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McKinsey Says CFOs Are Adopting 'Downside Protection' Playbooks in Their 2026 Budgets
CFOs are adopting a conservative 'downside protection' strategy for 2026 budgets in response to widespread economic and geopolitical uncertainty.
Key Points
CFOs are adopting a conservative 'downside protection' strategy for 2026 budgets in response to widespread economic and geopolitical uncertainty, according to reporting from CFO Dive.
The defensive approach prioritizes essential spending over 'nice-to-haves' to mitigate risks from tariffs, unclear AI ROI, and talent shortages.
Despite the need for agility, the traditional annual budget remains a key tool for alignment, though forecasting customer demand is the biggest challenge.
In response to widespread economic and geopolitical uncertainty, CFOs are adopting a conservative budgeting strategy for 2026 centered on "downside protection," according to an interview with a McKinsey executive quoted exclusively by CFO Dive.
Reading the tea leaves: The prevailing mood among finance chiefs is caution as they grapple with a relentless wave of disruption. The laundry list of anxieties includes everything from geopolitical chaos and U.S. tariffs to the murky ROI of AI and a scramble for skilled talent.
Needs vs. wants: The defensive playbook involves baking cash-preservation tactics directly into financial plans and getting surgical with priorities. McKinsey & Company senior partner Kevin Carmody noted that finance leaders are being “really careful about what they must spend versus what is a ‘nice-to-have’ and how they prioritize that in a very analytical way.”
The budget abides: Despite all the talk about agility and real-time data, the traditional, static annual budget isn’t going anywhere. Carmody says the process remains a key tool for alignment, ensuring "people understand that they’re all rowing in the same direction" and planting a "stake in the ground."
This defensive posture reflects a strategic recalibration for finance leaders, who must now balance immediate risk mitigation against funding necessary long-term growth. Forecasting customer demand remains the biggest challenge in this uncertain environment.
