It is immensely hard to truly comprehend the enormity of the series of earthquakes that has rocked the global financial markets. Events which just over a year ago would have been unimaginable have come thick and fast and have taken on a degree of the commonplace. What started as a freeze in global liquidity in the summer of 2007, which many thought could well be over by the time the holiday season had run its course, has turned into a crisis of confidence that the financial services, regulators and government are struggling to understand, let alone deal with. The extraordinary has become the ordinary. Only the brave would dare to predict the next twist and, more importantly, where and when it will all end. So fast-moving are events that experts writing in newspapers or appearing on TV can have their analysis and assessment confounded by events only a few hours later. With certainty in such short supply, it is not surprising that experts in risk are being attended to with a great deal of care. Treasurers in corporates report that one effect of the credit crunch and the subsequent dislocation in the global financial markets is that they are being drawn into wider discussions on risk management than ever before. It will be interesting to see when conditions return to some sort of semblance of normality whether treasurers will continue to be asked to advise on these wider risk topics. In the meantime, while it is impossible to answer the question “what next?”, it is clear that this is no time for inaction. Many are working incredibly hard to ensure that corporates, financial institutions, markets and systems come out of this crisis as unscathed as possible. It is too early to assess what the lasting response will be in terms of regulation. However, bodies such as the ACT are continuing to work sensibly and dispassionately to answer the request of regulators for help in changing laws and regulations. For instance, the ACT has told the SEC that it disagrees with its proposal to reduce the role of credit ratings in its rules for money market funds. Treasurers have recognised that the circumstances of the last few weeks have challenged and for now at least changed many of the assumptions that were universally accepted in terms of the way corporates view issues, such as counterparty risk with banks. Cash, credit and confidence are in desperately short supply. At some point down the line, lessons will be learned and no doubt questions will be raised over issues such as moral hazard. But not now. For the moment the key focus is working together to ensure survival.
