In an article for Trade and Forfaiting Review, Rossi, who is global head of liquidity and investment product development and UK head of institutional cash management at Deutsche Bank, says the fundamentals of corporate treasury management have not changed. “There is nothing new about the treasurer’s basic dilemma: liquidity management will always need to strike a balance between having sufficient spare cash, and losing interest that could have been earned on idle cash kept back for contingencies.”
“However, negative interest rates,” continues Rossi, “along with the effects of financial regulation, have combined with geopolitical volatility and economic uncertainty to subvert old rules and turn the habits on which treasurers have relied for decades completely upside down.”
“What is new,” Rossi continues, “in our post-crisis financial landscape is the fact that leaving cash on deposit may cost rather than earn a company money. Also, suddenly treasurers face having a bank decline to give a return on cash, because it is the wrong kind of corporate cash (non-operational rather than operational).”
Rossi has recently outlined a fresh approach, and new strategies, for treasurers to follow when managing their companies’ liquidity in the changed financial environment in a white paper she wrote for Deutsche Bank’s global transaction banking unit entitled ”Liquidity Management: Thriving in a New World”.
“These are times for treasurers to look lively, react nimbly and pre-empt developments as best they can,” says Rossi. However, they can be assured of plenty of help from their banks that should now be offering corporate customers one-stop platforms connecting the many kinds of different investments in one place, allowing them to plan, simulate and make customised investments that meet their companies’ specific risk, return and liquidity needs.
The full article in the October 2016 edition of Trade and Forfaiting Review can be read online (with subscription) here.
Deutsche Bank’s white paper “Liquidity Management: Thriving in a New world” can be downloaded for free here.