Topics:   Risk Management

Topics:   Risk Management

October 21, 2020

As the Election Approaches, Directors Should Watch These Six Areas

October 21, 2020

With the election now less than two weeks away and the end of 2020 fast approaching, most board directors and members of senior management are taking a wait-and-see posture while perhaps engaging in a bit of scenario planning, rather than rolling out aggressive new strategies. And that’s not a bad approach. Uncertainty—and the need to respond with agility—remains the through line of 2020 for businesses.

Our PwC US Pulse Survey periodically surveys C-suite executives on their top-of-mind issues and priorities. Our latest poll found chief financial officers (CFOs) feeling better about their companies’ ability to capture revenue and profits in this still-challenging environment, chief operating officers weighing their supply-chain and outsourcing strategies, and chief human resources officers considering how to keep their workforces productive and engaged.

The most recent survey was sent to respondents the day after the first presidential debate and remained open through the release of another disappointing jobs report from the US Department of Labor and President Donald J. Trump’s announcement that he tested positive for COVID-19.

Below are six further findings from the poll for directors to note as we await the outcome of November 3:

  • Business risks branch out in a Trump versus Biden administration. Respondents ranked their concerns twice—assuming one candidate will win the election, and then the other. No matter who theoretically wins the presidency, corporate taxes and the pandemic response ranked among executives’ top two risks, though taxes finished ahead by a sizable margin under a Joe Biden administration (62% vs. 39%). Health-care reform rounded out the top concerns under a potential Biden administration, while business leaders pointed to additional concerns about US-China business relations under a possible second Trump administration. Executives anticipate a swifter economic break from China under President Trump; Biden is expected to take a more multilateral approach to trade and has proposed expanding health-care reform.
  • There’s no escaping the tax man. More than three-quarters of executives (76%) are facing the reality that business tax rates will rise to pay for the $2 trillion price tag for already-enacted COVID-19 relief, regardless of which party controls Congress. And more than half of tax executives say the uncertainty of overall international tax policy is a greater challenge to US business than US tax policy changes, particularly as governments around the world consider solving the equation of pandemic-battered budgets with more auditing and scrutiny of taxes.
  • The outlook for trade and deals diverges. Executives anticipate making comparable trade and investment increases in most regions—except for China—under both administrations. Respondents said they are more likely to increase trade or investment in China under a Biden administration (28%) than under a Trump administration (15%). And while merger and acquisition projections are consistent for both candidates—with more than 60 percent of respondents saying they are likely to pursue an acquisition in the next 12 months—executives by a wide margin anticipate increased regulatory scrutiny if Biden wins the White House (61 percent, in opposition to 41 percent under Trump).
  • There’s optimism for headcount and hiring. Top human resource executives anticipate that headcount will increase over the next 12 months, both in the United States (59%) as well as outside the United States (36%), and they are more optimistic about headcount changes under a Biden administration. (Recent analysis by financial firms project that Biden’s plans will add millions more new jobs compared to Trump’s, with Biden proposing spending on education, infrastructure, and clean energy, and increasing social programs to boost the size and productivity of the workforce.) That hiring optimism could bode well for overall economic recovery, as workers who are secure in their jobs are more likely to be active consumers. Nearly 70 percent of tax leaders pointed to increases in domestic demand as the most likely factor prompting their companies to increase jobs or expand operations in the United States.
  • Risk leaders hope to get a handle on resiliency. Alongside enhancing confidence with customers, risk management leaders said increasing CEO and board confidence in their companies’ ability to withstand stresses and disruption would be the top goal of their strategies over the next 12 months. Chief risk officers plan to spend on workforce resilience and implementing changes to products and services based on changing customer expectations.
  • Leaders are making investments to improve stakeholder transparency. Ninety-four percent of CFOs are making one or more investments to improve transparency with stakeholders, with financial reporting the number one area of focus (61%). Clustered behind financial reporting were three important runners-up: overall data quality (47%); environmental, social and governance (ESG) reporting (40%); and diversity and inclusion reporting (39%). As stakeholders look for new ways to measure how well a company is performing—in terms of long-term value creation and social responsibility—gaining accurate insights from data outside the realm of financials will be key to an organization’s ability to recognize risk and seize opportunity.

Whichever candidate assumes office in January, watch Congress closely in the first 100 days for signals on the direction of future policy. And don’t overlook implications for your competitors and your disruptors—different businesses will respond differently to policy shifts. In the meantime, make sure your company’s scenario plans consider policy proposals as well as economic indicators; together, these components can greatly inform the potential outcomes and decisions that will need to be weighed as companies prepare for whatever 2021 brings.

Paula Loop is a partner with PwC and the leader of PwC’s Governance Insights Center.


NACD: Tools and resources to help guide you in unpredictable times.

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