Treasurers toe the line between yields and risk management

The recession did two things to financial institutions' consumer credit risk management strategies. First, it drove lenders to develop more robust strategies to curb excessive risk-taking, and second, it drew back financiers' willingness to take risks. But with recent improvements in market activity - such as capital investment, startup volumes and business expenditures - organizations appear to be more willing to take on risk. A report released this week by JPMorgan Asset Management shows company treasurers have a greater appetite for risk, as they navigate an environment replete with low-risk interest rates and high levels of surplus cash. Treasury departments now cite risk management as the third-highest area of importance, up from fifth in 2010. Treasurers also claim that the financial strength of an institution is now the most important factor in selecting a primary bank, overtaking relationship management for the first time. "2011 has been a challenging year for treasurers as they walk a 'tightrope' between their appetite for yield on one hand and their caution about risk on the other - a delicate balance that was summed up by one treasurer as 'managing the margin: getting the best return for minimum/zero risk,'" said Robert Deutsch, head of global liquidity at JPMorgan AM.