There are some astonishing statistics on the amount of cash held by non-financial firms. Around the end of 2013, the average FTSE 100 company held £1.9 billion, US non-financial firms held USD 1.64 trillion, all at record levels. It is worth looking at this from both a corporate finance angle and for what it means for the role of the treasurer.
Risk management is a challenge. Any treasurer who has sat at a dealing desk understands how risky some instruments and positions can be. This has always given them a particular advantage when it comes to looking at all sorts of risk.Risk management is now moving towards enterprise risk and the understanding of it is improving. We now have concepts such as risk appetite and managers are beginning to understand the link between the risk in a firm and the returns that its owners seek. We now have risk management committees and risk officers.
There has been a lot of comment in the press recently concerning the topic of how the movement of exchange rates can influence economic growth in an economy.In broad terms a country with a weak currency should be more competitive compared to one with a strong currency, mainly down to lower labour costs. Accordingly a weak currency should boost exports and hence economic growth, something which almost every country seeks. As a result governments may adopt policies designed to weaken their currency and so provide competitive advantage.
In the UK it is possible, as an individual, to have a basic bank account for free (as long as you stay in credit). The concept was introduced by Midland Bank in 1984 and was followed by almost all the other providers. The concept was, of course, that free banking would entice customers in and then that provided an audience to sell to. So customers who opted for free banking would use savings products, loans and mortgages, as well as insurance products such as house insurance, endowments, etc. The bank also had access to interest free deposits. The model is
The press is full of issues around the manipulation by Barclays Bank of their input into LIBOR calculations. They did this to seek advantage to themselves and sometimes to help out some key contacts. The behaviour has been described variously as criminal, illegal or deceitful. Whatever describes it best, the damage done to the reputation of the bank has been high and this must spread to the reputation of other banks, both in the City of London and elsewhere. Employees move relatively freely between banks and while many banks and their employees have very high integrity, this kind of behaviour
Older treasurers (and possibly younger ones) will recall the days when a bank mandate for a company was a fairly simple affair. There would be panels of signatories and payments were controlled usually by the seniority of the staff. Senior managers gained confidence that they had the final word on cash leaving the firm. That confidence was probably misplaced. Many individuals at different levels can bind the firm with purchase orders, and in fact control should be at that level rather than the actual payment authorisation. Dealing mandates were rarely used; dealers at banks usually had a personal relationship with