Finance Execs Still Jittery Over Economy, Pension Plan Volatility

I don’t usually think of finance execs as nervous types when it comes to the economic outlook — they tend to be more upbeat than the rest of us in tough times, it seems to me — so it’s a bit disturbing to come across a couple of new surveys which suggest that many CFOs are not quite ready to join the “green shoots” chorus just yet.

Nearly half of U.S. finance execs expect a double-dip recession, according to a survey released in November by software firm Adaptive Planning and the BPM Forum, a thought leadership organization. Almost three-quarters said they don’t expect the recovery to really take off until the middle of next year.

A study from professional services firm Towers Perrin, published this week, confirms that gloomy outlook among corporate finance execs. Nearly half predict that the recession won’t end until the second half of 2010 or even in 2011.

The data for both polls was collected shortly before the government reported a 3.5 percent GDP growth rate in Q3 (which has since been revised downwards to 2.8 percent), meaning we’re out of recession already (though that’s not to say we can’t be heading into a second dip). Still, finance leaders seem to be taking to heart Yogi Berra’s famous dictum that “it ain’t over ’til it’s over,” as Towers Perrin notes.

So what’s preying on CFOs’ minds?

When Towers Perrin’s participants were asked to identify issues for which their level of concern has risen since the height of the financial crisis, pension plan volatility was the most frequently cited issue (54 percent). While many stocks have seen steady gains since March of this year, corporate bond yields (which figure into pension liability calculations) have declined, and many companies are facing the need to make large contributions.

At the same time, perhaps because they’ve been swamped with more pressing issues, companies have been reluctant to tackle the funding challenge head-on. Only one-third have actually tweaked their pension plan investment strategy as a result of the financial turmoil, and only 12 percent have changed their pension plan hedging strategies.

But that may be about to change. “Now that the financial crisis is subsiding, finance executives are becoming more focused on bigger, long-term problems,” notes Prakash Shimpi, managing principal and head of Towers Perrin’s enterprise risk management practice, in the report. “You might say they put out the fire and are now dealing with the longer-term consequences of the credit crunch.”

That’s an encouraging way of looking at it. But however you cut it, it’s clear we’re not out of the woods yet, at least as far as finance pros are concerned.