CFOs remain cautious on 2024 while keeping an eye on policy and AI

The Fed has likely reached its most restrivtive stance in this cycle. In 2024, do you expect (Single choice)

Which of the following areas is your company most focused on from a policy perspective? (Multiple choice)

Many provisions of the Tax Cuts and Jobs Act (TCJA) will expire in 2025, likely driving the debate on taxes next year, depending on the outcomes of the elections. President Biden has laid out a series of proposed increases to fund other priorities, while Trump would likely choose to prefer to extend his signature legislative achievement (and perhaps for additional cuts, as conservatives prefer, with resulting “pay-fors” to help offset the loss of revenue). Hopes for further changes before 2025 seem unlikely.

While the US policy outlook is important, global internal taxation is also critical. “It’s a combination of overall rates but also international rates and the ability to leverage cash in our international markets — what that will be and what the burden and liability will be,” one CFO shared. Another CFO for a life sciences company added: “A vast majority of my time is spent on Pillar Two and regulations and implications of international taxation.”

In addition to overall tax rates and international rates, CFOs were most focused on these legislative topics:

• The ability to leverage cash in international markets, including penalties for repatriation, particularly with regard to China
• R&D amortization, a TCJA pay-for that recently kicked in, which arguably encourages companies to move their R&D outside the US
•  Antitrust policy, in which the current administration is seen as aggressive
• The administrative impact of ever-evolving climate disclosures

In terms of the regulatory environment, “The approach to regulation is an obvious area where the two candidates differ significantly, but it’s not a black-and-white comparison between the two candidates,” Neill said. “You might hear: ‘Trump is absolutely anti-regulatory.’ That’s not quite the case. And we won’t have a disappearance of enforcement.”

She noted that the leaders of the SEC under Trump and Biden were almost equal in the number of rules adopted, although they had different rulemaking priorities, such as capital formation under SEC Chair Jay Clayton and investor protection under current SEC Chair Gary Gensler. “I couldn’t accept that when I first saw it,” she said. “But to some extent, those differences have played out with litigation rates — it’s almost threefold higher under Gary Gensler. Both leaders believed in rulemaking, but their terms played out differently.” While Gensler has signaled his interest in continuing as Chair in a second Biden administration, most agencies typically experience turnover after a presidential election — and since “people are policy,” that is evidence that priorities can shift even when a familiar face returns to the Oval Office.

As CFOs debated the realities of today’s labor market and the costs associated with it, GenAI naturally came up as a driver of productivity. And when the discussion turned to regulation, GenAI surfaced again.

Boland has already seen an evolution in expectations surrounding GenAI. “Of all the audit and board committee meetings I join, there had been a lot of conversations on experimentation,” she said. “And now this year it’s: ‘Where are you getting ROI?’ For CFOs, it’s procurement, talent, and design and product development. These people tend to be outside of finance, but they’re looking to CFOs to determine where to double down on investment more.”

These executives are also forced to rethink when to hire (and how) when the equation has become murkier. “AI should produce productivity, and it’s not an easy one-for-one gain,” one tech CFO said. “It’s a forcing function of getting productivity over time. We’re pacing ourselves and thinking forward on hiring that could or should happen as we invest in AI. It’s a different rhythm than we’re used to, but it’s promising in terms of payback potential.” Another CFO in consumer products added: “We’re not hiring more, but it’s not that we’re not confident about in the future — we expect a good year in 2024. We’ll have a good year with the same investments thanks to AI, especially on increasing efficiency.”

Although AI has been used at many multinationals for several years, GenAI specifically remains in its earliest stages at most of the organizations represented in the discussion, including in the finance function. CFOs said they were leveraging digitally enabled managed services with regard to their account and journal entry processes, as well as scrutinizing data management and workflow automation. Thinking more broadly than just GenAI and finance, CFOs mentioned use cases such as:

• Significantly reducing call center activities, with opportunities to drive customers to self-service
• Optimizing HR and personnel functions, including in recruiting
• Advancing predictive modeling in forecasting and supply chains

“The predictive piece on forecasting is interesting to us,” one CFO said. “We have one that runs in parallel to our existing forecasting; it’s another data point, and the two are surprisingly close. It’s been helpful although not proven in uncertain times. It’ll be interesting to see how it reacts in downcycles.”

Many also said they were updating their infrastructure to layer on GenAI capabilities, by moving toward common ERP and data platforms and better enabling use of the cloud. And with regard to regulation, the Biden administration issued an ambitious executive order that Trump has said he would rescind. However, Hallmark noted that two universal truths in Washington apply to any president on AI: it’s an opportunity for the US to solidify its global leadership role, yet the risks are ever-present and must be mitigated — such as worker displacement, deepfakes and biased algorithms. In the case of a Trump victory, “It may not be an effort to stop the regulations but rather rebrand them,” Hallmark said.