In the years following the Covid-19 pandemic, the treasury team at Southwire was confronted with a series of headwinds that required strategic planning and careful execution to successfully navigate.

As is usually the case with rapid growth, Southwire’s expansion did not come without its share of challenges for the treasury team – especially with regards to effective cash and investment management. By 2021, Southwire’s six‑person treasury group was having to log into each of its nine bank portals individually to manually confirm and update daily cash balances in Excel – a process that took a lot of time and was prone to errors.

Without fast and effective visibility, Southwire’s cash was often left in deposit accounts at its various banking institutions, where earnings credit rates (ECRs) were much lower than prevailing interest rates. Although this practice was acceptable from a safety and liquidity standpoint, it did not meet yield expectations, especially compared to what was achievable by investing its cash in money market funds (MMFs) or other short-term instruments.

Although holding cash in bank deposits was not a huge detriment for Southwire initially, the practice became increasingly cumbersome as interest rates rose. Eventually, the opportunity cost of not investing its cash in higher-yielding products became an unavoidable issue. Between March 2022 and July 2023, the US Federal Reserve’s most aggressive monetary tightening cycle in decades saw the federal funds target rate increase to 525 basis points. As a result, Southwire treasury was proactive with its relationship banks and requested rate increases. However, the ensuing results remained unsatisfactory.

That same year, the issue of institutional counterparty risk was also thrust into the spotlight as Jason Hanson, Senior Treasury Analyst, recalls; “Calls to our banks to negotiate rate increases took time, and rates still were much lower than what other investment options offered. Then when Silicon Valley Bank failed, the C-suite were extremely concerned with where our money was, asking if we were too concentrated in any one bank. If any one of our banks were to have failed, the single counterparty exposure would have sparked very difficult conversations, and we would have had to scramble to put out fires.”