An ominous weekly rates report from the Royal Bank of Scotland (RBS) has hit the headlines with forecasts of gloom and possibly doom for the year ahead. It urges investors to “sell mostly everything” in expectation of a very bad year ahead for global markets, triggered by the slowdown in China and forecast devaluation of the yuan.

RBS's European Rates Weekly, dated 8 January, warns the bank's clients of risks ahead in 2016: “We think investors should be afraid that the ominous outlook for the world in our Year Ahead has been borne out (ex-ECB cuts) over the past six weeks.” It adds that the priority is now “return of capital, not return on capital” and that the coming year is looking a lot like 2008.

Oil already plunging

The analyst's forecast is that European and US markets could fall by between 10% and 20%, while the price of oil could fall to $16 a barrel. In fact it briefly plunged below the $30 barrier on 13 January. The FTSE 100 is particularly at risk, according to the report, due to the predominance of commodity companies.

Jobs at risk

RBS is bearish not just on global commodities and oil but also on China. It says the world has far to much debt to be able to grow well. It also predicts that automation will destroy 30-50% of all jobs in the developed world.

Reaction from corporate treasury?

So how should corporate treasurers react to this news?

There is little any corporate treasurer can do to mitigate in any meaningful way against the risks associated with another global financial crisis of 2008 proportions. If another serious economic shock and depression are on the cards then it will affect practically all areas of the global economy and no one will be immune. And conducting your business in a vacuum isn't an option.

Time to assess exposures

However, corporate treasurers can ensure that they revisit their risk management framework and make sure they have a full, up-to-date and transparent understanding of their exposures, including their bank counterparties, supply chain risks and any exposure they may have to equities. FX rates will also be a key risk to manage in the coming year, with predictions across the board of significant FX volatility in the year to come.

Is doing nothing the best option?

Moreover, not everyone agrees with RBS's gloomy outlook. David Blanchflower, an economist at Dartmouth College and a former member of the Bank of England’s monetary policy committee, told the Guardian: “This is a scary warning from RBS but it doesn’t seem sensible to spook investors. As Keynes made clear, consumer and business confidence matters – he called them animal spirits. Volatility is high but a great collapse doesn’t seem to be in the air. It doesn’t make sense to talk down markets as that can become self-fulfilling.”