The cash and liquidity management priorities for 2012 look pretty simple. While the macro environment is so uncertain, treasurers have to ensure their companies have the liquidity they need to survive. That means adopting a conservative attitude to holding cash, and with question marks hanging over the banking sector it also means keeping counterparty risk under constant surveillance. It’s a lot harder to do than it sounds, when every day brings a fresh, and not usually pleasant, surprise.
With the imperative to have liquidity accessible for the day-job and a reserve for the unforeseen, it’s tough to get anything like a decent return for that hard-won cash. Recent research has confirmed that holding onto cash these days provides only a meagre return that may not even keep pace with inflation. Normally the sensible course would be to find a better return for the company’s assets. But we are not living in normal times, so for the moment at least, when applying the old mantra of security, liquidity and yield, the emphasis should be on the first two.
