2025 is a baseline for what sustained cost volatility looks like, S&P Global expert warns CFOs

Core Insights - The year 2025 is expected to be pivotal for CFOs as they manage cost volatility and global economic shifts, which may lead to profit losses [1] - Corporate expenses are projected to increase by at least $1.2 trillion in 2025 compared to earlier expectations [2] - Global corporate margins have contracted by approximately 64 basis points, resulting in a profit loss of $907 billion among companies analyzed [2] Expense Breakdown - Companies are absorbing rising costs by sacrificing profit margins while also passing some costs to consumers, with $592 billion of profit loss being transferred through higher prices and $315 billion being absorbed internally [3] - Additional cost pressures include $155 billion from uncovered public firms and $123 billion from private equity and VC-backed companies, contributing to the total projected costs for 2025 [4] Implications for CFOs - The significant increase in costs indicates a need for CFOs to view 2025 as a baseline for sustained cost volatility rather than an outlier [5] - Factors contributing to margin pressure include unexpected tariffs, rising wages, logistics bottlenecks, and increased spending on AI and automation [6] - CFOs are advised to focus on building flexibility into budgets and supply chains to better absorb these pressures, as the mix of challenges varies by geography and sector [6]