Balance sheet management – it’s all about understanding the risks
Many of South Africa’s key enterprises have to manage, on a monthly basis, large inflows and outflows of cash. Utilities, local governments, life insurers, medical aids, asset managers and state-owned enterprises are alike in that they need to manage large monthly inflows from a wide range of customers while also having to manage complex disbursements, to deliver on their services.
These entities represent essential services for their customers and society as a whole, from delivering municipal services to paying pensions or medical scheme claims. These are services that many South Africans depend on.
The typical cash flows described requirements can present specific challenges, notably in managing their liquidity and interest rate risks. Some will be required to keep a portion of their inflows in cash or as reserves (such as a medical scheme, pension fund or insurer), while others will also need to manage external debt and other liabilities, including, in some cases, foreign currency borrowings.
Given the size of the flows, management of liquidity and interest rate risk (across currencies) is critical. They will look to match their flows, while also maximising the returns on their cash reserves and minimising the cost of borrowing.
Enterprises will therefore often call upon specialists such as Investec’s balance sheet management team, to help manage these risks. From sourcing competitive deposit rates with the right level of accessibility, to hedging the cost of borrowing or other risks such as commodity prices or foreign exchange exposures, these specialists can help enterprises to navigate the complex offerings on the market for managing their risks, including:
- Money Market
- Call and term deposits
- Negotiable certificates of deposit
- Floating rate notes
- Jibar- and prime-linked products
Investec’s balance sheet management team is uniquely placed to understand and manage the requirements of even the most complex enterprises. They bring with them over 100 years’ of combined experience and knowledge across the money, fixed income, currency and commodity markets. Most important, they understand the unique requirements of each sector, ensuring the most important services run smoothly.
Investec Corporate and Institutional Banking is a division of Investec Bank Limited registration number 1969/004763/06, an Authorised Financial Services Provider (11750), a Registered Credit Provider (NCRCP 9), an authorised Over the Counter Derivatives Provider, and a member of the JSE. Investec is committed to the Code of Banking Practice as regulated by the Ombudsman for Banking Services. Copies of the Code and the Ombudsman’s details are available on request or visit www.investec.com.