As I respond to this question, it is not entirely clear which way the dollar is going – as is invariably the case with currency projections.
Going back to treasury operations, the main problem we have when we see a currency weakening, or anticipate such a weakness, is whether we should increase the amount of protection we take against the currency – mainly by adjusting the currency mix of our debt – in this case by increasing dollar debt. We are currently carrying a small movement from benchmark in that respect but nothing significant.
2. I am not a supporter of outsourcing cash management. We have a US and European pool so, in principle, we never have surplus dollars or euros or minor European currencies lying around overnight. Europe is not perfect in this respect but pretty close. Asia and Latin America are, given their generally closed nature, labour intensive for cash management – and cash extraction or injection is often linked to taxation and dividend policy.
Given this mix of smooth-running, automated operational pools and bespoke practices, I don’t think we would outsource well – even if I thought outsourcing was generally a good thing.
3. In the area that is thought of as traditional corporate banking, I do not have any special requests. However, one of the main financial risks that I manage these days is the defined benefit pension scheme. We can almost get the maturity we need from interest swaps and inflation swaps, and inflation swap capacity continues to increase.
However, there is no reasonably priced instrument or solution for mortality hedging. We see ideas occasionally but have yet to see anything that combines sufficient functionality with reasonable cost. It would be great if something could be done there. But, given that this issue has been around for a while, and the banks have not solved it, I suspect we are unlikely to see anything that will work for us anytime soon, if at all.