The Changing Risk/Reward Landscape
Portfolio examinations are typical activities for this time of year as year-end audits get underway. What may come as a surprise, however, is the additional scrutiny on valuation methodology that auditors are requesting. Supporting our clients for this additional scrutiny reminds us of the benefits that may be achieved through our broader Credit/Risk Management Oversight offering. This service, for companies with portfolios that aren’t managed by Capital Advisors Group, evaluates the overall risk/reward of your portfolio structure and is designed to validate and support your cash investment strategies. Viewing risk/reward effectiveness from money market funds to separate account strategies may provide management with important validation for meetings with both outside auditors and one’s own audit committee.
The changes to the regulatory landscape that are expected in 2012 will most likely impact the risk/reward profile of the majority of corporate cash investment practices currently in place. These changes range from the expiration of unlimited FDIC insurance coverage for non-interest bearing DDA bank accounts to an anticipated overhaul of current money market fund regulations. Understanding the impact of these events on your company’s investments/portfolio before they unfold is just as important as having information to communicate risk/reward characteristics to one’s auditors and the audit committee at year-end. Of course, identifying the impact to your investments/portfolio is just the first step. Crafting and implementing a plan to overcome the impact is vital and we believe that a separately managed account strategy provides a great solution to these challenges.
This month’s research on identifying the risk/reward characteristics in corporate cash portfolios delves into some of the issues that should be examined to gain a clear understanding of the balance of risk and reward in one’s cash investment strategies.he New Year has a way of prompting us to focus on priorities and agendas for the coming 12 months and as Treasurers plan their “To Do” lists for 2012, it is helpful to identify trends and events that will shape the short-term cash management environment. A view of the potential issues that could develop in the New Year may prove valuable and may perhaps help to preempt credit or liquidity difficulties that might arise as the year progresses.
Best Regards,
Ben Campbell
President & CEO
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