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A good time to re-evaluate your cash forecasting

The current regulatory and macroeconomic environment has had a profound impact on the liquidity standards of banks and their corporate clients, creating…

By Sascha Petrusev, Head of Liquidity & Investment Products Americas, Global Transaction Banking, Deutsche Bank | Updated on September 28, 2015

The current regulatory and macroeconomic environment has had a profound impact on the liquidity standards of banks and their corporate clients, creating a heightened need for corporations to re-evaluate their approach to cash forecasting.

Sascha Petrusev, Deutsche BankCash forecasting has always been fundamentally important, as it aligns with the core objectives of a treasury department: meeting external obligations, minimizing external borrowing costs, maximizing investment outcomes, managing currency positions, and monitoring risk exposures. As corporations face a landscape of low or negative interest rates and changing appetite for deposits due to Basel III standards, they need to take a more proactive approach to cash forecasting, as it is more critical than ever before to employ the right tools and practices to ensure predictability and efficiency of cash positions across the organization.

Current drivers

The interconnectivity between banks and their corporate clients has resulted in corporations feeling the downstream effects of regulation in the banking sector, most specifically Basel III’s Liquidity Coverage Ratio (LCR). The new LCR has created a paradigm shift in the value of client deposits, with different treatment applied across client types (e.g., corporations vs. financial institutions) and balance types (e.g., operating vs. non-operating).

As a result, companies are demanding better visibility and accurate cash forecasting tools to mobilize surplus cash in order to avoid potential bank charges on idle “non-operating” balances or balances held in currencies or jurisdictions facing negative interest rate environments (e.g., euros and Swiss francs).

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