The CFO optimism in the Middle East dropped to a two-year low in the fourth quarter of 2011, thanks to the continued social upheaval in the region coupled with uncertainty and risk aversion in business dealings, said a recent survey.

Conducted on a semi-annual basis for the past two years in the Middle East, the 'Deloitte Q4 2011 Global CFO Signals Report' is the only one for major corporate users of capital that gauges attitudes towards the general economic outlook, financing, valuations and risk.

Globally, the picture is not too positive either, according to surveyed chief financial officers (CFOs) in many countries. By many accounts, 2012 may turn out to be a difficult year, the survey added.

“While CFO optimism in the Middle East has declined, the economic fundamentals of the region remain strong, relative to other parts of the world. It is the prospect of unexpected events or ‘Black Swans’ which weigh heavily on the minds of CFOs at the moment,” commented James Babb, CFO program leader at Deloitte in the Middle East.

The decline in CFO positive sentiment is further reflected in expectations for operating cash flow to be generated in the coming 12 months, where only 47 per cent of CFOs surveyed in the Middle East expect operating cash flows to increase, down from 82 per cent in the previous year.

“CFOs in the region would do well to assess the events of the past year and to focus more time in their roles as strategists and catalysts for their organizations in this time of uncertainty,” he added.

A net 68 per cent of CFOs in the Middle East reported an above average level of financial and economic uncertainty facing their business.

As per the findings, 46 per cent do not believe now is a good time to be taking greater risk onto their balance sheets which is up from a net 5 per cent in Q1 2011.

The survey also found that expectations regarding the levels of merger and acquisition (M&A) activity reached a two-year survey low.

A net 40 per cent of CFOs reported an expected increase in M&A over the coming 12 months down from a net 63 per cent in the first quarter and a net 82 per cent in the third quarter of 2009.

According to the Deloitte survey, globally the CFO optimism was wavering thanks to continuing sovereign debt troubles in the Euro zone, dwindling global demand and global concerns over economic uncertainty.

In the UK, in fact, CFOs have no doubt that the biggest threat to their businesses in 2012 comes from a potential breakup of the European Union. Almost 40 per cent of UK CFOs see a high probability that one or more member states will leave the single currency in the course of 2012.

In Belgium, 76 per cent of CFOs report that the Euro crisis is impacting their companies negatively, and in Switzerland, the pessimistic outlook is compounded by the perception that the Swiss Franc is overvalued and by fear of a drop in demand.

In North America,  the CFOs remain worried that the debt crisis might not be contained and that a spillover might threaten consumer and capital markets throughout the world.

The survey also found that the CFOs are still finding themselves spending more time in the operator and steward roles within their respective organizations than they feel they should.-TradeArabia News Service