As they tighten their belts, here’s what CEOs will cut first

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In the past few months, inflation and a worrying economic outlook has impacted everything from grocery bills to gas prices. This combination of pressures is also affecting which sectors business leaders choose to invest in – and where they plan to cut back. 

In June, tech analyst Gartner surveyed 128 CFOs and CEOs to find out which investments they plan on cutting first in the face of rising inflation, talent shortages and supply constraints. 

Of the 128 CEOs and CFOs surveyed, 41% identified mergers and acquisitions (M&A) as the most likely to be cut first. Investments for improved sustainability and reduced environmental impact was a close second with 39% of respondent votes. 

SEE: Inflation and your business: What happens next and how to navigate the storm

The choice to cut M&A can be linked to the rising interest rates that significantly increase the cost of financing such deals, according to vice president of research at Gartner, Randeep Rathindran. However, Rathindran says the cuts to sustainability come as more of a surprise, since companies have made ESG a top strategic priority in 2022. Growing concerns about the environment from both consumers and employees have compelled businesses to take ESG goals more seriously. 

Technology, workforce and talent development investments are not where CEOs or CFOs plan on making cuts. In fact, only 23% of respondents said technology was one of their top two cut choices, and 46% of respondents said spending on workforce and talent development remains last on the chopping block.  

Technological investments are unlikely to drop due to their positive impact on efficiency. According to Rathindran, these investments are a necessity. “Implementing digital in a way that boosts the productivity of workers, assets, and working capital will be a necessity going forward,” he said in a statement. 

As inflation continues, and CEOs and CFOs reconsider their priorities, it looks like investments in product innovation and technology are here to stay – at least for now.



Original Article

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