“Cuts to M&A are an obvious choice after record activity in 2021 and with rising interest rates significantly increasing the cost of financing such deals,” said Randeep Rathindran, vice president, research in the Gartner Finance practice. “It’s more surprising to see sustainability so close to the chopping block because CEOs rated it as a top strategic priority for the first time in 2022, and ESG disclosures are increasingly becoming enshrined in legislation.”
The survey identified the most selected areas that CEOs and CFOs will likely cut first in the face of continued economic disruption (see Figure 1).
Figure 1: Investment Categories to Cut First
“Despite the cost, companies are turning to digital investments to improve efficiency and protect margins,” said Rathindran. “According to Gartner’s 2022 FinTech Bullseye Report, companies that implement blockchain, Internet of Things (IoT), and digital twin technologies see improvements in reporting ability, performance optimization, and workforce efficiency. Implementing digital in a way that boosts the productivity of workers, assets, and working capital will be a necessity going forward.”
Although talent and workforce development was the top pick to protect from cuts, a third of respondents also rated it as one of first areas to cut.
“This is likely due to differences by industry, because companies in service-based industries are most likely to reduce their investments due to the high proportion of labor costs,” said Rathindran. “Meanwhile, product-based industries protect these investments as a source of advantage, helping them to maximize human capital.”