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Fiscal Cliff Major Concern For Finance Executives, Says Survey

Most finance executives that are responsible for managing corporate assets are worried what will happen as a result of the Fiscal Cliff that could happen in January, according to a finance survey conducted by industry representative the Association for Financial Professionals (AFP).

This news could be of concern to professionals involved in corporate financial analysis.

Fiscal cliff

The AFP survey, which polled 6,000 finance professionals attending the industry organization's Annual Conference in Miami, revealed that these finance officials expect that the economic situation will deteriorate if lawmakers do not take the needed action to resolve disputes that could cause $600 billion worth of tax hikes and spending cuts.

Weak economy

Of the people who responded to the on-site survey, 39 percent said that tepid demand for products and services as well as lackluster economic conditions are combining to make them less likely to put their money into hiring more workers and engaging in strategic expansion.

In addition to this reply, 63 percent of participants said that the election will not have substantial impact on existing business conditions. Also, 71 percent predict that their plans to invest or expand operations will not be changed much by these elections.

"Companies are looking beyond the elections," Jim Kaitz, president and chief executive officer of AFP, said in the statement. "The most important issue is resolving long-term fiscal and deficit issues."

Companies operating in the current environment of economic uncertainty might be able to increase certainty through the use of budgeting software.

Post-election concerns

When asked what areas were most important for lawmakers to work on after the election, survey participants specified solving the long-term problems involving the deficits and the national debt as their primary concern. Almost two-thirds, or 63 percent of respondents specified fixing these issues.

The second-highest-cited concern was implementing the needed changes to make sure that the fiscal cliff is not triggered. This matter was specified by 49 percent of participants.

In addition, 42 percent said that making regulations more simple and certain was crucial. Another 37 percent said that making debates more positive and solving the sources of political disputes was important.

Regulatory uncertainty a concern

"This survey reiterates our view that treasury professionals see regulatory change as a significant concern for their business," Bob Stark, vice president of strategy at cash management firm Kyriba, which underwrote the survey, said in a statement. "It is also very interesting to note, although not entirely surprising, that half of the respondents expect to reduce their cash held in bank accounts at the start of next year. This change will increase the need for improved cash visibility, a trend we have seen throughout the market."

Corporate conservatism

The concerns of many business have been illustrated by the cost management behaviors exhibited of many major corporations. Over the last several years, the profit growth of these firms has been created by their cost management efforts.

Since many of these organizations have not encountered rising demand in many different markets, they have boosted earnings by cutting costs wherever possible. They have experienced strong productivity growth and reduced their personnel expenses substantially.

The chance that fiscal policy could change substantially in the beginning of 2013 is not exactly helping to improve this economic uncertainty. Resolving the disputes will at least provide companies with one less variable to worry about.

The outlook of the global economy has recently encountered more factors that could boost uncertainty, including the International Monetary Fund reducing growth forecasts for emerging markets. Since these regions have been a major source of corporate demand, this warning could make multinational firms more concerned.