The need to understand customers’ needs and the ability to optimize them by delivering services accordingly has given vent to analyzing liquidity management in the industry. It is important to note that this analysis has revealed some trends in allied corporations like the media and other technological driven with similar characteristics in liquidity and investment management.
The burden of cash
Many technological companies are rich in cash and have surplus liquidity. This in turn vides towards investment needs rather than routine borrowing or working capital purposes. In theory, we can assume that the challenges facing treasurers is how to invest such surplus cash, it is not as simple as that, this is because the volume of cash involved create a dilemma of either centralization or straight investment including how best to invest them.
This is because such corporations have relatively small overhead and their infrastructural requirement is low. They tend to outsource their manufacturing while the corporations in media, telecommunication and technology tend to promote the culture of working from home. As recently as May2020, twitter social media Tech Company said their staffs could remain and work at home till 2021 while considering the staffs working at home for eternity.
The menace of cash in such corporations has given treasurers a nightmarish situation of whether to centralize in large cash pools, or create much larger pools in different geographical locations. While these companies are innovative in their product lines, services and business models, they remain largely conservative in their investment decisions. Security of capital remains of primary concern. In this regard, the investment decisions of the treasurers would be in segmenting cash into different trenches of investment portfolios with different returns, duration and liquidity requirements ( working capital, reserve cash and strategic cash for example)is a key element to a successful investment.
Evolving investment opportunities
Outside managing large volumes of cash, the importance of automation and efficiency within the TMT corporations’ treasurers is an idea catching on; there have been drive toward adoption treasury management technology integrated with online dealing portals as well as electronic banking tools.
By seamlessly integrating cash and liquidity management activities with investments, treasurers gain the benefit of diversification, same day access to liquidity, and potentially higher investment returns without compromising on visibility or control over cash. Investment bankers would need to be more innovative to bring on board multipurpose investment tools and template if they are keen to get their hands on huge cash being generated by the TMTs who in turn stands to benefit from and harnessing these banks expertise and detailed market knowledge. Treasurers would get access to timely market updates and information on emerging solutions.