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Corporates demand safeguards for their cash

Companies must guard their cash more zealously than ever before and deploy it more efficiently as economies slow. Banks with the right products to help them will prosper. Those don’t include high-yielding cash funds. Peter Lee reports.

ANY INVESTOR IN bank stocks looking for bright signs amid the recent collapse in earnings should take a careful look at those banks with sizeable corporate cash management franchises. For banks, cash management is the classic counter-cyclical business – one that receives a boost from financial market calamity, reduced risk appetite and tightened lending standards.

In good times of ample and cheap liquidity, corporate treasurers and CFOs might consider projects to wring greater efficiency from their payments and receivables processes, to reduce reconciliation errors, improve monitoring and forecasting of cashflows and, where cash surpluses persist, at ways to pool and invest those so as to generate returns.

But making the business case to a board of directors to press ahead with new systems and procedures can be tough. These can look like luxury projects. It’s when the tough times hit and cash becomes scarce that the need becomes more urgent for corporate treasurers to husband every dollar flowing through their businesses.

"Those projects can take time to implement and boost your bank’s P&L," says Marilyn Spearing, global head for trade finance and cash management corporates at Deutsche Bank. "But the economic outlook and turbulent financial market conditions are coming together to make a compelling business case for corporate treasurers to upgrade control of their cash.

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