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A Time to Get Back to Basics

by Sarah Jones, Managing Director, JPMorgan Liquidity and Investment Products

If there’s a silver lining to the current liquidity squeeze, it’s that today’s market turmoil gives companies an opportunity to get back to basics and reexamine, strengthen and improve their investment processes.

Among the issues that are top of mind for corporate treasurers as they manage and invest excess liquidity in a volatile market are investment guidelines, risk management processes and operating practices.

Spurred by market conditions and regulations, such as Sarbanes-Oxley, CFOs, CEOs, boards of directors and corporate audit committees are demanding an in-depth look at investment policy. Senior officers, responsible for overseeing and monitoring internal controls, want clearly articulated investment guidelines. Clear, published guidelines provide a common basis for understanding investment practices and explicit parameters for allowable investments, duration and investment processes.

When revisiting investment guidelines, companies must carefully review objectives, portfolio characteristics, risk tolerance, credit quality and limits, performance and analytics—all within the framework of industry standards and peer group comparisons. The ultimate goal: aligning investment strategies and guidelines with corporate strategies.