflation Only 34% concerned about inflation; energy and food cost concerns up slightly Financing Only 14% expect financing to be more difficult in next quarter, least among regions Challenges Domestic issues continue to head the top challenges list Top 3 Challenges = Domestic economic conditions, domestic competition, global economic conditions 38
CGMA optimism US 80% 70% 60% 50% 40% 30% 45% Organisation outlook Domestic economic optimism Global economic optimism 20% 22% 10% 6% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Chart displaying percentage of Very optimistic and Optimistic responses 39
CGMA KPIs - revenue, profit and headcount US 6.0% 5.0% 4.0% 3.0% 2.0% 2.8% 2.7% Revenue Profit Employees 1.0% 1.0% 0.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators Percentage displayed represents average expected change. 40
CGMA spending - IT, other capital and training US 6.0% 5.0% 4.0% 3.0% 2.0% 2.4% IT Other capital Training 1.0% 1.3% 1.1% 0.0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators 41 Percentage displayed represents average expected change.
CGMA difficulty obtaining finance US 80% 70% 60% 57% 50% 40% 30% About the same More difficult Less difficult 20% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 14% 6% Do you expect it to be more or less difficult to obtain your required financing in the next quarter? 42
CGMA risk of inflation vs. deflation US 80% 70% 60% 50% 40% 30% 34% Inflation Deflation 20% 10% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 For your business, over the next 6 months, are you more concerned about the possibility of 43
CGMA inflationary factors representing most risk- US 60% 50% 40% 30% 20% 10% 30% 21% 19% 17% 7% Raw material costs Labour costs Energy costs Interest rates Food costs 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Which of the following potential inflationary factors represents the most significant risk to your business? 44
CGMA top challenges for organisations - US Challenge 1 Challenge 2 Challenge 3 4Q11 1Q12 2Q12 3Q12 Domestic economic conditions Regulatory requirements/changes Employee and benefits costs Challenge 4 Domestic competition Challenge 5 Challenge 6 Domestic political leadership Global economic conditions Challenge 7 Materials/supplies/equip Challenge 8 Challenge 9 Challenge 10 ment costs Availability of skilled personnel Developing new products/services/marke ts Stagnant/declining markets Domestic economic conditions Regulatory requirements/changes Domestic political leadership Domestic competition Domestic economic conditions Employee and benefits costs Global economic conditions Regulatory requirements/changes Please indicate the top three challenges for your organisation T(Number) indicates tied position and number of position tied in Domestic economic conditions Domestic competition Global economic conditions Competition from nondomestic developed markets Financing (access/cost of capital) Regulatory requirements/changes Materials/supplies/equip Domestic political ment costs leadership Developing a new Availability of skilled products/services/market personnel s Employee and benefits Stagnant/declining Currency exchange rates costs markets Availability of skilled personnel (T8) Domestic competition Employee and benefits costs (T8) Energy costs (T8) Stagnant/declining markets (T10) Global economic conditions (T10) Materials/supplies/equip ment costs Developing new products/services/market s Financing (access/cost of capital) (T10) Changing customer preferences (T10) Domestic political leadership (T8) Deflation 45
Appendix - Regional breakdown Europe
CGMA global economic forecast - -3Q 2012 Europe region highlights (excluding UK) Respondents = 90 of 1179 total CGMA Global Index Optimism for both global and domestic economies still weak Europe 3Q 2012 = 45 Europe 2Q 2012 = 47 Combined regions 3Q 2012 = 58 Optimism Only 4% of respondents optimistic about global economy Only 10% optimistic about domestic economies, down from 14% in 2Q 2012 Only 29% currently optimistic about prospects for own company KPIs Revenue, profit and headcount expectations low, headcount expectation continues to be negative at -1.3% Spending for IT, other capital and training all expected to decline Inflation Only 19% concerned about inflation; energy costs concerns up, material cost concerns down Financing 34% expect financing to be more difficult in next quarter, up from 28% at 2Q 2012 Challenges Financing (access/cost of capital) now top concern in Europe Top 3 Challenges = Financing, regulatory requirements/changes, domestic economic conditions 47
CGMA optimism Europe 80% 70% 60% 50% 40% 30% 20% 29% Organisation outlook Domestic economic optimism Global economic optimism 10% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4% Chart displaying percentage of Very optimistic and Optimistic responses 48
CGMA KPIs - revenue, profit and headcount Europe 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 0.9% 0.3% Revenue Profit Employees -1.0% -2.0% 4Q11 1Q12 2Q12 3Q12-1.3% Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators Percentage displayed represents average expected change. 49
CGMA spending - IT, other capital and training Europe 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -0.1% -0.6% -0.8% Other capital Training IT -2.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators 50 Percentage displayed represents average expected change.
CGMA difficulty obtaining finance Europe 80% 70% 60% 50% 40% 30% 49% 34% About the same More difficult Less difficult 20% 10% 0% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Do you expect it to be more or less difficult to obtain your required financing in the next quarter? 51
CGMA risk of inflation vs. deflation in Europe 80% 70% 60% 50% 40% 30% Inflation Deflation 20% 19% 18% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 For your business, over the next 6 months, are you more concerned about the possibility of 52
CGMA inflationary factors representing most risk Europe 60% 50% 40% 30% 20% 29% 29% 21% Labour costs Energy costs Interest rates Food costs Raw material costs 10% 7% 7% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Which of the following potential inflationary factors represents the most significant risk to your business? 53
CGMA top challenges for organisations in Europe Challenge 1 Challenge 2 Challenge 3 Challenge 4 Challenge 5 Challenge 6 Challenge 7 Challenge 8 Challenge 9 Challenge 10 4Q11 1Q12 2Q12 3Q12 Global economic conditions Stagnant/declining markets Domestic economic conditions Regulatory requirements/changes Developing new products/services/market s Currency exchange rates Credit control/collections Materials/supplies/equipm ent costs Domestic competition Financing (access/cost of capital) Global economic conditions Stagnant/declining markets Developing new products/services/markets Regulatory requirements/changes (T4) Materials/supplies/equipm ent costs (T4) Financing (access/cost of capital) Credit control/collections (T7) Domestic economic conditions (T7) Availability of skilled personnel (T7) Domestic competition Global economic conditions Stagnant/declining markets Domestic economic conditions Regulatory requirements/changes Developing new products/services/markets Domestic competition (T6) Changing customer preferences (T6) Currency exchange rates (T8) Credit control/collections (T8) Financing (access/cost of capital) Financing (access/cost of capital) Regulatory requirements/changes Domestic economic conditions Domestic competition Currency exchange rates Liquidity (T6) Energy costs (T6) Domestic political leadership Competition from nondomestic developed markets Employee and benefits costs Please indicate the top three challenges for your organisation T(Number) indicates tied position and number of position tied in 54
Appendix - Regional breakdown UK
CGMA global economic forecast -3Q 2012 UK region highlights Respondents = 342 of 1179 total CGMA Global Index UK up slightly from 50 at Q2 to 53 UK 3Q 2012 = 53 UK 2Q 2012 = 50 Combined regions 3Q 2012 = 58 Optimism Only 9% of respondents optimistic about global economy Only 13% optimistic about domestic economy, down slightly from 15% in 2Q 2012 Now 45% currently optimistic about prospects for own company, up from 38% in 1Q KPIs Revenue and profit projections all slightly improved from 2Q 2012, although headcount increase only.5% Expectations for spending for IT and other capital up from Q2, now all slightly positive Inflation Less than one-third (29%) now concerned about inflation, energy cost concerns up sharply from Q2 Financing Only 21% expect financing to be more difficult, a slight increase from 19% at 2Q Challenges Regulatory requirements/changes now at top of challenge list Top 3 Challenges = Regulatory requirements, financing (access/cost of capital, domestic political leadership 56
CGMA optimism UK 80% 70% 60% 50% 40% 30% 45% Organisation outlook Domestic economic optimism Global economic optimism 20% 10% 13% 9% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Chart displaying percentage of Very optimistic and Optimistic responses 57
CGMA KPIs - revenue, profit and headcount UK 4.0% 2.0% 2.7% 2.1% Revenue Profit Employees 0.5% 0.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators Percentage displayed represents average expected change. 58
CGMA spending - IT, other capital and training UK 2.0% 0.0% 1.1% 1.0% 0.8% IT Other spending Training -2.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators 59 Percentage displayed represents average expected change.
CGMA difficulty obtaining finance UK 80% 70% 60% 56% 50% 40% 30% About the same More difficult Less difficult 20% 21% 10% 0% 4Q11 1Q12 2Q12 3Q12 5% Do you expect it to be more or less difficult to obtain your required financing in the next quarter? 60
CGMA risk of inflation vs. deflation in the UK 50% 45% 40% 35% 30% 25% 20% 29% Inflation Deflation 15% 10% 11% 5% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 For your business, over the next 6 months, are you more concerned about the possibility of 61
CGMA inflationary factors representing most risk UK 60% 50% 40% 30% 20% 31% 25% 24% Raw material costs Energy costs Labour costs Interest rates Food costs 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 9% 5% Which of the following potential inflationary factors represents the most significant risk to your business? 62
CGMA top challenges for organisations in the UK Challenge 1 Challenge 2 Challenge 3 Challenge 4 Challenge 5 Challenge 6 Challenge 7 Challenge 8 Challenge 9 Challenge 10 4Q11 1Q12 2Q12 3Q12 Domestic economic conditions Global economic conditions Stagnant/declining markets Developing new products/services/marke ts Regulatory requirements/changes Domestic competition Availability of skilled personnel Materials/supplies/equip ment costs Financing (access/cost of capital) Changing customer preferences Domestic economic conditions Global economic conditions Domestic competition Materials/supplies/equip ment costs Developing new products/services/marke ts Stagnant/declining markets (T6) Regulatory requirements/changes (T6) Availability of skilled personnel Financing (access/cost of capital) Employee and benefits costs Domestic economic conditions Global economic conditions Domestic competition Stagnant/declining markets Regulatory requirements/changes Financing (access/cost of capital) Domestic political leadership Domestic economic conditions Developing new products/services/marke Currency exchange rates ts Regulatory requirements/changes Materials/supplies/equip ment costs Changing customer preferences Availability of skilled personnel Employee and benefits costs Employee and benefits costs Domestic competition (T7) Liquidity (T7) Changing customer preferences Deflation Please indicate the top three challenges for your organisation T(Number) indicates tied position and number of position tied in 63
Appendix - Regional breakdown Rest of World Developed
CGMA global economic forecast -3Q 2012 RoWD region highlights Respondents = 67 of 1179 total CGMA Global Index RoWD increased slightly from 57 to 60 RoWD 3Q 2012 = 60 RoWD 2Q 2012 = 57 Combined regions 3Q 2012 = 58 Optimism Only 4% of respondents optimistic about global economy Now 38% now optimistic about domestic economies, up slightly from 36% in 2Q 2012 More than half (54%) now optimistic about prospects for own company, after declining to 47% in 2Q KPIs Revenue, profit and headcount expectations all rebounded from 2Q declines Spending for IT and training also rebounded; other capital spend declined slightly Inflation Only 21% now concerned about inflation; labour costs continue as top concern, materials cost concerns increased sharply, while energy cost concerns declined in ranking Financing Now 26% expect financing to be more difficult, consistent with 24% in 1Q 2012 Challenges Currency exchange rates now top ranked concern Top 3 Challenges = Currency exchange rates, regulatory requirements/changes, employee and benefits costs 65
CGMA optimism RoWD 80% 70% 60% 50% 54% 40% 30% 38% Organisation outlook Domestic economic optimism Global economic optimism 20% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4% Chart displaying percentage of Very optimistic and Optimistic responses 66
CGMA KPIs - revenue, profit and headcount RoWD 6.0% 4.0% 4.3% 3.3% Revenue Profit Employees 2.0% 1.2% 0.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators Percentage displayed represents average expected change. 67
CGMA spending - IT, other capital and training - RoWD 4.0% 3.6% 2.0% 1.8% IT Training Other spending 1.1% 0.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators Percentage displayed represents average expected change. 68
CGMA difficulty obtaining finance RoWD 80% 70% 60% 56% 50% 40% 30% 20% 26% About the same More difficult Less difficult 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4% Do you expect it to be more or less difficult to obtain your required financing in the next quarter? 69
CGMA risk of inflation vs. deflation in RoWD 80% 70% 60% 50% 40% 30% 20% 10% 21% 12% Inflation Deflation 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 For your business, over the next 6 months, are you more concerned about the possibility of 70
CGMA inflationary factors representing most risk RoWD 60% 50% 40% 30% 20% 42% 25% Labour costs Raw material costs Interest rates Energy costs Food costs 10% 8% 8% 0% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 71
CGMA top challenges for organisations in RoWD Challenge 1 Challenge 2 Challenge 3 Challenge 4 Challenge 5 Challenge 6 Challenge 7 4Q11 1Q12 2Q12 3Q12 Domestic economic conditions Global economic conditions Domestic competition Availability of skilled personnel Regulatory requirements/changes Employee and benefits costs Domestic economic Global economic conditions conditions Domestic economic Domestic competition conditions Developing a new Availability of skilled products/services/marke personnel ts Regulatory Currency exchange rates requirements/changes (T4) Developing a new Developing new products/services/marke products/services/markets Challenge 8 Currency exchange rates ts (T5) Please indicate the top three challenges for your organisation T(Number) indicates tied position and number of position tied in Currency exchange rates Regulatory requirements/changes (T2) Employee and benefits costs (T2) Domestic political leadership Global economic conditions (T5) Stagnant/declining markets (T4) Domestic competition Financing (access/cost of Domestic competition Developing a new capital) (T5) products/services/markets Availability of skilled Financing (access/cost of personnel (T7) capital) (T7) Changing customer preferences (T8) Challenge 9 Staff turnover Staff turnover Challenge 10 Financing (access/cost of capital) Domestic political leadership (T7) (T8) Changing customer preferences Employee and benefits Employee and benefits costs (T10) costs (T9) Stagnant/declining markets (T10) Currency exchange rates (T9) (T7) Liquidity Energy costs (T7) Global economic conditions (T10) Competition from nondomestic developed markets (T10) Deflation (T10) 72
Appendix - Regional breakdown Rest of World Emerging
CGMA global economic forecast -3Q 2012 RoWE region highlights Respondents = 84 of 1179 total CGMA Global Index RoWE continued to lead all regions with 66 RoWE 3Q 2012 = 66 RoWE 2Q 2012 = 69 Combined regions 3Q 2012 = 58 Optimism 15% of respondents optimistic about global economy Just a third (34%) currently optimistic about domestic economies, vs. 44% in 2Q 2012 However, nearly two-thirds (63%) continue to be optimistic about prospects for own company KPIs Revenue and profit expectations constant; headcount expectations down slightly RoWE continues to lead all regions in expected spending increases for other capital, and training, lags RoWD group in IT spending this quarter by.3% Inflation RoWE slightly behind Asia in concern about inflation at 48%, interest rates concerns continue to top list for RoWE companies Financing Those expecting financing to be more difficult decreased slightly from 28% to 23% Challenges Availability of skilled personnel no longer tops tops list of challenges Top 3 Challenges = Regulatory requirements/changes, domestic economic conditions, employee and benefits costs 74
CGMA optimism RoWE 70% 60% 63% 50% 40% 30% 34% Organisation outlook Domestic economic optimism Global economic optimism 20% 10% 15% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Chart displaying percentage of Very optimistic and Optimistic responses 75
CGMA KPIs - revenue, profit and headcount RoWE 6.0% 5.3% 4.0% 3.6% Revenue Profit Employees 2.0% 0.9% 0.0% 4Q11 1Q12 2Q12 3Q12 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators Percentage displayed represents average expected change. 76
CGMA spending - IT, other capital and training - RoWE 6.0% 4.0% 3.3% 3.0% 2.8% IT Other spending Training 2.0% 0.0% 4Q, 11 1Q, 12 2Q, 12 2Q, 13 Thinking about the coming 12 months, please comment on the probable change for your organisation of each of the following key performance indicators 77 Percentage displayed represents average expected change.
CGMA difficulty obtaining finance RoWE 80% 70% 60% 64% 50% 40% 30% About the same More difficult Less difficult 20% 23% 10% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 3% Do you expect it to be more or less difficult to obtain your required financing in the next quarter? 78
CGMA risk of inflation vs. deflation in RoWE 80% 70% 60% 50% 48% 40% 30% Inflation Deflation 20% 10% 0% Q4 2011 Q1 2012 Q2, 2012 Q3 2013 7% For your business, over the next 6 months, are you more concerned about the possibility of 79
CGMA inflationary factors representing most risk RoWE 60% 50% 40% 30% 20% 31% 20% 20% 20% Labour costs Energy costs Interest rates Raw material costs Food costs 10% 6% 0% 4Q 2011 1Q 2012 2Q 2012 3Q 2012 80
CGMA top challenges for organisations in RoWE Challenge 1 Challenge 2 Challenge 3 Challenge 4 4Q11 1Q12 2Q12 3Q12 Global economic conditions Domestic economic conditions Domestic political leadership Regulatory requirements/changes Availability of skilled personnel Domestic political leadership Global economic conditions Domestic economic conditions (T4) Availability of skilled personnel Global economic conditions Regulatory requirements/changes (T3) Domestic economic conditions (T3) Regulatory requirements/changes Currency exchange rates Domestic economic conditions Employee and benefits costs (T4) Challenge 5 Domestic competition Domestic competition (T4) Domestic competition (T3) Domestic political leadership (T4) Challenge 6 Challenge 7 Availability of skilled personnel Currency exchange rates Developing new Developing new products/services/markets products/services/markets Challenge 8 Currency exchange rates Challenge 9 Challenge 10 Stagnant/declining markets Developing new products/services/markets Domestic political leadership Currency exchange rates Global economic conditions Domestic competition Financing (access/cost of capital) (T8) Liquidity Credit control/collections Materials/supplies/equipm ent costs (T8) Stagnant/declining markets (T10) Employee and benefits costs (T10) Employee and benefits costs (T9) Developing new products/services/markets (T9) Financing (access/cost of capital) (T9) Competition from nondomestic developed markets (T9) Deflation (T9) Please indicate the top three challenges for your organisation T(Number) indicates tied position and number of position tied in 81
Demographics
Demographics Positions Size of organisation (by number of employees) Type of organisation 1% 14% 14% 11% 2% 9% 25% 22% 14% 16% 58% 19% 29% 58% Chair/MD/Pres/CEO/COO CFO/FD/VP Financial Controller Other 1-50 51-250 251-1,000 1,001-10,000 10,000+ Publicly listed company Privately owned company Government Not for Profit Other
About this survey In connection with the launch of the new CGMA credential by the AICPA and CIMA we have launched the CGMA Global Economic Survey designed to capture the views of CGMA Management Accounting professional decision makers from around the world on global economic conditions and current topical issues. The CGMA Global Economic Forecast is intended to highlight the broad business perspective of management accounting executives and the value that they bring to their organisations. This quarterly survey was sent to a select panel of AICPA and CIMA executives (primarily CFOs, CEOs and Controllers) between 22 August and 19 September 2012. In total, the opinions of 1,179 CGMA Management Accounting Professional Decision makers from around the world were captured in 3Q 2012. The regional breakdown of panelists who participated in the 3Q 2012 survey is as follows: Asia: 86 US: 510 Europe (excl. UK): 90 UK: 342 Rest of World Developed (RoWD): 67 Rest of World Emerging (RoWE): 84
Regional definitions Asia = Azerbaijan, Bangladesh, China, Hong Kong, India, Japan, Kazakhstan, Malaysia, Myanmar, Pakistan, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam US = United States Europe (excl. UK) = Austria, Belgium, Bosnia & Herzegovina, Bulgaria, Cyprus, Czech republic, France, Germany, Gibraltar, Greece, Hungary, Ireland, Italy, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Russia, Spain, Switzerland, Turkey UK = United Kingdom Rest of World Developed (RoWD) = Australia, Canada, New Zealand Rest of World Emerging (RoWE) = Angola, Bahamas, Barbados, Bermuda, Botswana, Brazil, Cayman Islands, Gambia, Ghana, Guam, Kenya, Kuwait, Liberia, Malawi, Mauritius, Nigeria, Paraguay, Peru, Puerto Rico, Qatar, Saudi Arabia, Senegal, Sierra Leone, South Africa, St. Helena, Tanzania, Trinidad and Tobago, UAE, Zambia, Zimbabwe
Thank you For additional information contact: CIMA Michelle Taylor Research and Customer Intelligence Manager Michelle.Taylor@cimaglobal.com AICPA Kenneth Witt Technical Manager Kwitt@aicpa.org Amy Campbell Market Research Executive Amy.Campbell@cimaglobal.com Nancy-Anne Potts Research Manager Npotts@aicpa.org