Until recently, the health of banks hasn’t been a pressing issue for finance executives. After all, it’s been almost two decades since the last swell of commercial bank failures and seven years since the credit cycle took a big dip. But thanks to the subprime crisis, banks are back on CFOs’ radar. The discovery of modern banking’s soft underbelly has created unease, and the ripple effects are hitting corporations from many directions.
In this special report, we examine whether giants such as Merrill Lynch and Citigroup are really changing their risk structures or simply throwing new C-suite executives at the problem (see “Missing Pieces”). In “Pedaling As Fast As They Can,” we explore how companies are sweating to find capital for new investment — and paying more for it.
The clots in the arteries of financial markets are bad news for companies that grant trade credit to their customers. In “No Uncertain Terms,” we examine how to handle nonpayment risk in this environment.
Companies could be paying for the mistakes of banks for years. But in times of crisis, much can be learned. The credit crunch of 2007 will make CFOs more inquisitive of their financial institutions’ business practices and balance sheets. That may do more to strengthen the foundations of banking than the previous 20 years of prosperity.