Risks are crowding in again. The euro zone seems determined, in the helpful words of the governor of the Bank of England, to tear itself apart. Growth is somewhere between disappointing and anaemic in many parts of the global economy. And even well-respected banks such as JP Morgan have demonstrated how the world of business can fail to keep hold of anything approaching common sense by losing $2bn (£1.3bn) on a series of high- risk trades.
What happened at JP Morgan is due to be laid bare at a US Senate committee early this month, but the episode, along with the tremors hitting Spanish banks, will be a barely needed reminder to treasurers that counterparty risk remains a serious concern that needs to be constantly monitored.
The financial sector seems determined to head for the abyss and many in Europe appear to be rejecting the austerity medicine prescribed, creating political mayhem across the globe. And at the same time as all this is going on – and just to prove what strange times we live in – Facebook has managed to float in an initial public offering that valued the social networking site at a mind-boggling $104bn. That number is more or less the cash on the balance sheet of Apple, another highly rated IT company beloved for its iconic products. (See the Summer Cash Management supplement distributed with this issue of The Treasurer for more on the cash reserves of Apple and other nonfinancial companies.)
The astonishing rise of Facebook is a stark reminder that in many sectors the accepted business model is being ripped up. It is a cliché that business desires stability above all, but when instability is the dominant theme it is treasurers who are better placed than any other professionals to help their companies come to grips as much as possible with the risks, downsides and yes, even in these days, the potential upside.
The truth is that most of us are spectators at these global affairs.
Most corporates and individuals can do little to influence the course of events. However, businesses need to do all they can to prepare for a range of possible outcomes and that means some hard work at a senior level to put detailed contingency plans in place. Few of us know what will happen and when. But treasurers must continue to collaborate with others to manage through these momentous events.
PETER WILLIAMS
EDITOR
