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Safety and liquidity are priorities as corporates build cash holdings

Safety is the most important objective of an organisation's cash investment policy and many companies are increasing their cash holdings, according to the 2016 AFP Liquidity Survey.

It found that 68 per cent of treasury and financial professionals with a written cash investment policy said safety was the priority. Just two per cent said the main objective was yield and 30 per cent said that liquidity was the main consideration.

The survey also found that 32 per cent of respondents said that their cash and short-term balances in the US had grown in the past year, compared with 21 per cent that said they had decreased, while 47 per cent said there was no significant change. For cash holdings and short-term balances outside the US, 58 per cent of respondents said there was no significant change in the past 12 months.

Jim Kaitz, president and CEO of the AFP, said: “Bank deposits continue to hold the majority of corporate cash and short-term investments, and banks also play a role as sponsor of both onshore and offshore money market funds held by organisations.”

Other findings from the survey include:

  • 85 per cent of respondents use banks as a resource for information about operating cash and short-term investment holdings.
  • 90 per cent of treasury and finance professionals cite their overall relationship with their bank as an important factor when choosing a bank for short-term cash investment.
  • 71 per cent of organisations with cash and short-term investment holdings outside the US maintain most of their holdings in bank-type investments, including certificate of deposits and time deposits.
  • 55 per cent of corporate cash holdings are in banks.
  • With the SEC ruling on money funds taking affect this October, 62 per cent of respondents plan to make changes in how they invest in prime funds.
  • 73 per cent of organisations have a written investment policy that dictates their short-term investment strategy.
  • 86 per cent of larger organisations with annual revenue of at least $1bn have written investment policies compared to 58 per cent of smaller organisations.
  • Publicly owned organisations are more likely to maintain written investment policies than private entities (88 per cent versus 54 per cent).

The survey received feedback from 787 respondents.  The infographic below shows more data:


This item appears in the following sections:
Cash & Liquidity Management
Cash Concentration in Liquidity Management
Global Cash & Liquidity Management
Global Cash Visibility
Liquidity Risk Management
Partner Banking & ICM Solutions
Releasing Trapped Cash
Releasing Working Capital

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