Strategic Treasury

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New Year, New Cash Strategies? The Editor looks at how treasurers can guide their companies through financial volatility and the impact of regulatory changes by employing a process of regular review and refinement of existing policies and strategies.

New Year, New Cash Strategies?

 New Year, New Cash Strategies?

by Helen Sanders, Editor


Ring out the old, ring in the new,
Ring, happy bells, across the snow:
The year is going, let him go;
Ring out the false, ring in the true.

Alfred Lord Tennyson, In Memoriam, 1850

Finding clarity amidst noise and confusion is a problem for many treasurers, faced with a barrage of regulations, market volatility and geopolitical shocks. So in the world where Black Friday, Cyber Monday, Christmas markets, short days and long nights prevail, where should treasurers be focusing their time and attention?

Corporate cash balances continue to grow to record levels, both in companies’ home market and overseas, creating a growing challenge for corporate treasurers. In September, for example, Capital Economics calculated that US companies alone are holding $2.5 tr outside the US, an increase of nearly 20% in two years and nearly 14% of US gross domestic product (GDP). While the rationale for holding large surplus cash balances varies across organisations, depending on their working capital, business investment, tax and M&A strategies, the task of managing this cash falls to treasurers. 

Not every corporation or industry is enjoying a feast of plenty, however: while the top 50 companies in the world are sitting on huge cash piles, particularly those in the technology and healthcare sectors, many others are having to tighten their belts. This does not mean that cash investment issues are not relevant: Even those that are not enjoying a cash-stuffed turkey this Christmas still face challenges on how to manage (and avoid erosion of the value of) cash required for working capital purposes, to provide a buffer against changing revenue dynamics, pay down debt or fund planned investment/M&A. In the past, rolling overnight deposits or money market funds (MMFs) may have been the default investment options for these companies, regulatory and market challenges are forcing treasurers to revisit their investment policies and strategies. A new era brings apprehensions, uncertainties and the end of some things that were familiar, but it also brings new potential and opportunity.

Mapping the regulatory pathways

Treasurers are typically well-versed in the need to understand and manage the impact of regulatory change, and I can think of few periods over the past 20 years that treasurers have not had one or more regulatory or accounting change on their agenda. Today, however, the number and degree of these changes is unprecedented, not only those that impact directly on corporate treasurers, such as changes to money market fund (MMF) regulations in the US, but also indirectly, including banking regulations such as Basel III. As Jennifer Doherty, Global Head of Commercialisation, Liquidity & Investment Products at HSBC illustrates,

“2016 has been a very busy year with a number of regulations taking full force. MMF reform in the United States and now more recently in Europe as well the bedding down of Basel III in its various forms has seen a step change in the way we are all approaching liquidity. Added to this is the continual low interest rate environment in Europe which is a juxtapose to the rising rates environment in the US.”


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