The many interlocking parts of the current economic downturn add up to one overriding concern for CFOs: weakening consumer demand. For the second consecutive quarter, consumer demand topped the list of CFO worries in the quarterly Duke University/CFO magazine Global Business Outlook Survey. The related issues of credit markets, housing-market fallout, the cost of fuel, and the cost of other commodities also ranked in the top 10.
Fears about credit rippled throughout the supply chain, with CFOs anxious about their customers’ creditworthiness and the financial health of their suppliers. Finance executives are concerned about their own companies’ access to capital as well.
“In health care, we are generally better off than some other sectors, but it’s still not the best of times,” says David Dreyer, CFO of AMN Healthcare Services, a medical staffing firm based in San Diego. “We don’t have any urgent need for credit, but I’m very concerned about whether it will start to have an impact on us — for example, if we want to do an acquisition.” Dreyer says he has heard from fellow CFOs recently that when they attempt to make relatively simple changes to their debt covenants to finance new projects, lenders are “holding their feet to the fire” and trying to renegotiate at a higher rate.
Within their own companies, finance executives continue to be concerned about the cost of labor. The economic turmoil has made forecasting results difficult as well. Dreyer says the uncertain environment means companies will be quick to pull the plug on struggling initiatives or underperforming business units. “Sometimes you would like to give things more of a chance, but you can’t when the business is under pressure,” he says.
The barrage of bad economic news makes Alliant Credit Union finance chief Mona Leung uneasy, but not because her business is in trouble. “I don’t have any huge economic concerns right now, but I do worry that regulators will overreact to the crisis,” she says. As stakeholders throughout the financial markets debate Treasury Secretary Henry Paulson’s sweeping proposal to restructure the financial regulatory system, her worry could prove well founded.