Recession is on the mind of many procurement, finance professionals: Study

Despite economic growth, recent headwinds have procurement and finance professionals considering how to deal with a possible recession in the next year or so, according to a survey by the data-aggregation firm Suplari, which published “Plans & Tactics to Recession-Proof the Enterprise in 2019 and Beyond.”

While only 6% of the 104 professionals surveyed are concerned about the possibility of a recession hitting the nation within six months, 55% believe it will take place within 18 months, Suplari notes.

Though the U.S. economy has continued to expand following the financial crisis of the late 2000s and early 2010s, the study found 77% of finance and procurement professionals surveyed believe the U.S. economy will see a recession within the next two years.

Suplari’s study, released last month, notes many recent surveys spotlight executives’ concerns that job markets, credit risks and tariff policies could push the economy to decelerate.

The survey evaluates how to avoid disruptions of performance, growth and profitability, considering what strategies can be employed swiftly to identify cost-savings and risk-optimization.

“Respondents are mostly concerned about the impact a recession could impose on their budgets and headcount cuts, even more so than the risks associated with losing suppliers or issues about suppliers’ business continuity or solvency,” the study notes.

Suplari notes in the study that even if a recession does not take place, experts suggest that procurement and finance organizations should put plans in place to avoid such problems regardless.

The study also notes the importance of ensuring that finance and procurement professionals, as well as stakeholders in these businesses, have access to the proper insights they need to make informed choices regarding their spending, suppliers and contractual decisions.

“Enterprises need and should be proactive, with an always-on systematic approach to managing spend,” the study suggests.

Executives surveyed also discuss specific tactics applied by each industry sector to deal with a recession and what categories, budgets and supplier tiers face the most scrutiny amid a slowing economy.

While many business leaders expect some sort of slowing for the economy, 61% of those surveyed said they believe their company is prepared to deal with such conditions.

Suplari survey chart

If the economy slows, 60% of executives identified travel expenses as a primary expense category to cut costs. Large companies with revenue higher than $1 billion are even more likely than smaller companies to scale back on travel, with 72% focusing on this cost-cutting strategy, as opposed to 50% of smaller or medium-size companies.

Other primary areas for cost-savings include contract negotiations and vendor consolidation efforts, executives said in the survey. Procurement and finance professionals identified contract renegotiation at 49% and vendor consolidation at 45% as the top strategies for cost-saving opportunities.

Two-thirds of the survey’s respondents said reinvestment in longer-term projects, expansion and improving the bottom lines were key areas of focus for cost-savings.

Among manufacturers, for example, 56% of business leaders surveyed noted the delay of project expenditures as an additional, though temporary, cost-cutting move.

As companies continue to identify potential cost-cutting methods, the survey notes that many are also setting savings goals, aiming for 5-14% in savings.