Staying Ahead of the Curve

Liquidity Management Innovation

Faced with a new macroeconomic era, corporates are understandably prioritising effective cash and liquidity management. Here, three industry experts highlight the key issues and innovations for treasurers to consider when looking to optimise the use of excess cash, maximise yield, and manage risks in these testing times.

Efficient liquidity management is vital for corporates at the best of times – without a proper handle on it even the most profitable company can go under. And in periods of high market volatility, economic turmoil, and uncertainty, as we are seeing now, its importance is magnified.

Walter Cegarra, CEO of FNZ Q-Hub, a specialist team within wealth management platform provider FNZ, is clear about just how challenging the environment for managing liquidity has become on the back of Covid-19, geopolitical tensions, and the Russian invasion of Ukraine. This recent period, he reminds us, contrasts sharply with the previous decade, which was characterised by a relatively benign, super-low-rate environment and virtually zero yield on cash. However, the rapid hike in inflation and rates globally over the past year (although tapering is on the cards), have necessitated a sharp revision of corporate liquidity and investment strategies.

Cegarra says: “The much-altered rate environment has significant implications for cash investment. Treasurers must now consider cash as an asset that can be used to generate a reasonable return to compensate the increased inflationary pressures impacting all corporates. But it is also important to recognise that such an investment bears significant risk. The recent woes in the banking sector, for example the collapse of Silicon Valley Bank [SVB] in the US and Credit Suisse in Europe, demonstrate that even global banks can be risky institutions for cash. Certainly, our conversations with corporate treasurers suggest they are rethinking their short-term investment strategies in light of the new environment.”

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