Treasury Contrarian View: Are Treasurers Too Conservative with Cash?

Treasury Contrarian View: Are Treasurers Too Conservative with Cash?

In uncertain times, treasurers often lean toward holding more cash as a buffer against risk. Liquidity is king, right? But here’s the contrarian view: Are treasurers holding too much cash and missing opportunities to drive value through smarter investments? Is conservative cash management a strength—or a missed opportunity?

The Case for Holding Excess Cash

  1. Risk Mitigation and Resilience
    • Maintaining high cash buffers protects against unforeseen disruptions, market shocks, or funding gaps—especially during economic downturns.
  2. Operational Flexibility
    • Readily available cash enables quick responses to M&A opportunities, supply chain shocks, or sudden capital needs.
  3. Stakeholder Confidence
    • Strong liquidity positions reassure boards, rating agencies, investors, and lenders about the company’s financial health.
  4. Rising Interest Rates
    • With interest rates climbing, holding cash in interest-bearing accounts or short-term instruments has become more attractive again.

The Case for Putting Cash to Work

  1. Opportunity Cost
    • Excess cash sitting idle earns minimal returns compared to the potential value it could generate through short-term investments, supply chain financing, or strategic initiatives.
  2. Pressure to Optimize Capital
    • Investors and CFOs increasingly expect treasury to contribute to financial performance. Hoarding cash can be seen as inefficient capital allocation.
  3. Advanced Investment Options
    • Today’s treasurers have access to innovative investment platforms, enhanced deposit products, and liquidity-focused funds that offer returns without sacrificing safety.
  4. Cash Flow Visibility
    • Improved forecasting tools and real-time visibility reduce the need to hold excessive cash buffers “just in case.”

Finding the Balance: Smart Liquidity Management

Rather than extremes, the future lies in a balanced approach:

  • Segment Cash by Purpose: Define operational, strategic, and surplus cash—and apply different strategies to each.
  • Revisit Cash Policies: Regularly challenge cash targets and stress-test scenarios to avoid overly conservative assumptions.
  • Explore Yield Opportunities: Partner with asset managers, TMS providers, or platforms offering safe but flexible short-term investment options.

Let’s Discuss

  • Is your organization holding more cash than it truly needs? Why or why not?
  • How do you balance safety and return in your cash management strategy?
  • What tools or strategies have helped you put idle cash to better use?

We’ll be sharing views from treasury leaders, tech providers, and institutional investors—join the discussion and let us know your take!

COMMENTS

Lorena Pérez Sandroni

Lorena Pérez Sandroni, Treasury Masterminds board member, comments:

Cash is king, and treasurers often face significant pressure during uncertain times. Balancing this pressure to meet the expectations of stakeholders, investors, and CFOs, while ensuring we hold enough cash to cover operational needs without holding too much, can sometimes feel like a martial art.

In my opinion, we should not be overly conservative. We must monitor the minimum cash balance and short-term needs, as well as extraordinary events, to challenge established targets. I prefer to do this at least quarterly, considering that our analysts will closely review and monitor the short-term needs (at least 8 weeks) to identify any extraordinary requirements.

In the ideal world of Treasury, we would seek cash pool structures and products that enhance our efficiency in holding cash. We would negotiate the remuneration of our excess cash and remain continuously curious about market developments to improve and drive value from our idle cash.

However, different approaches are necessary depending on whether you are a Regional Treasurer or managing Corporate accounts. In the latter case, it is crucial to help the company understand the benefits of cash centralization, In-House Banking (IHB) when possible, and any cash management products that coordinate cash where and when it is needed. As well as how by centralizing our cash we can also improve Risk management , for example in the cases where your company operates in emerging and high risk countries.

Smart liquidity management isn’t just about maximizing returns. Treasurers sometimes need to prioritize strategic initiatives over immediate financial gains, such as reallocating cash to support global operations or business strategies. Being flexible and understanding the impact and importance of cash centralization is the most visible way treasurers contribute directly to business initiatives.

Control, monitoring, evaluation, and control again! Whether you are in a sophisticated and automated Treasury environment or dealing with thousands of Excel tabs and dozens of currency pairs, you must know your minimum cash requirements to manage properly and make the right proposals for Smart Liquidity Management with an holistic view.

Patrick Kunz_Treasury Masterminds (2)

Patrick Kunz, Treasury Masterminds founder and board member, comments:

Treasurers: Guardians of Cash – But Don’t Stop There

As treasurers, we’re the guardians of cash – and we’re good at it. But once the guarding is done, that’s not the end of the line. Too often, cash just sits idle in a bank account. And, I hate to say it, frequently earning 0% interest.

Let’s not even dive into the counterparty risk of leaving large balances at a bank – a risk often overlooked but very real. (Remember Credit Suisse? Gone in days. Lehman? Weeks.)

So, fellow treasurers, it’s our duty not just to protect cash, but to put it to work. That means finding the balance between maximizing return without significantly increasing risk. Easier said than done – I know. It depends heavily on your company’s cash position, volatility of cash flows, and, of course, the current interest rate curve.

For years, there wasn’t much point locking away cash for longer periods. But today, interest rates shift faster than US tariffs – so keep a close eye on them. And yes, that means your investment policy and strategy should be reviewed at least annually.

I still see too many clients leaving money on the table – and that’s a shame. Your cash can do more.

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