Nearly two-thirds of the 250 economists surveyed in March by the National Association for Business Economics predict that the consumer price index (CPI) will rise to more than 2.5 percent within the next two to five years. That compares with the current CPI, which fell 2.1 percent over the 12 months ending in July, the Bureau of Labor Statistics reports.

The concern that prices may start rising isn’t limited to economists. “A significant number of people are concerned about it,” says Arun Bansal, managing consultant in the corporate enterprise risk management group of Towers Perrin. That includes many corporate financial executives, who point to the liquidity in the market created by the Federal Reserve through its purchases of mortgages and cuts in the interbank lending rate, which now stands at about .25 percent.

Inflation can mean that the cost of everything from labor to raw materials will jump, eating into most companies’ bottom lines. A few steps are key in protecting the corporate coffers when prices start inching up, Bansal says.

• Look at your organization’s interest rate exposure: With interest rates so low right now, it makes sense to lock in some cheap debt. If your company is exposed to rising rates through floating rate debt, you’ll want to consider swapping it for fixed rate loans.

• Understand your investments: The value of your firm’s holdings of fixed rate securities will drop if inflation kicks in. You may want to reconsider the allocation between fixed income and equity investments. On the other hand, while equities generally hold up better during inflationary periods, that may not be the case this time. After all, unemployment already is inching toward 10 percent; add inflation to that, and consumers may balk and spend even less than they’re doing now. While that’s a worthy shift in the long run, it means less revenue now for companies that cater to consumers. The moral of the story? “One has to be prepared for extreme market movements,” Bansal says.

• Check debt covenants. Bansal compared the number of S&P 500 companies rated below BB in 2004 and again in 2009, and found that it actually had dropped by about half. Why? Companies are saving money in order to boost their ratings and avoid tripping any covenants on their bank credit. “If you’re low-rated, it’s not just the cost of financing, but access to the market” that’s a problem in the current environment, he says.

• Consider seasonality and cyclicality. Calculate the worst-case scenario. The goal is to make sure that if it hits, you have enough cash on hand to cover necessary expenses. ###