If you work in the finance area of a nonprofit with operations overseas, you already know there are lots of risks you have to manage. Risks of having cash moving around have gone up this week.
If you haven’t been following the banking fiasco in Cyprus, might be wise to pay attention for several reasons
First, it’s a good learning tool.
This financial mess is small enough and visible enough that you can quickly understand one story on how an international crisis develops and is handled.
I’ve written several posts on my other blog as this fiasco has developed. If you’re interested, they are:
- Raiding customer’s bank accounts in Cyprus is very dangerous
- Even with Cyprus’s parliament voting “never mind” to the plan of taking depositor’s money, an invisible line has been crossed
- Cyprus government pondering how much private wealth to seize to save banks
- Bailout of Cypriot banks taking shape
A second reason to pay attention is you can use this as an exercise on how you would handle a similar crisis – if something like this happened in a country where you are working, how would you respond in order to continue your operations and protect your staff?
Third, this illustrates that cash located overseas is risky. In this situation, a country that was slightly troubled closed their banks freezing check clearing and limiting ATM cash withdrawals. When they reopen two weeks or so later, there will be capital restrictions, likely large haircuts given to uninsured depositors at the troubled banks, and there might be confiscation of a small portion of every bank account in the country.
Might be wise to consider that risk in the countries where you have substantial operations. What can you do to mitigate risks for field operations? What could you do to mitigate danger of wanting to sell off assets and move a lot of money because you’re moving operations to another country? What would this do to your field projects? Not that you don’t already have enough to do, but it might be worth a few minutes thought.
Fourth, this shows a major change toward deposit insurance in developed countries. Regulators across Europe and in Cyprus have shown no qualms about using insured deposits as a source of funds to bail out a troubled bank. Repudiating deposit insurance is a major change. Does that affect your operations? They even thought about raiding private retirement accounts.