With limited tools and increased demands, corporate treasurers have their hands full right now.
“As a treasurer, my mandate is to keep the cash safe at hand, and I really need to mitigate my risks. It’s not about outperforming or being too clever on that front,” Stephane Lintner, CEO and co-founder of Jiko, told PYMNTS.
Easier said than done. A slowing economy, rising interest rates, increasing compliance requirements and an ever-growing array of external threats are putting treasurers to the test in unprecedented ways.
Liquidity management has not been this urgent a consideration in years, said Lintner — more than a decade, in fact. Beginning in 2008, as financial crisis and the Great Recession took root, central banks set about injecting cash into the economy — so much so, that rates went to zero, liquidity was never at issue, and counterparty risk was effectively negated.
“Over the last 12 months, you suddenly had rates creep up really fast on everyone, so suddenly, having cash in the wrong place means you’re losing money,” he said. And though the FTX debacle of recent weeks has had a fallout limited to the crypto sphere, the implosion and bankruptcy has piqued treasurers of all sorts of firms to examine where the chain of custody lies, and where corporate cash is at any point in time.
Everyone’s woken up the fact, he said, that visibility and security of funds are critical, daily and real-time considerations.
Some Safety Amid the Volatility
Against that backdrop, there’s some safety to be found in U.S. Treasury bills, he said, which represent what he termed the “primary building block” of liquidity. T-bills, he said, are often the first things banks and money market funds buy when they need cash.
Similarly, he said, T-bills should be a first stop for corporates as they seek to manage their own daily cash activities. (T-bill yields have been rising, significantly, in recent months, too, to more than 4.5%, where it has been only a few basis points as recently as last year.)
Traditionally, however, those financial instruments, which mature in one-year horizons or less, have been most readily embraced by larger enterprises, especially multinationals (Apple, for example), who have had the deep pockets and human capital on hand to staff trading desks that manage a broad range of investments in pursuit of yield.
By providing liquidity on demand through a platform model and Jiko Money Storage, Jiko, a FinTech that bought Mid-Central National Bank in 2020, helps smaller and high-growth companies put cash to work in T-bills. Those firms, with significant funding in hand from investors, will want to put those funds to work and generate returns. In doing so, they broaden their cash management options beyond bank deposits or money market funds (both of which can be rocked by volatility in times of economic stress).
The liquidity-on-demand model, he told PYMNTS, also offers access to T-bills beyond the confines of archaic, traditional routes. Typically, enterprises have had to go to the U.S. government’s Treasury Direct website, which launched decades ago.
But there’s a catch here: Firms have to hold the bills for 45 days before they can liquidate — and to liquidate they have to open trading and brokerage accounts. “That’s the investment side of an organization,” said Lintner, “not treasury,” which adds complexity and multiple steps to back-office functions.
Jiko abstracts some of that complexity away, as a fully regulated entity, complete with broker-dealers, that sets up enterprises bank and brokerage accounts, with BNY Mellon as custodian.
As a result, he said, as client firms access, hold and offload T-bills, “it’s all fully transparent. You know what you’re holding, you get the confirm, you know what you’ve bought.”
And in looking ahead, the company is examining expansion beyond operating during U.S. hours (and to handle trading 24/7 over time) and to look at euro and yen markets. “The model is exportable,” he told PYMNTS, “and it can scale.”
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