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A Risk-Averse Approach to Cash Investment As economic and regulatory challenges create greater complexity in managing cash, treasurers have become aware of the importance of defining and delivering on the right investment policies.

Learn how the study results can help you improve your short-term cash investment strategies and gain transparency into investment risk. Click here to view the webinar and download a copy of SunGard's 2013 Corporate Cash Investment Report.

A Risk-Averse Approach to Cash Investment

Findings of the Corporate Cash Investment Study 2013

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

SunGard recently commissioned a study amongst corporate treasury professionals to understand attitudes to cash investment, including strategic cash holdings, asset allocation, investment policies and transaction execution. This follows similar studies conducted in 2011 and 2012, allowing trends and developments to be monitored over time.

Respondent Profile

The study attracted responses from 161 corporations globally. This included respondents from all regions and industries, with 49% of companies headquartered in North America and a significant number of responses from Europe. Most of these had a centralised approach to treasury management, with 91% of respondent organisations having either a single global treasury centre or regional treasury centres.

The majority of companies involved in this study had already centralised their treasury at a global or regional level. Of those companies, 60% represented a single, global treasury centre, and 31% of companies are adopting a regional treasury approach.

Approach to cash investment

Surplus cash balances

Companies hold cash balances for a variety of reasons. In the short-term, cash is required for working capital financing (noted by 35% of respondents, an increase of 6% on the 2012 study, emphasising the growing importance of working capital management). A large proportion (27%) also hold cash to finance capital investment, fund mergers and acquisitions (M&A), pay down debt and pay dividends to shareholders. In addition, 13% of companies noted that they held surplus cash as a ‘buffer’ against dips in revenue in the future, a fall of 4% on the 2012 study, potentially as a result of a slight increase of confidence in economic recovery.

Thirty-five percent of the companies had not experienced any material change in their cash balances over the past 12 months, while 43% of companies noted an increase, more than a third of which had seen a significant increase. This is consistent with the findings in 2012. Revenue growth, working capital improvements and arrangements to protect the company against future liquidity constraints or to fund future investment were amongst the primary reasons for this. 22% of the respondents reduced cash balances, typically as a result of M&A, capital investment, paying down debt or returning cash to shareholders.

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