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Bristol-Myers Squibb Co.’s $275 million write-down on auction-rate securities partially collateralized by subprime mortgages was more than just the biggest loss by a nonfinancial company related to subprime investments: It has become the stimulus to reopen the debate on whether corporate treasuries should operate as a cost center or, on the other end of the spectrum, a profit center. Jeff Wallace, managing partner at Greenwich Treasury Advisors, sums it up: “Is it treasury’s job to take trading risks to bolster the bottom line, or should it be assuming a more conservative posture of preserving capital and keeping the company’s cash liquid and available?”

That question is reverberating in e iboardrooms and C-suites around the country, as directors and executives question their roles as cash managers. The pendulum has swung back and forth over the years on the issue–for instance, taking a sharp swing towards the conservative after the bond default by California’s Orange County. With the cash buildup in the years since 9/11 and the Enron Corp. debacle, treasurers have been increasingly placed between the need to manage risk and the equally compelling requirement to produce a better return for shareholders. When economic times look rosier–and the need for a cushion seems less, the impetus has been to more actively invest these liquid assets either by sinking money back into the enterprise in R&D, capital investment or M&A; bolstering the stock price through higher dividends or stock repurchases; or investing in slightly more risky short-term investments. “These [strategies] all play into the overarching theme of trying to derive increased value for the company,” says John Tus, treasurer of Honeywell International Inc.

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