In the rapidly changing financial landscape, the role of a Treasurer is more critical than ever, tasked with the vital duty of protecting the company’s assets to meet future obligations. This involves a delicate balance of security, liquidity, and yield in treasury portfolio decisions, with each investment carefully evaluated against these principles.
Recent global disruptions, including the COVID-19 pandemic, fluctuating interest rates, and the UK’s LDI crisis, have thrust liquidity management into the limelight. These events reveal the pressing need for institutions to bolster their liquidity frameworks to navigate sudden financial strains, although maintaining substantial liquidity reserves is not without its challenges and costs.
This paper delves into the strategic approach of Cash Segmentation within treasury portfolios, a method that categorizes liquidity into Operational, Reserve, and Strategic segments based on anticipated needs. This strategy, aligned with the foundational principles of security, liquidity, and yield, offers a nuanced way to enhance cash management.
In this paper NLC team explores the advantages of allocating a segment of Reserve Cash towards Sub-Line Financing, a lesser-known but potentially valuable tool in the treasurer’s arsenal for optimizing liquidity reserves.
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