With the economic downturn and the problems that emerged last year in the supposedly low-risk money markets, more boards are riveting their attention on liquidity and investment policies, according to a survey from KPMG. Fifty-seven percent of directors and finance executives say their boards have taken a closer look at treasury investment policies and procedures, while another 9% say the board has talked about doing so. Of the companies that have reassessed treasury investing practices, 16% have altered the investment authority granted to treasury so that more transactions require board approval.

Jim Negus, a principal in KPMG's financial risk management practice, says this reassessment is just part of boards' newly awakened interest in corporate liquidity. “Most of the liquidity conversations we're having today begin with the board,” Negus says. “The board is trying to answer the question, 'Are we liquid?'”

Boards are asking for liquidity reports that look out anywhere from six months to a year, he says. The reports take into account significant cash inflows and outflows, look at what might happen to those flows under certain scenarios, and match the information up against the company's credit facilities.