It’s Coming Home

by Insignis Cash Solutions in Industry Perspective

It’s Coming Home

After a 364-day delay, the 16th UEFA European Football Championship, “EURO 2020”, commenced last Friday (11th June 2021).  Why, you might wonder, would a Cash Solutions platform write about EURO 2020? The similarities between managing cash deposits and hosting the EUROS in a Global Pandemic will not initially be clear-cut, however, keep reading to find out exactly what these two have in common…

With the average FTSE 100 company holding £2 billion in cash, and the pre-pandemic revenue expectations of EURO 2020 at an eye-watering €2.5billion, the stakes are high. The costs of getting it wrong in either case would be unfathomable.

With this in mind, we put it to you that the three main principles and risk management techniques in the world of Cash Management can equally be applied to a major football tournament as they can when compiling a robust Cash Management strategy.

Principle 1: Security

EURO 2020 was postponed by a year due to the COVID-19 pandemic, but still retains the name “UEFA EURO 2020” to align with its 60th Birthday. It is this landmark for which the 16th edition largely owes its unique “one-off” structure of hosting the tournament across 11 cities in 11 different countries, from Munich to Baku to London.  

The birth of this format was largely associated with a degree of romance to mark the 60th birthday, but it was also a result of financial imperative since at the time of bidding for host rights in 2012, the continent wrangled with a debt crisis and the prospect of bearing costs of stadia and infrastructure undoubtedly discouraged many countries from submitting bids. UEFA was likely pushed to innovate the format.

Diversification was therefore an inherent reason for the creation of the new tournament structure.

Was it successful in increasing security?

By diversifying across countries, the risks associated with hosting an entire tournament for host nations were reduced. Alongside this, the risks posed to UEFA of stretching exposure beyond reasonable limits in single countries to build infrastructure at a time of financial struggle were also reduced, hence limiting factors that could potentially prevent the tournament from going ahead (the irony!).

Whilst an unintended consequence, UEFA is now able to run the tournament (albeit a tad late) in a global pandemic because they diversified the host nations in the first place.

If there is a spike of COVID-19 cases in one city, or even one country, it would be more than feasible to move games to another city or country where the cases are lower since the required infrastructure will already be present in other host cities for a major tournament. The diversification has ensured that the tournament’s survival is not excessively exposed to the success of a single country’s handling of the pandemic.

In treasury management terms, in spreading your cash deposits across multiple counterparties, you protect against the same concentration risk in terms of reducing the possible impact of a single bank failure.

Principle 2: Liquidity

Flexibility has come from the array of tournament-ready countries at UEFA’s disposal. The format has afforded UEFA the ability to reallocate games to cities and countries which have rolled out vaccination programs to the extent they are able to welcome fans to venues. UEFA exploited this flexibility by requiring cities to submit spectator plans, and the failure of Dublin to assure spectators due to the COVID-19 pandemic in the Republic of Ireland led to the governing body reassigning their games to Saint-Petersburg and London.

Similarly, Bilbao could not guarantee the presence of spectators, largely reported as a result of COVID stipulations imposed by the Basque Government, and this led to the reallocation of games to Seville. The flexibility offered by the format has enabled UEFA to maximise attendance and hence ensure the most compelling product is presented to fans both as in-person spectators and through TV/streaming platforms.

In treasury management terms, establishing the correct liquidity profile is fundamental to cash flow, this enables you to deal with unexpected outflows as and when they occur or quickly exploit opportunities presenting themselves to increase returns.

Principle 3: Yield 

In applying the parameters of diversification and liquidity, UEFA has delivered a tournament that will yield significant revenue. A key stream of UEFA’s revenue derives from ticket sales and through ensuring host cities can welcome fans (albeit at a lower capacity) and selecting London as host for the climax of the tournament, ticket sales have been maximised; hope remains that by the time the semifinals and finals are played at Wembley, more than 45,000 fans could be in attendance with the UK delivering the fastest vaccine roll-out in Europe.

UEFA has maximised yield without sacrificing security. In treasury management terms, similar opportunities exist to deliver significant income and enhanced security, without sacrificing liquidity. This can be achieved by utilising higher interest-bearing accounts while still diversifying counterparties and liquidity terms.

So, the risks involved in running a large treasury management function and a large continental football tournament can be aligned and mitigated by applying certain risk management techniques.

We may not know whether “it’s coming home”, but to finish a football-themed thought piece with some of the most famous words in football history (or, depending on your age, the name of a 90’s quiz show hosted by Nick Hancock): “they think it’s all over, it is now”.

 

Find out more

If you would like to find out more about how Insignis Cash Solutions can help you to reduce risk, increase return and save time, please get in touch with us at info@insigniscash.com. You can also click here to join our mailing list and similar articles by email.

Comments are closed.

Press Contacts

TWITTER

Insignis Cash's Twitter avatar
Insignis Cash
@InsignisCash

Savings rates are creeping up from their all-time lows. With individual rates increasing between 30% and 69% acros… t.co/5j468i6e5n

Insignis Cash's Twitter avatar
Insignis Cash
@InsignisCash

We’re pleased to announce our Head of Institutional Clients, Sam Mackenzie-Carmichael has been shortlisted for the… t.co/EHOFq4Gz3b

Insignis Cash's Twitter avatar
Insignis Cash
@InsignisCash

We are pleased to welcome Wesleyan Bank as the latest partner bank to join our platform! The partnership expands… t.co/ONEyA0LGZG

Insignis Cash's Twitter avatar
Insignis Cash
@InsignisCash

At various stages in the pension lifecycle, a material portion of your clients’ pension assets may be in cash. The… t.co/CQEuZtf6te

Insignis Cash's Twitter avatar
Insignis Cash
@InsignisCash

We’re thrilled to have been shortlisted for the PAM Awards 2021, recognising Insignis as one of the leading players… t.co/bq2U4azo4T

As Featured In: