It is early days yet, and there is still plenty that can go wrong, but developments in the conflict in Iraq this month have helped clear up some of the uncertainties surrounding the war. In particular, the prospects of long drawn-out guerilla warfare seem to have receded. There can be little doubt that there will continue to be problems but at least some sort of shape, and hope for a better future, is taking place.
Along with Saddam, one small element of uncertainty dogging the financial markets has now disappeared and other recent events are also showing a certain amount of new-found stability. Firstly, the latest budget (did anyone notice how Saddam cunningly used budget day as cover for his capitulation in Baghdad?): John Whiting, Tax Partner at PricewaterhouseCoopers, described it as “an espresso Budget, although somewhat reheated! Short, dark, an attempted pick-me-up, with the odd sweetener, and the sense that we have tasted it before.” (His colleague, Mohammed Amin, provides a more detailed summary on page 15). In addition, The Bank of England’s Monetary Policy Committee has held rates for the time being. Notwithstanding that some feel rates could have been cut, this still gives the impression of stability.
Our worst fears seem not to have been realised and there may almost be room for some cautious optimism. But why ruin that glorious feeling which comes from being a doom and gloom merchant? Plenty can still go awry in the Middle East; economic prospects in the US and Europe are very uncertain, with the clouds of pensions liabilities, rising unemployment and growth stagnation still refusing to disappear over the horizon. In the UK, the Chancellor is intent on saying there is little wrong but we have our own cumulonimbus – property prices, consumer debt, reduced tax income combined with an increase in public sector spending, resulting in increased government borrowing.
For treasurers, these clouds have a silver lining of sorts in that they represent an opportunity to prove your real worth. The risks in business are considerable at the best of times but companies are now more exposed than at any time in the past 30 years. Equally, the opportunities are there for those companies which are strong (and brave) enough, and, you could say, have the best treasurers. To help you on the way, this month’s Spotlight examines what risks there are and how treasurers can best manage them. And, in the June Spotlight, we examine other ways in which treasurers can provide added value and underline the business case for treasury.
Traditional aspects of treasury still need to be managed in such a way as to provide maximum value. One area which is increasingly used by treasurers to manage their liquidity is money market funds. In a new departure for The Treasurer, in the next three editions we are running a special feature: Money Market Funds – a critical appraisal.
So, whether at the ‘risky’ or the ‘traditional’ end of treasury, I would advise you to take a deep breath, brace yourself and start heading for that light at the end of the tunnel. Just keep an ear open for the sound of an oncoming train.
MIKE HENIGAN
Managing Editor