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The Secrets Behind Corporate Cash Hoarding

Large corporations have some hefty cash reserves, and businesses are holding onto it. The Association for Financial Professionals’ Corporate Cash Indicators that were released last April found that corporations in the U.S. are becoming more conservative with spending money.

Similar conclusions were reached by Forbes Insights, which published “Cash Rich: Are You Prepared to Handle the Risks” late last week.

According to the research, which was sponsored by Northern Trust, two-thirds of corporate treasurers and senior money managers at U.S. conglomerates have more cash reserves than they did prior to the financial crisis of 2008.

Researchers said the main driver behind this cash hoarding is treasurers’ uncertainty over the economy. While the market has seen improvement, a survey found these money managers still feel the economy is too unstable to take on major risk.

Forbes Insights focused its research on what corporate treasurers are doing with all that money. Researchers found that nearly half (43 percent) say they are more aggressively pushing for short-term investments, and even more (49 percent) said they are extending the maturities of their investments for greater returns.

[bctt tweet=”Nearly 1/2 of treasurers say they are more aggressively pushing for short-term investments.”]

Major corporations are using newer and more varied risk management tools, the researchers added, while nearly one-third of treasurers surveyed said they are setting aside at least a portion of their investments as longer-term assets.

Forbes Insights also questioned whether the data means corporations are taking a more critical standpoint of the role of the treasury department.

“As the above research suggests, it may be time for a comprehensive review of short-term investing,” the report said, suggesting businesses should review their fundamental cash management strategies, like policies, metrics and investment objectives.

“They might also consider building more bridges between their pension management teams and corporate treasury as a means of greater knowledge sharing,” the report added.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.