The business case for liquidity optimisation: Why, why now and how?

Events of the past two years have further boosted the importance of optimising liquidity, while simultaneously driving a shift in the liquidity strategies of many treasuries. This, in turn, has precipitated a change in the way banks support their corporate clients.

While a broad range of factors have emerged from the general economic malaise to influence these changes, three in particular have been prominent from a treasury perspective counterparty risk cost and availability of credit and bank relationships.

Counterparty risk

Treasurers' perception of counterparty risk has changed dramatically since the autumn of 2008. While managing counterparty risk has always been an element of the treasurer's role, it has often been secondary to other types of risk management such as interest rate and foreign exchange. Counterparty risk has typically been limited to setting and monitoring counterparty exposure limits for surplus investment and foreign exchange, which although a valuable discipline, does not fully recognise all the...

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