Cash & Liquidity Management

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Treasury Barometer 2012-13 Participants at the Cash Management University completed a short survey in advance of the event, with a view to exploring changing trends and behaviours in cash and treasury management.

Treasury Barometer 2012-13

by Helen Sanders, Editor

Participants at the Cash Management University organised by BNP Paribas completed a short survey in advance of the event, with a view to exploring changing trends and behaviours in cash and treasury management. All major industries were represented, with 37% in manufacturing, and 62% of respondents represented corporations with a turnover exceeding €1bn. 

Centralisation

  • 51% of participants implemented or extended physical cash pooling structures during 2012, and 34% intend to do so in 2013.
  • 51% had either increased centralisation of payments during 2012 or were intending to do so in 2013.

Centralisation was a major priority in 2012, and perhaps because of this, there would appear to be slightly less focus on this in 2013. Use of pooling and sweeping, in order to take control of cash globally, has been a focus for over half of Barometer participants, with payments also an important priority, in order to improve efficiency and control and reduce costs. We have also seen an increased use of notional pooling in countries where physical pooling is not permitted, and to optimise cash balances in decentralised organisations where local subsidiaries manage accounts locally. Collections are typically more difficult to centralise, not least due to greater commercial sensitivity, but increasingly there are opportunities to achieve this, particularly with the move to a harmonised payments and collections landscape through SEPA.

Cash management bank relationships

  • 25% of respondents have not changed the number of cash management bank relationships they maintain, and do not intend to do so.
  • 43% have reduced, or intend to reduce their cash management banks.
  • 33% have increased, or intend to increase their cash management banks.

Twenty-five per cent of participants have already achieved the right balance of risk management and financial and operational efficiency in their banking relationships. Fourteen per cent have increased the number of bank relationships over the past year, primarily to diversify their risk and facilitate geographic expansion, but only 4% intend to do so in the coming year. We have also seen some companies decentralising limited portions of their cash and treasury management activities to take advantage of local borrowing and investment conditions, and provide on-the-ground management of local cash management issues, which typically involves working with local banks. However, the broader trend, illustrated by nearly half of respondents, is to rationalise banking relationships: ‘Relationship banking’ has been discussed at length in recent years, and it now appears that this is becoming a reality.

Cash investment

  • 21% of participants had not changed their cash investment strategy in 2012 and 30% did not intend to do so in 2013.
  • 27% of companies reduced the number of deposit banks in 2012, and 15% intended to do so in 2013.
  • 24% had, or intended to increase the use of other investment instruments.

Corporate treasurers still have large cash balances that they need to manage, not least as a result of more extensive cash pooling noted previously. Companies are also building up cash to fund M&A and future investment opportunities, and to support possible future periods of income volatility. Twenty-seven per cent of companies reduced the number of banks with which they place deposits in 2012 as they seek higher-rated counterparties, while only 8% have sought to diversify their counterparty risk. There is moderate growth in corporates’ use of money market funds (MMFs) but other instruments such as commercial paper (CP) and repurchase agreements (repos) are also becoming more popular, and a few respondents noted that they are increasingly inclined to invest in corporate debt.

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