BlogsPlanning for a euro crisis
It’s clear that increasingly CFOs are taking defensive and decisive actions
By Peter Williams | Published 15:19, 20 February 12
Whatever politicians and central bankers stitch together in terms of a deal to solve the euro zone crisis, big business is taking no chances. Debating openly about the options in the event of some catastrophic default has now become acceptable and there are tantalising glimpses of the preparation that chief financial officers are putting in place with their finance teams, the rest of the business and their bankers.
Vodafone - the world’s biggest mobile operator - for instance revealed that it is reviewing its billing system in Europe in case the telecoms giant needs to start billing customers in currency other than the euro. In addition the company said that it emptied its Greek bank accounts every night but said that had been normal practice for a number of years and dismissed claims it was a reaction to the crisis.
Around the same time as news broke of Vodafone’s account receivables review, pharmaceutical giant GlaxoSmithKline’s chief executive Sir Andrew Witty was informing investors through the press that last year the company had started emptying “tens of millions of pounds” out of most euro zone countries into UK-based accounts.
It is certainly a decisive approach to euro cash management and follows a comprehensive review in 2011 by the company of the risks of exposure to the European financial crisis. A small number of countries in the euro zone, including Germany, were considered safe enough to continue holding deposits. All other euros were switched into sterling.
Before they can move the cash, corporates first have to collect it. Government departments and public institutions in some part of the euro zone have been staging their own default party by delaying payment to suppliers by years (yes years). And here CFOs need to tread carefully; refuse to supply your product any more -especially if it is lifesaving medicines - and you can just imagine the headlines in the local press.
Moving money into safe havens and working out how to carry on collecting cash are just two of the problems that CFOs would have to deal with in the case of a currency collapse or partial euro meltdown. The risk management review throws up all sorts of other issues.
For instance, CFOs may know that their business is not directly exposed either financially or operationally to the euro. But they also need to check out whether key suppliers and customers are in an equally comfortable position. And then if any sort of default does happen it will be a legal nightmare lasting years to sort out who owes what to whom if individual sovereign currencies are introduced. And little CFOs can do, except reduce exposure.
Publicly companies can take the business-as-usual, responding-to-a-crisis or try to say-as-little-as-possible approach. But whatever the PR strategy it’s clear that increasingly CFOs are taking defensive and decisive actions.
Vodafone - the world’s biggest mobile operator - for instance revealed that it is reviewing its billing system in Europe in case the telecoms giant needs to start billing customers in currency other than the euro. In addition the company said that it emptied its Greek bank accounts every night but said that had been normal practice for a number of years and dismissed claims it was a reaction to the crisis.
Around the same time as news broke of Vodafone’s account receivables review, pharmaceutical giant GlaxoSmithKline’s chief executive Sir Andrew Witty was informing investors through the press that last year the company had started emptying “tens of millions of pounds” out of most euro zone countries into UK-based accounts.
It is certainly a decisive approach to euro cash management and follows a comprehensive review in 2011 by the company of the risks of exposure to the European financial crisis. A small number of countries in the euro zone, including Germany, were considered safe enough to continue holding deposits. All other euros were switched into sterling.
Before they can move the cash, corporates first have to collect it. Government departments and public institutions in some part of the euro zone have been staging their own default party by delaying payment to suppliers by years (yes years). And here CFOs need to tread carefully; refuse to supply your product any more -especially if it is lifesaving medicines - and you can just imagine the headlines in the local press.
Moving money into safe havens and working out how to carry on collecting cash are just two of the problems that CFOs would have to deal with in the case of a currency collapse or partial euro meltdown. The risk management review throws up all sorts of other issues.
For instance, CFOs may know that their business is not directly exposed either financially or operationally to the euro. But they also need to check out whether key suppliers and customers are in an equally comfortable position. And then if any sort of default does happen it will be a legal nightmare lasting years to sort out who owes what to whom if individual sovereign currencies are introduced. And little CFOs can do, except reduce exposure.
Publicly companies can take the business-as-usual, responding-to-a-crisis or try to say-as-little-as-possible approach. But whatever the PR strategy it’s clear that increasingly CFOs are taking defensive and decisive actions.
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