Campbell Harvey, founding director of the Duke-CFO Magazine quarterly survey and a finance professor at Duke, is alarmed not so much about CFO fears regarding a recession.

He’s concerned about the lack of planning for one.

“Even more worrisome than CFOs’ recession fears is that 46 percent of CFOs have no plan in place to deal with a recession next year if it happens,” Harvey said.

“It seems like they will wing it, which is shocking because the risk is substantial at 31 percent as opposed to just a couple of percentage points.”

Of those who do have contingency plans in place, Harvey noted that cuts would be harsh.

“CFOs would slash employment by 8 percent and hack investment spending by 30 percent. And let me emphasize, that is from today’s already depressed levels,” Harvey explained.

CFOs would be willing to “cut into the bone,” he added, with 69 percent ready to cut discretionary spending, including research and development. Harvey sees that as penny wise, pound foolish.

“Cutting R&D reduces future growth opportunities and destroys long-term value,” Harvey said.

Harvey made his comments after compiling results of the latest “Global Business Outlook Survey, which was issued Thursday.

The findings as cited in the report:

  • 46 percent of firms say that they do not have an explicit contingency plan to implement should a recession begin in the US.
  • Of the 54 percent that do have a contingency plan, the recession driven cuts would be drastic, reducing employment by 10% and capital spending by one-fourth.
  • Fewer than half of companies would spend cash reserves to avoid laying off employees or reducing spending.
  • More than two-thirds would cut R&D

Read more about the report here.

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