Avoiding The Next Liquidity Squeeze

High on corporate treasurers’ agenda – getting ready for the next global financial crisis


Earlier this year, Victor Penna, managing director, head of corporate sales and treasury solutions at Standard Chartered, asked a roomful of corporate treasurers whether they thought another major global financial meltdown would happen in six months. About 15% of treasurers raised their hands.

What about in 12 months, he asked? This time about 80% showed their hands.

The treasurers, it should be said, were not from small to medium-enterprises in countries where currencies are running through a patch of volatility.

They were from two classes of corporates—global companies looking to optimize their treasury operations in Asia and the Middle East, two of StanChart’s prime markets, and Asian companies in expansion mode.

The latter include Chinese companies “going out” from the mainland, and Asean companies looking to take advantage of new technology, regulatory easing and growing consumer markets.

So why the caution? “There’s a sense that the time is now for building protection against a future crisis,” Penna told Global Finance at Sibos in Singapore. “Treasurers are investing in better systems now because they never want to be caught in a liquidity squeeze again.”

He adds: “A crisis may hit in any way, but it always amounts to the same thing at the outset: liquidity freezes. At this point, they’re not able to hedge proactively, just when they need to.”

There is a push among global treasurers to develop systems that enable them to measure their exposures in depth—as it applies to all liquidity positions, and how movements in one or more positions affect the other.

Like a motorist in the outback, they don’t want to be stuck with a flat without a tire iron.

This, of course, is classic risk management based on the value-at-risk model. The fact that it is surfacing, suggests Penna, has much to do with the legacy of the financial crisis.

“It is only now that they [corporates] are tapping into the possibilities of a changing global treasury market,” he says, having spent so much time simply ensuring that treasury operations were durable and operable since the market collapse over five years ago.

In Asia and the Middle East, Penna says treasurers are looking to upgrade regional treasury centers, in-house banks, payment factories and a substantial number of them are seeking cloud applications.

Penna says he has more than 100 projects currently running in his practice and that at least a quarter of them have a cloud element to the implementation.

His unit is outfitted to design and manage corporates’ in-house reengineering. Penna’s team of 12 includes eight former corporate treasurers from diverse companies such as Chinese telecom and tech giant, Huawei; French materials supplier, Saint-Gobain; and cosmetics giant, Avon.

Now bankers, they have a common point of view with treasurers. “We’ve been there,” says Penna, “We understand where they’re coming from.”