CFOs More Cautious Due to Financial and Health Care Reform

According to the second quarter 2010 “CFO Outlook Survey,” released by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business, CFOs this quarter also indicated that they anticipate a number of newly added expenses to appear on their balance sheets over the next year.  A news release said that when asked about the potential impact the financial regulatory reform package would have, the most-cited effect was increased banking costs (45%), followed by additional compliance and reporting requirements and costs (39%).

CFOs this quarter continue to weigh in on the imminent impact of health care reform, and how it will influence their companies and employees.  While several months have gone by since the package was passed, CFOs are still preparing for a 10% increase in health care costs over the next 12 months; the same time last year, they anticipated only a 7% increase.  

Similar to previous quarters, CFOs still plan to take extreme measures to offset potential added costs.  Two thirds (66%) plan to increase the monthly amount that their employees pay for benefits, and over a third (34%) also plan to decrease the scope of the health care package.

However, by and large, companies have held off communicating with their staffs potential health care-related changes.  Only 29% of CFOs’ companies have begun conversations with employees on how rising health care costs under the new law will affect their package.  CFOs are split on the intricacy of negotiating new packages with staff – while the majority (58%) have found the process more difficult than expected, 42% stated that the process has been easier than expected.

“The quarterly CFO Outlook Survey has shown that, while the worst is likely behind us, CFOs are still being prudent when navigating their companies fully out of the recession,” said Marie Hollein, President and CEO of FEI, in the news release. “With unemployment levels still high, it is not surprising that CFOs have retracted some of the economic confidence they expressed earlier this year.  We are seeing CFOs in recovery mode, and to prepare for potential costs in a number of areas, they are taking a more cautious approach to protect their companies in the long-term.”

Full survey results and historical data comparisons are available at www.financialexecutives.org.