2017 Liquidity Risk Survey - Corporate Treasury Consultants€¦ · firm advising on treasury,...

2017 Liquidity Risk

Proprietary & Confidential: Strategic Treasurer © 2017

1

Analysis of Results & Key Findings

2017 Liquidity Risk Survey


June 2017

Co-Presented By:

http://strategictreasurer.com/?utm_source=proposal&utm_medium=pdf&utm_campaign=bellin-2016

2017 Liquidity Risk


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About the Presenters

Craig Jeffery, CCM, FLMIFounder & Managing Partner

Strategic Treasurer

Strategic Treasurer is a consulting firm advising on treasury, financial risk and risk technology issues. Their seasoned treasury consultants efficiently work alongside financial executives in treasury, finance, and other related areas within corporate, government, education, and not-for-profit entities.

Capital Advisors Group, Inc. is an independent SEC-registered investment advisor specializing in institutional cash investments, risk management, and debt finance consulting. Since 2003, Capital Advisors Group's debt placement consultants have advised more than 428 companies with debt needs of approximately $2 billion.

Ben CampbellChief Executive Officer

Capital Advisors Group


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Topics of Discussion

Survey Demographics

Key Survey Takeaways

Analysis of Key Findings

Final Thoughts, Q&A

Survey Objective

To shed light on treasury departments’ efforts to mitigate liquidity risk in short-term cash investment, debt, and forecasting practices and changes over time.


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Survey in Context: Prior Years


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Survey Demographics

The survey ran for approximately 1.5 months from March into May.

The survey captured responses from approximately 130 corporate practitioners.

The 2017 edition is the 8th annual Liquidity Risk Survey hosted by Strategic Treasurer and Capital Advisors Group.

Respondent Breakdown:31% were Treasury/Cash Managers19% were Treasurers, 18% Analysts

65% had revenues over $1 Billion22% revenues exceeding $10 Billion

70% operating in more than 1 country43% operating in 11+ countries

76% had 4+ treasury staff globally31% had 11+ treasury staff


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Key Survey Takeaways

Corporate Investment Policies are a Low Priority• 37% have not made any changes to their corporate investment policy in the past 2 years.

• Only 23% have updated their investment policy in the past 6 months.

Firms Continue to be Overexposed & Uninsured with their Bank Deposits • 68% of respondents used bank deposits as short-term investment channels.

• 72% had either no policy limits on uninsured bank deposits, or the limit was over $10 million.

• 39% had a minimum credit rating of BBB+ or lower for uninsured deposits.

Counterparty Exposure is Under Greater Scrutiny • 78% of respondents collected and reviewed total counterparty exposure in aggregate.

• Bank Deposits & Lines of Credit were the areas most frequently monitored.

Credit Facilities Take Front & Center • 59% of respondents renegotiated their credit facilities within the last year.

• 50% had more than one maturity date, with 34% intentionally staggering maturity dates.


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Corporate Investment Policies are Infrequently Updated

23%

20% 20%19%

10%9%

0%

5%

10%

15%

20%

25%

Within thepast 6

months

Within thepast 12months

Within thepast 2 years

More than 2years ago

I don't know We do nothave an

investmentpolicy

When did you last update your corporate investment policy?

Most corporates have not updated their investment policies within the past year.

Nearly 1 in 5 did not have an investment policy or were unaware of the last time it was updated.

These figures have stayed roughly even over the years.


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Corporate Investment Policies – Changes Made

7%

13%

23%20%

9% 10%

19%

7% 5%

41%

6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Shortenedallowablemaximummaturities

Lengthenedallowablemaximummaturities

Restrictedpurchases ofspecific more

riskysecurities

Added assetclasses

Removedasset classes

Reinstateduse of moneymarket fund

portals

Modifiedmoney

market fundlanguage toreflect new

floatingprime funds

Raisedminimum

credit ratingrequirements

Loweredminimum

credit ratingrequirements

N/A Other:

What revisions have you made to your corporate investment policy in the past 2 years? (Select all that apply)


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Bank Deposits: Overexposed & Uninsured

68%

23%

28%

11%

13%

5%

24%

14%

8%

12%

27%

8%

10%

10%

3%

6%

5%

16%

0% 20% 40% 60% 80%

Bank deposit (DDA, Sweep, MMDA)Certificate of Deposit

Money Market Fund (Fixed NAV) - DirectMoney Market Fund (Floating NAV) – Direct

Money Market Fund (Fixed NAV) - Independent PortalMoney Market Fund (Floating NAV) - Independent Portal

Money Market Fund (Fixed NAV) - Bank PortalMoney Market Fund (Floating NAV) - Bank Portal

Registered Investment Advisor / Separate AccountCorporate Debt (i.e. direct purchases of CP)

Government SecuritiesMunicipal Securities

Short Term Bond FundAsset-Backed Securities

Variable Rate Demand NotesRepurchase Agreements

Other:N/A

In the past year, what US (domestic) investment channels did you use for short-term funds? (Select all that apply) Bank Deposits

continued to make up the vast majority of all short-term investment channels used by respondents.

However, the use of bank deposits fell by 9% compared to 2016.


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13%

6%

9%

13%

6%

14%

11%

2%3%

23%

0%

5%

10%

15%

20%

25%

What is the minimum credit rating for uninsured bank deposits allowed by your

company's investment policy?

While 16% of respondents had a minimum credit rating of BBB+ or lower for uninsured deposits, almost 1 in 4 had no policy requirement at all.

These figures have remained in-line with 2016 data.


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19%

2% 3%5%

32%

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

< $1 million $1 - $3million

$3 - $6million

$6 - $10million

> $10 million No policylimits

What is the maximum dollar value exposure to uninsured bank deposits allowed by your

investment policy?

72% of respondents either had a maximum dollar value exposure of greater than $10 million, or had no policy limits for uninsured bank deposits.

While the number of respondents with no policy limits dropped by 12% from 2016, the number with policy limits in excess of $10 million increased by 17%.

Given there is no FDIC coverage for uninsured deposits, all funds stand to be lost in the event of a bank failure.


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Counterparty Exposure – Aggregate Views

61%

31%

21%

32%

48%

34%

22%

3%

0%

10%

20%

30%

40%

50%

60%

70%

From which of the following investment channels does your company collect and review total counterparty exposures in

aggregate? (Select all that apply)

In total, 78% of firms were collecting and reviewing their counterparty exposures in aggregate.

With regards to specific areas, Bank Deposits and Credit Facilities were the areas of highest scrutiny for respondents.

Bank Deposits are the most frequently used short-term investment channel for respondents, while credit facilities have come under greater scrutiny in recent years.


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Counterparty Exposure – Visibility Levels

79%

62%

44%

20%27%

54%

37%

48%

24% 20%

5% 4% 4% 4%0%

4% 6% 4%11% 11%

2% 3% 4%10% 7%

11%17% 14%

19% 16%

4% 4% 4%

14%

3%8% 10% 8%

4%9%

0%10%20%30%40%50%60%70%80%90%

Please indicate the level of frequency at which you have visibility (systematically) to various counterparties.

Daily Weekly Monthly Quarterly


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Counterparty Exposure – Banks & Lines of Credit

69%

33% 32% 35%

20%16%

51%

34%

59%

27%22%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

For which of the following do you monitor counterparty exposure? (Select all that apply)


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Firms Ramp up Monitoring of Credit Counterparties

15%

43%

26%

16%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

No Informally andoccasionally

Formally Formally and it isa significantfactor in ourrelationship

decisions

Do you actively monitor your credit counterparties (debt, consolidations)? 85% of respondents

actively monitored their credit counterparties; 7% more than in 2016.

10% more respondents were formally monitoring their credit counterparties in 2017 compared to 2016.


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38%

21%

24%

10%

7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Within 6months

6 months to 1year

1 year to 2years

More than 2years

We do not havea credit facility

When was your most recent negotiation or renegotiation or your credit facility/facilities?

Credit Facilities: Frequent Renegotiation

While most respondents had not touched their investment policies in over a year, nearly two-thirds had renegotiated their credit facilities within the past 12 months.


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Credit Facilities: Multiple Maturity Dates

17%13%

50%

34%

0%

10%

20%

30%

40%

50%

60%

We have no creditfacility/debt

We have one pieceof debt and onematurity date

We have more thanone maturitydate/period

We intentionallytry to stagger when

our facilitiesmature

Which answer best describes the maturity dates of your credit facilities and other types

of debt? (Select all that apply)

Exactly half of respondents had more than one maturity date or period for their credit facilities; 11% more than in 2016.

34% of respondents intentionally staggered when their facilities mature, 5% more than in 2016.


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Final Thoughts, Q&A

Corporates need to take a serious look at their investment policies.

Uninsured Bank Deposits still represent an area of exposure for many firms.

Counterparty exposure is on everyone’s mind.

Credit facilities face intense scrutiny from firms.


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Craig Jeffery, CCM, FLMIFounder & Managing PartnerStrategic Treasurer

Email: [email protected]: +1 678.466-2222

Ben CampbellChief Executive Officer Capital Advisors Group

Email: [email protected]: +1 617.630-8100


mailto:[email protected]

mailto:[email protected]

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