European elections this weekend went “anti-austerity” but treasurers stay focused on every-day activities.
No doubt this weekend’s elections in Europe will cause international market mayhem for a little while, but for treasury it’ll be mostly business as usual. That’s because corporations for some time have been preparing for the possible fracturing of the eurozone; therefore they’re able to focus on (for them) more important issues.
In elections in Europe this weekend, France elected Francois Hollande, a Socialist while in Greece there was wave of “anti-bailout” fever that swept new political parties into parliament. Mr. Hollande wants to begin fixing things by raising France’s top income tax rate to 75 percent from 45 percent. While in Greece new leadership has promised higher taxes on the rich. Here again, while it’s news to roil the markets, treasurer can continue to put on its best “What me worry?” face.
Indeed, the topic of a eurozone breakup has been on the agendas of several NeuGroup peer group meetings over the past several months, so many are prepared. Therefore, it is other priorities on which treasurers, FX managers and others up are focused. This includes a lot of cash-flow and balance sheet-related exercises, like actively managing a cash-flow program using an options portfolio, managing a cash-flow hedging strategy in complicated countries with complicated regulations; fixing problems with the mechanics of balance-sheet forecasting program, tightening up ISDAs and CSAs where necessary or overseeing the implantation of a treasury management system.
Treasurers are able to focus on these issues because they’ve been preparing. Here are a few of the things they’ve done and what they know. They (in no particular order):
- Have already been moving cash from risky European locales to safer havens.
- Have already in many cases identified necessary steps for business continuity.
- Have been reviewing supply chains and supply chain finance programs.
- Know the European Central Bank’s Long-Term Refinance Operations (LTRO) has been a success so far, stabilizing European banks (many companies already reduced exposure to European banks anyway).
- Have shifted emphasis to Asia.
- Have taken advantage of easy money in the US and issued record amounts of debt.
- Have cash surpluses at home.
Nonetheless, treasurers are not complacent. They still remain alert and continue to ferret out any hidden exposures that could catch them by surprise. So despite all the double, double toil and trouble treasurers have been able to focus on things that are of more immediate (albeit mundane) concern.