Cash & Liquidity Management
Published  8 MIN READ
Please note: this article is over 5 years old. If you feel this article is inaccurate or contains errors get in touch here . Many thanks, TMI

Liquidity Management: A Whole New World


While the treasury environment is never static, one area where it has become particularly dynamic of late is liquidity management. Multiple drivers have combined to create a situation where continuous (re)evaluation and evolution have become almost mandatory.  An HSBC representative examines these factors and how they are affecting the process of liquidity management.


Change drivers

Macroeconomic factors

One of the most striking changes in corporate liquidity in recent years is its sheer volume. In the aftermath of the financial crisis, corporate treasuries worldwide put huge efforts into freeing up cash from within the business and have continued to do so. More recently, the global economy has also been picking up, with global GDP growth of 3.2% in 2017 (up from 2.5% in 2016) and some commentators forecasting growth of 3.3% for 2018 [1]. As a result, the level of cash on corporate balance sheets has now reached exceptional levels: USD1.8trn in the US and EUR974bn in Europe, the Middle East and Africa, while collectively the 25 most cash-rich corporates globally hold just under USD829bn of cash [2].

At the same time, interest rates in various countries have started to rise. The US is the most prominent in this respect with the Fed Funds rate now at 2% [3], up from 0.25% in late 2015 [4]. In addition, the Federal Reserve has signalled that it will raise rates to 2.5% in 2018, 3% in 2019, and 3.5% in 2020 [5]. A diverse mix of other countries are also forecast to raise rates by Q2 2019 including China, Brazil, Mexico, the UK, India, Canada, South Korea, Indonesia and Japan [6].