Cash & Liquidity Management
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Spotlight on Corporate Cash Investment Priorities

by Michael F. Vogel, senior vice president, SunGard's wealth management business, and Vince A Tolve, vice president, SunGard’s wealth management business

Since the financial crisis of September 2008 in particular, treasurers have increasingly recognised the importance of defining and delivering on the right investment policies. The current economic and regulatory challenges have resulted in a complex cash management environment for corporations globally. One element of this is the need to define and deliver on the right investment policies. Counterparty risk has become a particular priority but with a number of credit rating downgrades, and a growing awareness that no organisation is ‘too big to fail’, companies that have developed large cash balances often struggle to find a sufficient number of counterparty banks and issuers that meet their credit requirements.

The problem of finding appropriate repositories for cash is compounded by the need to maintain access to liquidity in an environment where borrowing is more difficult and expensive. Furthermore, with interest rates remaining at a historic low, treasurers and cash managers are tasked to generate a return on cash to prevent value erosion through inflation and rising prices.

To help understand investment trends and corporate treasurers’ priorities, SunGard conducted an online survey amongst treasurers globally, which attracted responses from 215 corporations. This included respondents from all regions and industries. Fifty per cent of companies were headquartered in the United States with a significant proportion of responses from other regions such as Europe and Asia. The survey aimed to understand corporates’ cash investment policies, their attitude to risk and return and consequently, their preferred cash investment instruments, both now and in the future. It also sought to explore how companies transact their investments in practice, such as using web-based portals.