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Liquidity Management © David Blair 2013 – [email protected] – Page 1

Liquidity Management

What is liquidity management?

Liquidity management can refer to the practices we use in corporate

treasury to concentrate cash (aka liquidity). Liquidity management

can also refer to the investment decisions resulting from cash

concentration. They go together because, once we have

concentrated our cash, we need to do something with it. This article

will concentrate on the former ie cash concentration.

Why do we need liquidity management?

“Waste not, want not” as the saying goes. Just as we humans need

to shepherd ecological resources, corporations need to manage

cash with care. Cash is a scarce resource these days and,

according to MGI’s Dec 2010 report “Farewell to cheap capital?” [1],

this scarcity is likely to get worse. As a result of multiple rounds of

quantative easing and other liquidity measures undertaken by

western central banks, top corporates can borrow very cheaply on

public debt markets at the moment. But smaller companies are

cash squeezed because banks are contracting their balance sheets

to meet ever tightening liquidity regulations designed to make the

banks less risky and because economic uncertainty and pervasive

risk aversion have sharply reduced their investor pool.

Even in good times, wasting cash by leaving it dispersed and idle

has to be sub optimal for most corporates. Idle cash increases

costs by tying up capital unnecessarily and reduces operational

flexibility. Corporates that use some kind of value based

management like EVA or CFROI and understand from using WACC

that low interest rates do not equate to cheap capital appreciate the

importance of efficient cash management.

The biggest savings in capital efficiency normally come from

addressing issues in the working capital cycle – accounts


receivable, inventories, accounts payable. The resulting cash is a

core responsibility of treasury and is relatively easy to manage,

because money is easier to move than customers, warehouses,

and suppliers.

Cash concentration also enhances control over cash. Cash that has

been centralised can be deployed according to group priorities or

invested according to group investment policy. It is easier to ensure

consistent and compliant use of cash from one location than from

many locations.

Cash concentration also helps to manage and reduce credit risk.

Once we have concentrate our cash to one place, we are free to

invest it in the safest way possible – for instance in a high

availability money market fund – and thereby to reduce our

exposure to banks. This has been a major benefit of liquidity

management during the global financial crisis.

Another benefit is the significant workload reductions that come

from properly implemented liquidity management. Done properly,

liquidity management structures can be thought of as outsource in

house bank type functionality to banks. We reduce the workload in

subsidiaries without significantly increasing central treasury

workload, once the solution is up and running.

Bank relationship management is often raised as an issue when

discussing liquidity management. Clearly banks want corporate

liquidity, especially idle funds dispersed in current account around

the world. Banks appetite for liquidity has increased since the global

financial crisis. But, as described above, efficient cash and working

capital management is increasingly germane to corporates too post

GFC. Concentrating cash helps corporates to deploy liquidity more

strategically for BRM purposes.

The perils of cash concentration


Before we dive into the standard techniques for cash concentration,

we need to consider the corporate context.

Another duty of liquidity management is to ensure that the

corporation has cash where needed, when needed, and in the right

currency. In our enthusiasm for concentrating cash, we must avoid

leaving subsidiaries short of funds – for instance in certain

regulated emerging markets where cross border funding can be

problematic, and may take time to arrange.

Also in the context of regulated and developing markets, we need to

keep in mind the limits of the techniques described below. In some

emerging markets, a weekly manual payment to the concentration

centre may be the best realistic (and cost effective) outcome.

Internal or external?

When discussing cash concentration, we often think of a variety of

bank services like pooling and sweeping (see below). It is worth

remembering that there are a variety of internal business models

that can help concentrate cash – for instance: principal structure,

re-invoicing, commissionaire, single legal entity, etc. And, as

mentioned above, in emerging markets simple manual processes

may be the most cost effective solution.

Precursors to liquidity management

Liquidity management arrangements like sweeps and pools

represent the automation – normally by outsourcing to banks – of

precursor arrangements to ensure first cash visibility and then

control over cash.

Visibility means having next day visibility over global cash. This can

include exchange control countries because for visibility we just

need balance reporting, there is no money moving so no

regulations apply. Visibility is normally achieved with SWIFT or

agency balance reporting solutions across multiple banks.


Control means having access to execute payments from multiple

banks globally. Control is normally achieved with SWIFT or agency

payment messaging solutions across multiple banks.

Liquidity management means leveraging the visibility and control

with an automated system (usually outsourced to a bank) that

concentrates cash globally or regionally.

While this is a logical and necessary sequence, it does happen that

visibility and control are put in place simultaneously as part of a

liquidity management roll out project.

Pool or sweep?

The terms “pooling” and “sweeping” are often used interchangeably,

and the term “cash pool” is often used to refer to sweeping

structures like zero (or target) balance accounts (ZBA). For current

purposes, we will distinguish between notional pooling and

sweeping.

Notional pooling is an arrangement with a bank whereby the bank

agrees to pay credit interest and charge debit interest on the net

balance of a designated group of accounts (and not on each

account individually) – as illustrated in figure 1.

In the above example, instead of receiving credit interest on the

gross credit balance of +500 and paying debit interest on the gross

debit (overdraft) balances of -300 -190 = -490, and incurring

typically very large bank spreads on the difference between the

Notional poolNotional balance = +10

Account ABalance = +500

Account CBalance = -190

Account BBalance = -300


credit and debit interest rates, the corporation would only receive

credit interest on the net credit balance +10.

Key characteristics of notional pools include:

- No movement of funds

- No change of ownership of funds

- Balances remain at bank

- No additional accounting entries

- Bank normally needs right of offset

In contrast to notional pooling, sweeping means transferring funds

from participating accounts into a designated master account (and

the reverse in case a participating account is in overdraft), normally

at the end of each banking day – as illustrated in figure 2.

In the above example, funds are transferred (or “swept”) at the end

of the banking day from Account A to the Master Account and from

the Master Account to the other two accounts, so that Accounts A

and B and C show a zero balance at the day’s close. The economic

result is similar to the notional pooling above in the sense that the

bank pays interest only on the Master Account balance of +10 and

the corporation avoids the spread between bank credit interest

rates and bank debit interest rates.

Key characteristics of sweeping include:

- Movement of funds to and from the master account

Account APre bal. = +500

Post bal. = 0

Account CPre bal. = -190Post bal. = 0

Account BPre bal. = -300Post bal. = 0

Master AccountPre balance = 0Post bal. = +10


- Ownership of funds passes to pool master entity

- Sub account balances become intercompany balances

- Daily accounting entries required

- Bank does not need right of offset

Notional pooling and sweeping are very different ways of achieving

the goal of cash concentration. Which is better for any given

corporation depends on business model, corporate structure,

culture, geography, regulatory context, etc.

Notional pooling

Notional pooling requires that the bank gets the right to offset the

pooled debit and credit balances in the bank’s own balance sheet

so that the bank need not set aside regulatory capital for the gross

pooled balances. If the bank does not have the right of offset from

its regulators then the bank will have to set aside capital to cover

the gross pooled balances; this capital has a cost which the bank

will need to recoup from the corporation somehow, thereby

negating the spread saving described above.

In order to get the regulatory right of offset, banks need to be sure

that they have the right of offset with regard to the client. This

means that bank must have a legally enforceable right to use

pooled credit balances to cover pooled overdraft(s) for instance if a

subsidiary goes into default. This is typically done with a floating

pledge of credit balances to cover any overdraft balances that may

exist from time to time. Some regulatory regimes require that such a

pledge be supplemented with a general cross guarantee, and the

situation can be further complicated based on different jurisdiction’s

bankruptcy practices.

Some regulators do not allow the right of offset required facilitate

notional pooling (for example, USA). Some countries prohibit

intercompany lending and intercompany guarantees; this precludes


cross guarantees, and thereby makes notional pooling impossible.

Many emerging markets prohibit notional pooling directly.

Notional pooling enhancements

Notional pooling has evolved over the decades. One area of

improvement has been multi-currency pooling. Originally notional

pooling was only done in one currency. Later some banks

experimented with overnight foreign exchange swaps to bring in

other currencies, but that proved too complicated and expensive to

be viable. The leading providers now can offer multi-currency

notional pools including 40 or more currencies – albeit with

important caveats (see below).

Multi-currency notional pools offer an interesting alternative to

forward foreign exchange contracts for hedging foreign exchange

exposures. But note that most providers are not efficient enough to

make this economically viable, because their interest rate spreads

are too wide (which compares unfavourably with the relatively low

capital weighting of forward contracts).

Early notional pools were single entity; this obviated the need for

cross guarantees. Multiple entity notional pools are now normal.

Notional pools can now also cross borders, involving entities from

different countries. Cross border pooling raises tax issues (see

below). But note that, for regulatory reasons, all the bank accounts

in a notional pool must be in one bank branch. Some banks offer

multi branch arrangements – for example, interest optimisation –

but this is not as cost effective as true notional pooling because the

bank does not have the right of offset and will therefore need to

recover a capital charge.

Sweeping

From a regulatory perspective, sweeping is simpler. It can be done

in any situation where money can be transferred. Indeed, sweeping

need not be a bank service at all. Many corporate TMS (Treasury


Management Systems) can read in MT942 electronic intraday bank

statements, compute a sweep amount, and then initiate MT103

payment instructions. The same process can be done manually,

given sufficient resources. Most corporations choose to outsource

the process to banks because banks have greater scale in

technology and are more likely to run 24 hour operations needed to

do this globally, and because banks have been doing this for

multiple decades.

Challenges for sweeping include tax and regulatory issues around

transforming bank balances into intercompany balances, and

operational issues around managing and accounting for the daily

sweeps.

The challenges are not insurmountable. They are basically the

same as those facing any in house bank which allows subsidiaries

to go into debit with the IHB. IHB is out of scope for this article.

Interest allocation

In case of notional pooling, none of the accounts intrinsically

receives or pays interest. From a tax perspective (and from an

internal accountability perspective), this can end up looking like the

credit balance accounts subsidising the overdraft accounts. Indeed

tax authorities have attacked notional pools on the basis that they

distort intercompany transfer pricing.

To some extent the same problem can occur with sweeping. Unless

the corporation has an ERP or TMS set up to calculate interest on

intercompany balances, there will be no interest payments other

than at the master account level.

Because of this, most banks who offer pooling and sweeping

services, offer various forms of interest calculation services, where

the bank calculates interest on behalf of the corporate and often

executes interest settlement as well.


The three most common methods are:

- Arm’s length interest. The bank calculates interest on each

account at market rates including a market risk premium. This

results in a profit for the group (which approximates the saving

of bank spread) which would normally be credited to treasury

or head office.

- Gross interest reallocation. The bank allocates the pool net

interest amongst all the pooled accounts in proportion to their

balances such that all pooled accounts benefit equally from

the spread saving.

- Net interest reallocation. The bank allocates the pool net

interest amongst all the pooled accounts which have balances

in the same direction as the pool net balance (normally credit

balances). The distortive effects may be problematic fiscally

and organisationally.

Please note that most providers do not offer flexible interest

allocation, and some do not offer it at all. They will suggest that the

corporate do their own interest allocation. This brings issues of

complexity (especially when dealing with bank spread as well),

workload, and heightened tax risk. Since the method of interest

allocation can have big tax consequences in terms of whether the

balance is considered to be a bank or inter-company balance and in

terms of transfer pricing, this is a more important issue than it might

at first appear to be.

Tax considerations

Tax is beyond the scope of this article and in any case different

corporations will present different tax situations, so it is advisable to

seek specific tax advice on any cross border movement of funds.

Just to give a flavour of the typical issues arising in different cash

concentration arrangements, here are some common tax

considerations.


Many tax authorities restrict related party loans with limits like thin

cap rules, debt to equity ratios, deemed dividends, withholding tax,

etc. Since swept balances become intercompany balances, this is a

problem when using sweeping arrangements to provide

intercompany funding.

Although balances that are notionally pooled remain bank balances

and not intercompany balances, many tax jurisdictions have rules

requiring balances that are supported by intercompany guarantees

be deemed as intercompany balances. Since many banks require

cross guarantees to support notional pooling, this can create a tax

risk for corporations wishing to use notional pooling for

intercompany funding. Just to be clear, cross guarantees need not

trigger deemed intercompany tax treatment – it depends on how

they are built. The specifics in each case will be critical, so specific

and competent tax advice is necessary.

Finding specific and competent tax advice is not easy. There is a

general lack of understanding of notional pooling. Many supposed

experts generalise from single cases. Beware of sweeping

generalisations like “Pooling does not work in [country x].” Look for

more nuanced understanding like “These conditions that must be

met to make pooling work in [country x].” Be aware that tax firms

(and even individual offices) may have internal disagreements on

these issues; so a tax partner in the same firm may be telling your

pooling provider that it works, while another tax partner in the same

firm is telling the corporate that pooling does not work. Be prepared

to educate your tax adviser on the critical nuances of you provider’s

pooling arrangements.

In some cases, it may be beneficial for tax purposes and also for

reporting purposes (for instance to net off pool balances on

consolidation under IFRS-IAS32) to periodically execute a physical

sweep even in a notional pool. Leading providers offer automated

services to execute such sweeps overnight so that the business is


not disturbed. This is typically over a weekend so that it does not

disturb the business.

Pool and sweep

Although we have compared notional pooling and sweeping as

alternatives, in practice they are often combined. In order for the

bank to achieve right of offset, notional pooling is normally done

within one branch. In order to concentrate cash from various

countries, we normally first sweep from in-country accounts to the

branch where the notional pool is run, and then pool within that

branch – as illustrated in figure 3.

The local accounts of the participating subsidiaries are swept to or

from accounts in the pooling branch held in the name of each

subsidiary so that the balances in the pooling branch can be

notionally pooled (or included in some kind of sweeping or ZBA

arrangement if that is preferred by the corporation).

Many corporations prefer to maintain in-country accounts –

primarily to ease collections but also to facilitate local payments. In

particular certain statutory payments must be done through local

banking systems.

Notional pool at pooling branch

Notional balance = +10

Sub A pool a/c

Balance = +500

Sub C pool a/c

Balance = -190

Sub B pool a/c

Balance = -300

Sub A local a/cPre bal. = +500

Post bal. = 0

Sub C local a/cPre bal. = -190Post bal. = 0

Sub B local a/cPre bal. = -300Post bal. = 0


These arrangements are often called “overlays”. The local banks

may be different from the pooling bank. The local accounts may be

in different currencies. The notional pool itself may be multi-

currency, or the sweeps from the local accounts may include

conversion between local currency and pool currency.

Overlays can be multi-layered. For instance, in country pools can

sweep into regional pools, which are in turn swept into a global

pool. Often this was done because of bank’s limitations on offering

a truly global solution. Sometimes this mirrors the corporate’s

regional treasury arrangements. The best providers today offer truly

global solutions.

Although multi-layered pools are still quite common, the trend is

clearly towards single global pools. These are simpler which

reduces operational risk and workload, and also more efficient

which maximises cash concentration – see chart/ figure N.

Regulatory issues

Overlay structures introduce multi-currency and cross border facets

to cash concentration, which tend to increase regulatory complexity.

For instance, a single currency notional pool poses the issue of the

bank’s right of offset as a condition for pooling cost effectively. In

case of multi-currency notional pooling, some regulators take the

view that, even when they have an effective right of offset, banks

must set aside capital to cover foreign exchange risk (in case they

have a shortfall if the currency of a defaulting overdraft account

rises against the offsetting credit account currencies). Banks in

such jurisdictions will have to reflect their added capital costs in

their charges for the pooling arrangement.

The cross border aspect may trigger exchange controls and other

regulatory constraints, in addition to the tax issues discussed

above. Sweeping is generally expected to be an automated

process. The required automation is often not possible in exchange


control environments where paper documentation has to be

submitted and approved prior to payment.

Operational issues

Overlay structures raise some interesting operational issues. The

sweeps need to be carefully timed with respect to the paying bank’s

cut-off times. The standard process typically requires the paying

bank to send SWIFT MT942 intraday statements which the

receiving bank will use to determine the amount to instruct with a

SWIFT MT103 payment instruction. A typical timeline is illustrated

in figure 4 below.

Time Action

15:30 Bank A sends MT952 intraday statement

16:00 Bank B sends MT103 payment instruction

16:30 Cut-off for receipt of MT103

17:00 Bank A executes payment

17:30 Bank A treasury cut-off time

18:00 Central bank clearing closes

The cut-off for the paying account is almost three hours before the

central bank closes. Between customers waiting to the last moment

to pay and banks practicing intra-day liquidity management, these

last three hours are when most collections come in. So the sweep

will miss a substantial part of the day’s collections. Some

corporations use their own cash flow forecasts to make the sweep

instructions, but then they risk running into unplanned overdraft if

they sweep too much.


This loss of value is made worse by time zone issues. A common

example is USD collections in Asia. USD has to clear in New York,

where FedWire closes at 18:00 EST which is 06:00 the following

morning in Singapore and Hong Kong. This means that USD funds

will be coming in with good value for twelve hours after Asian

branches have closed their books. And fifteen hours after the

MT942 on which the sweep was based.

Another issue with time zones concerns the direction of sweeping.

Sweeping westwards goes with the rotation of the earth – often

called following the sun – and facilitates sweeping from Asia to

Europe or Canada – Asia’s cut-off times are early morning in

Europe, leaving plenty of time for bank processing and corporate

investment decisions. Sweeping eastward goes against the sun and

complicates sweeping from Americas and Europe to Asia – Asian

bank branches and treasury centres are closed before the start of

Americas work days, which makes the loss of one value day almost

unavoidable.

In general, sweeps to overlays lose at least one value day.

With this in mind, it may be simpler and almost as effective to wait

for MT940 end of day statements and send MT103 payment

instructions the following morning. This obviates the risk of

sweeping too much and would catch more of the late incoming

funds.

An alternative which avoids the intricacies of inter-bank

collaboration is to set up standing instructions at the subsidiary

bank to sweep to the overlay bank during their close of business

process. This is technically just like doing a sweep to an investment

or deposit account, which is an established capability at many

banks. Some receiving banks will want the paying bank to send an

MT202 advice to receive or a direct copy of the MT103 to ensure

good value.


These less sophisticated alternatives work particularly well in a

follow the sun situation such as sweeping from Asia to Europe.

They do not bridge the information gap, but if the provider offers

good value on funds received, interest yield will be maximised.

Mono banking (using only one bank) might seem attractive from this

perspective, but in fact most bank branches have to manage their

daily liquidity on an almost stand-alone basis for organisational and

regulatory reasons. In other words, banks are not indifferent about

where their cash is located.

Generally, sweeping between two branches of the same bank

brings up the same issues as sweeping between different banks.

The one exception I know of is offered only to extremely large and

profitable clients of the bank, which makes me suspect that it is

done as a loss leader.

Investment

Although I earlier defined the investment part of liquidity

management to be outside the scope of this article, it is important to

understand the flexibility a proposed overlay solution will give for

investing or otherwise deploying the concentrated cash.

The corporate will be looking for

- late cut-off times,

- automatic processing during the bank closing cycle,

- freedom to sweep to other institutions,

- flexibility to specify trigger sweep levels,

- flexibility to change sweep instructions when needed, and

- reasonable default yield when there is no investment sweep.

Business continuity

As with all treasury operations and especially ones based on

technology, it is important to understand the implications of the


overlay arrangements not being available for whatever reasons. Are

manual backup procedures realistic? Are the resources available to

execute the backup procedures? Are the liquidity consequences

survivable? How frequently should the business continuity plan be

tested?

Smoke and mirrors

Pooling and sweeping are conceptually simple. Liquidity

management products are often presented in slick diagrams that

gloss over the complications discussed above. It’s clearly a case of

caveat emptor to avoid disappointments with operational,

accounting and tax hiccups down the road.

One good mitigation strategy is to be very clear and explicit about

corporate objectives for liquidity management. For instance, is the

goal simply cash concentration, which implies only credit balances

and only one way sweeping? Does it include inter-company

funding, implying some accounts in overdraft and two way sweeps?

Does it include foreign exchange hedging, implying a multi-currency

notional pool with zero or minimal spreads?

It is easy to be impressed with broad statements like “We have live

customers pooling across 100 countries and in 40 currencies.”

Corporates need to drill down and ask specifics about each country,

such as in what currency and is it two way sweeping? For each

country, corporates need to ask

- what can be done in local currency and in G3 currencies,

- whether the planned pooling branch has relevant local

currency nostro accounts,

- whether over draft is possible in local and hard currency, and

- whether sweeping is one way or two way.

Additionally, the corporate has to reach comfort on the tax

implications of the proposed arrangement country by country.


Successful reference customers do not guarantee fiscal success

because each corporate has a different tax profile.

Preparing detailed scenarios or use cases setting out operational,

accounting and tax requirements and seeking specific responses

country by country in RFPs helps to preventing misunderstandings.

The selection of the bank branch to do MCNP will require

understanding of the bank’s treasury practices. For example,

Singapore is a good location for MCNPs but the bank’s Singapore

branch may not have the require nostro account to facilitate pooling

Scandinavian currencies.

The proposed fee structure will impact the pool’s usability. For

example, a wide spread between debit and credit interest rates will

preclude using the pool for foreign exchange risk management.

Banks have some flexibility in how they charge for pooling, so it is

important to understand the wider consequences.

It is also important to understand how proposed sweeping

arrangements will handle back valuation. Many solutions do not

handle back valuation at all. Each corporation will have to decide for

themselves how important this is in their business.

A good way to ensure a clear understanding of the pros and cons of

different liquidity management offerings is to include a market

leading specialist in RFPs. This will help highlight operational,

accounting and tax issues at an early stage. The clear leader in

liquidity management capabilities is Bank Mendes Gans – a

boutique corporate treasury services firm in Amsterdam. Mendes

Gans was originally founded by corporates to provide treasury

services, and, since it provides only liquidity management (along

with related netting and IHB services), it does not compete with

global banks for conventional banking business.

Please find below a suggestion of the format for an RFP checklist:


For readability, the table above has been simplified. Some

questions to ask about each country when assessing liquidity

management solutions include:

- (for Local currency and hard currency separately)

- Sweep in

- Sweep out

- Notional pooling

- Overdraft availability

- Credit interest rates

- Debit interest rates

- Ability for corporate to set intercompany interest rates

- Two way sweeps

- Zero balancing sweeps

- Target balance sweeps

- Conditional sweeps (enabling corporate to set sweep minima

and maxima to meet regulatory and fiscal constraints)

- Back valuation

- Cut off times to achieve same day value

- Flexibility of interest allocation / reallocation

In addition to the checklist above, a good metric for liquidity

management evaluation is what we call Total Liquidity Capture.

This is the total amount of liquidity that will be included in the

proposed liquidity management solution when implemented. Total

Liquidity Capture can be compared with total liquidity to determine a

Checklist for liquidity RFP

Country Local currency Hard currency Two

way sweep

Interest rates

Back valu-ation

Sweep in

Sweep out

Pool Sweep in

Sweep out

Pool

� � � � � � � � � � � � � � � � � �


percentage captures by the proposed solution. Also, when

combined with the interest rate information gleaned from the

checklist, Total Liquidity Capture can be used to calculate the

interest saving from interest spread eliminated and improved yield

on concentrated cash. Applying the company’s WACC, we can also

compute the benefit to the business of implementing the proposed

solution.

Where elimination of external subsidiary funding is a major driver of

the proposed solution, measuring Total Funding Capability is also a

useful metric. Calculating Total Funding Capability helps assess the

solution's capability to support local and hard currency overdrafts.

Sweeps and roundabouts

Taxes on transfers are a further complication in some emerging

markets – in addition to regulatory constraints. To mitigate these,

and to manage payment charges in case of very small sweeps,

many cash pooling solutions allow corporates to set minimum

sweep amounts (trigger sweeps) and set target balances. It is also

increasingly common for software to be able to perform any-to-any

sweeps across a designated group of accounts (rather than

sweeping everything to and from a master account). This minimises

overdrafts whilst also keeping transfer taxes and charges at a low

cost effective level.

Target balance sweeps allow corporates to maintain targeted

balances in local accounts. This might be to ensure minimum

emergency funds are always available locally, or to satisfy local

regulatory requirements.

Trigger or threshold sweeps allow the corporate to set the minimum

amount to be swept, with a view to controlling transfer costs. This

might be set from a zero balance or a target balance base.

For some, the regulatory, fiscal and operational challenges will

seem too much. One option might be interest optimisation which


does not require right of offset or movement of funds. Interest

optimisation is basically an agreement under which the bank agrees

to reward the corporate for leaving credit balances in one

jurisdiction with either cheaper loans or higher yields in another

jurisdiction.

Others may opt to do it themselves, either manually or using TMS

functionality to check balances and initiate sweeps.

In any case, there is no need to leave idle cash scattered across

the planet.

Notes:

I would like to express my gratitude to Byron Gardiner who kindly

shared his wealth of experience with me for this article.

[1] McKinsey Global Institute: Farewell to cheap capital? The

implications of long-term shifts in global investment and saving

http://www.mckinsey.com/Insights/MGI/Research/Financial_Market

s/Farewell_cheap_capital

[2] EVA = Economic Value Added is a measure of economic profit.

It is calculated as the difference between the Net Operating Profit

After Tax and the opportunity cost of invested Capital. This

opportunity cost is determined by the weighted average cost of

Debt and Equity Capital ("WACC") and the amount of Capital

employed.

http://www.sternstewart.com/

(http://www.valuebasedmanagement.net/)

[3] CFROI = Cash Flow Return On Investment: Like the IRR

calculation of a project, the CFROI metric is a proxy for the

company’s economic return.

https://www.credit-suisse.com/investment_banking/holt/en/index.jsp



Acarate Consulting

Clients located all over the world rely on the advice and expertise of

Acarate to help improve corporate treasury performance.

Acarate offers consultancy on all aspects of treasury from policy

and practice to cash, risk and liquidity, and technology

management. We also provide leadership and team coaching as

well as treasury training to make your organisation stronger and

better performance oriented.

www.acarate.com

David Blair, Managing Director

25 years of management and treasury experience in global

companies

David Blair was formerly vice-president treasury at Huawei where

he drove a treasury transformation for this fast-growing Chinese

infocomm equipment supplier. Before that David was group

treasurer of Nokia, where he built one of the most respected

treasury organisations in the world. He has previous experience

with ABB, PriceWaterhouse, and Cargill.

David has extensive experience managing global and diverse

treasury teams, as well as playing a leading role in e-commerce

standard development and in professional associations. He has

counselled corporations and banks as well as governments.

He trains treasury teams around the world and serves as a

preferred tutor to the EuroFinance treasury and risk management

training curriculum.

[email protected]

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