LOOKING TO THE FUTURE

LOOKING TO THE FUTURE Two things are going to have a significant influence on the cash-management and hedging strategies of MNEs in the future. Rot is the information and technology explosion, and second is the growth anal sophistication of hedging instruments (financial derivatives such as options and forwards). The information explosion will continue to allow firms to get information more quickly and cheaply than in the past. In addition, the ad-j vent of electronic data interchange (EDI) will allow firms to transfer information and money instantaneously around the world. Firms will significantly reduce the paper flow and increase the speed of delivery of information and funds, thus enabling them to manage cash much more effectively. Not onhr will that reduce the cost of producing information, but it will also allow firms to reduce interest and other borrowing costs as they utilize intercompany resources much more effectively.
Second, the growing number and sophistication of financial derivatives, as well as the growing expertise of providers and users of derivatives, should allow companies to identify and hedge their exposure much more effecuvery. Firms that previously ignored hedging certain types of exposure will find that the availability of derivatives will increase and the cost will decrease, making cover much more possible.
Also, the centralization and regionalization of cash management and exposure management will increase, not decrease, even though local treasuri staff becomes much more sophisticated. The sheer volume of transactions anz resulting economies argues for more, not less, centralization. The speed anc.

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