Cash Is King

With Treasuries at all-time lows and bank lending still declining, companies are reorganizing their treasury operations in record numbers as they strive to increase efficiency, reduce costs and make best use of their internal cash. According to a recent survey by JP Morgan Treasury Services, 61 percent of companies polled had either just completed a treasury restructuring, were in the process of restructuring, or were building the business case for a restructuring.

The poll of 182 treasury executives—primarily from large corporations--found that 35 percent were implementing systems that would allow the company to get a global cash balance, 25 percent were reorganizing their bank account structures to reduce their number of banking partners, and 19 percent were restructuring their cash concentration programs to make use of extra cash for self-funding or debt repayment.

The need to make more efficient use of existing cash balances has been a growing theme throughout the crisis and continues to be a big driver of corporate treasury reorganization, as we discussed last week.  Swiss logistics company Panalpina, for example, recently went through a restructuring and treasury refocusing to reduce group-wide operating costs and better manage FX and interest rate exposures in the current market. The firm underwent a full review of its foreign exchange management and investment policies in order to more efficiently manage counterparties and instrument tenors, and better hedge FX exposures. The next step, according to the company, is to move to a single global treasury management system that is integrated with its ERP.

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