‘The outlook that emerges from many forecasts is perhaps best described as "not bad", though inevitably there are risks, some of them quite substantial.’ believes the BBC’s BBC World Service Economics correspondent, Andrew Walker. He cites the International Monetary Fund predicting global growth this year of 3.8% compared with 3.3% in 2014, which is not boom-time, though it would be the fastest growth since 2011. Fund managers expect US equity market and bond yield to rise. But all the forecasts come with several major “unknowns”, which is where the real risks are, such as: 

• the impact of the fall in the price of crude oil: for most countries it means consumers have more to spend on other things and it reduces business costs, but it is bad news for oil exporters and has already hit Russia hard
• how will the US economy progress, and how the FED will roll-back their monetary easing and increase interest rates?
• what will be the impact of the Chinese economy slowing?
• will there be a currency war between China and Japan?
• will the Greek economy generate another Euro crisis?
• how will cyber-risk affect our company (which is now a major concern for most corporate treasurers)
• political risk in many countries, e.g. Turkey, India, Brazil, and Middle East. 

And not only this, the Economist’s analysts point out that all these unknowns are inter-linked, and it is difficult to predict how they will behave together.

The Financial Times report that, ‘Albert Edwards, the famously bearish Société Générale strategist, last year said his “biggest risk” scenario for 2014 was a re-run of the 1997 Asian currency crisis and of deflation that snuffed out weak recoveries in the US and Europe, with a “wave of currency wars and protectionism to follow.” For 2015, he says, his worry list is the same “but worse”.’ While George Monbiot in The Guardian on 19 November 2014, wrote, “Another crash is coming. We all know it, now even David Cameron acknowledges it(In an article in The Guardian on 17 November). The only questions are what the immediate catalyst will be, and when it begins.”

Banks: some continuing services, others focussing on data usage, and others focusing on new models

Although no bank is prepared to be quoted on the potential for another financial crisis, there appears to be a consensus amongst the cash management banks that 2015 will be ‘another challenging year’, because, as RBS’s Carole Berndt points out, “The days when capital was abundant and cheap and regulations light have passed into history.” 

Alex Manson, Group Head of Transaction Banking, Standard Chartered Bank, believes there will be little change and that, “We will continue working for our clients in Cash Management – from Treasury Advisory and day to day servicing and delivery, to the quality of solutions supported by our technology capabilities. We are also looking forward to providing more innovations to our clients, for example in the RMB and Receivables space, as well as the growing mobile and digital channels as part of our product proposition.”

On the other hand, Jennifer Boussuge, Head of Global Transaction Services, EMEA at Bank of America Merrill Lynch, feels there will be changes in how corporate treasuries use data, because, “Treasurers are at the centre of huge data flows throughout their organisation. Understanding this data and putting it to use will enable the treasurer to be more strategic and gain greater influence with the C-suite. They can then be a more strategic partner and support business growth, and we see this becoming more important in 2015. This is where banks can help too – we gather the data, and can help clients to analyse it – it can be very useful & powerful.”

While Carole Berndt, Head of Global Transaction Services at RBS, is looking at new ways of doing business, “Banks are now looking to specialise – doing less but doing it better.” And that, “It also means we have to have honest conversations with our clients. Where can we bring most value? Some tough decisions will have to be made, but most banks will emerge from this detox fitter and healthier, with fewer clients but deeper relationships.” As well as having to develop new partnerships as she explained in her talk at Eurofinance last October, see.

Corporate perspective reducing risk and improving efficiency

Not surprisingly given the continuing/increasing uncertainties in the global economy, corporate treasury departments are continuing to focus on improved cash management efficiency, e.g. 2015 projects for several leading corporate treasuries include:

• finalizing strategic vision regarding “future treasury structure”
• being part of the strategic initiative to go to “One ERP” system
• tidying up the banking/account infrastructure and bank fee analysis
• receiving all bank account balances for subsidiary companies via SWIFT and detailed trade finance data from our two primary cash management banks
• integrating the bank account data with the company’s management reporting system, which will enable management to have an immediate comparison of accounting and treasury cash, and to see the value of subsidiaries’ purchases that are being financed by LCs.

Time to be careful

Not everyone is as pessimistic as SocGen’s Albert Edwards and George Monbiot, but CTMfile believe that 2015 is definitely a time to be very careful and be ready for any major financial crisis that might occur, whilst also taking advantage of short-term opportunities when they arise. The primary focus should be on releasing and protecting your group’s cash: 

1. ensure full visibility and understanding of your global cash position, see:

• Identifying & Investing Cash Surpluses | C&TM File

2. improve cash flow forecasting, see:

• Cash flow forecasting tips: achieving successful rolling forecasts | C&TM File
• Cashflow forecasting: new opportunities for significant improvement | C&TM File
• Cash flow forecasting systems and processes - the search for the holy grail | C&TM File

3. minimise trapped cash, see:

• JPM launches new on-shore RMB money market fund with unique same-day liquidity | C&TM File
• Releasing working capital is the cheapest source of cash, but how can your bank help? | C&TM File
• Eli Lilly Regional Banking & Cash Management Project - impossible achieved in 3 years | C&TM File

4. centralised funding using an in-house bank, see:

• Why Implement an In-house Bank? Advantages, Steps and Consequences
• Volante Technologies: “How to build an in-house corporate bank” | C&TM File

5. optimising pooling and sweeping, see:

• Global cash pooling and sweeping tips and insights | C&TM File

6. optimise working capital throughout the group, see:

• Citi launches Integrated Payables Solutions package to enhance working capital | C&TM File
• WCM in Europe & USA surveys show - key is to maintain best practices regardless | C&TM File
• McKinsey on uncovering cash and insights from working capital | C&TM File