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Treasury Management

Year in Review: Europe, Elections, Rules and More

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January 04, 2013

Although year-end brought a hint of certainty, 2012 saw a continuation of the challenges born of the financial crisis. Here is our list of the Top Ten stories that best described 2012.

Tragedy and comedyContinuing the theme of the last several years, 2012 was a tumultuous 365 days. And we have the stories to prove it.

In no particular order, the following top story lines depict the on-again, off-again concerns with Europe and the prospect of a Greece or other Eurozone countries exiting the euro; changing dynamics in global treasury organization deemphasizing centralization in the US or Europe to help focus support on business in growth areas of the world; continued trouble in developing economies that hinders their ability to take up the slack for slower growth in the US and Europe; the changing nature of credit and counterparty risk assessment as post-crisis responses have become part of the new every day; the rapid change taking place in banking and the impacts on bank relationship management; and, finally, the growing impact to be felt from fiscal imbalances plaguing public sector institutions, while so many private-sector corporations have been hoarding cash.

We’ve covered most if not all of them in International Treasurer and iTreasurer.com. Those we didn’t specifically dissect, we wrote about their impact on treasury. For instance, most recently we wrote about the effects of going over the Fiscal Cliff.

So without further ado, here is a list of the Top Ten stories, selected by our editorial team, that we feel captured the essence of a temperamental year. While we’ve ranked them as a Top Ten, they could actually be in any order, given their importance at their moment in time in 2012:

  1. Europe in the Driver’s Seat. In terms of Europe, the continent’s problems were very much like the month of March: in like a lion, out like a lamb. But given the up and down nature of the crisis throughout 2012, treasurers should expect a continuation of that trend, and thus should continue staying vigilant. This story (and embedded links) describes how treasurers were preparing for 2012, which still will have relevance here at the start of 2013. 
  2. Keeping Treasury’s Ground Game Sound. Faced with so much sturm und drang in Europe and in the US (indeed, around the world), treasurers felt it was time to take stock of how best to support business growth. In this story we advised more treasurers to remind themselves frequently that their principal duty is to support their firm’s business units—all the way down to the local level.
  3. Spreading the Word on CDS Spreads. Having a firm knowledge of the company’s counterparty risks has risen in importance when it comes to managing treasury in uncertain times. In this story we described how members of The NeuGroup’s FX Managers’ Peer Groups had been tinkering with counterparty assessment models to find a proper role for CDS spreads in their analysis.
  4. Getting Back on a Rater’s Good Side. It’s often said that nobody loves you when you’re down and nowhere is this truer than in the world of credit ratings. In this story we offered some tips for those companies that have fallen from grace. While it’s true ratings matter less these days, turning a negative view into a more positive one is never a bad idea.
  5. Argentina takes a Page from Venezuela’s FX Playbook. While all eyes were on Europe in early 2012, Argentina was imploding and an ever more populist approach to managing the country’s economy. In this story we described how Argentina was trying to stabilize its reserves by stemming capital outflow and by utilizing a Venezuela-like series of rule changes and delay tactics. The Argentine trend is unfortunate, as it would better for the global economy if this country with such a large footprint in what could be more dynamic growth region is following in the footsteps of the one that has been the source of some of the worst economic headaches for multinationals.
  6. Recalibrating Bank Relationships to the New Equilibrium. The year saw a continuation of financial regulation overhauls globally and banks responding to these new rules to their game. Therefore, over the next several years, corporate treasurers should expect to witness fundamental changes in the banking sector as banks seek to reorient their activities to account for new regulatory requirements and a dynamic global business landscape. In response, bank relationship management needs to be recalibrated from its current focus on near-term counterparty risk to more lasting partnerships with are key service providers.
  7. Internationalization of the RMB: A Reality Check. Another story buried below the eurozone crisis rock pile was the internationalization of the Chinese yuan. The RMB has been on what we described in 2011 as a “Long March to International Currency." But at least one observer had doubts as to the likelihood and pace of its success.
  8. In Fiscal Negotiations, US MNC Treasurers Should Worry About Offshore Taxes. With the US presidential election decided, the US watched with interest the political theater surrounding the so-called fiscal cliff negotiations. There were, and remain, many concerns, but the negotiations that may matter more to treasurers of US-based multinationals are those concerning how much offshore earnings will be taxed (regardless of their designation as permanently reinvested) and what they can get in return for paying this tax.
  9. Supply Chain Finance Gaining Favor Again. Support for business at the local level and greater realization for the strategic value of supply chains are giving supply chain finance a higher profile at a time when financial service providers must rejigger offerings in light of the new regulatory landscape. Large multinational companies continue to review and improve their strategies for managing working capital and seek new ways to more efficiently manage the flow of funds through the entire supply chain.
  10. The Principles of World-Class Cash Management. What does it take to establish a World-Class management program? This article provides a closing summary on the main principles derived from the collaboration of The NeuGroup’s Global Cash and Banking Group and Citi’s Treasury Diagnostics Group. In times of uncertainty, cash is truly king and those who manage it should deliver the most royal treatment.

Of course, many of these issues will continue into 2013, something International Treasurer will address in its upcoming 2013 Outlook Issue. Stay tuned! Note: Subscribe now to read all the articles mentioned above, plus receive a full year of International Treasurer, access to the entire archive and meeting summaries from The NeuGroup Network of treasury peer groups. Start 2013 right with a free trial to iTreasurer.com!
 

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