Against this turbulent backdrop, let’s take a look at some concrete steps that treasurers can take to manage risk in their organisations while maintaining their companies’ growth profile.

1) Get to grips with global threats

The crisis in Ukraine has already had far-reaching humanitarian and political costs, and there are also going to be severe economic consequences. Energy prices have soared due to disruptions to oil supplies, while stock markets remain choppy and currency volatility is increasing. Treasurers will need to hedge risks, such as FX on international payments, wherever possible, although the costs of doing so can mount up across multiple transactions.  

With no sign of volatility abating, means of coping with it are limited. Building cash reserves could help ensure your organisation has a liquidity backstop in place. Another problem at present is the difficulty in making forecasts as traditional data points, such as indicators of GDP, are much less clear than they used to be. 

Treasurers can use technologies such as artificial intelligence and machine learning to help with forward planning, and it’s also a good idea to diversify supply chains to make them more resilient and build robust supplier relationships to prevent bottlenecks. 

2) Capitalise on momentum from the pandemic

The pandemic remains firmly on companies’ risk radars, but the threat is becoming more manageable. Organisations have become more adept at dealing with any restrictions imposed on them and economies have been recovering. 

Treasurers could view the pandemic as a catalyst to embrace the power of e-commerce, which is creating new opportunities for collaboration across different functions. For instance, treasury teams could work with IT departments to prioritise payment and collection methods that can make online checkouts faster and more cost-efficient. 

3) Explore new payment rails and technologies

As some technologies emerge, others wane. Traditional payment methods, for instance, will become obsolete as the payments industry evolves at breakneck speed. If you’re still using the same payment and collection methods that you were three years or even 18 months ago, it’s time to review what you’re doing. You could be wasting time and money by using old payment rails and systems as technology moves on. 

For instance, the advent of open banking and the rise of APIs mean treasurers have new ways to send and receive online payments, and they can be settled in real time. This improves cash flow and visibility, and can save costs, including interchange fees. There are benefits from the customer’s perspective, too – they don’t need to register or enter their card details with some payment solutions. This has an added benefit to the merchant of not having to take the data protection risk of storing customer information. 

In short, treasurers should make time to evaluate which payment rails could deliver the greatest value for their company and the best experience for its customers.

4) Embrace ESG and maintain margins

The cost of global goods and services is rising, so treasury and wider finance teams have a golden opportunity to help their organisation maintain its margins. While it may be tempting to pass on price increases on to customers to do so, this is a short-sighted strategy. You could be more creative instead.

First, figure out what headroom you actually have in your margins, then consider value-added factors that are important to your customers. ESG is one of the most obvious as consumers are increasingly making choices not just based on price, but on their values. That’s why treasurers need to think about how they can embrace sustainability, possibly by looking at how products are sourced and offering incentives to suppliers to meet sustainability criteria. You may need to collaborate with procurement, sales and your banks to make a supply chain finance programme like this work, and of course it must meet the needs of your company, its buyers and suppliers. Supply chains are complex, so this won’t be easy. But if you miss the opportunity to untangle them, one of your rivals could get there first and reap the rewards. 

What’s more, without incorporating values into your business, you may find your access to cost-effective finance is reduced in years to come. ESG is no longer optional – it’s an essential part of modern business, so make sure your organisation steps up.

5) Prepare for the future of work

The pandemic has reshaped working habits and desires, with the Great Resignation showing how people have been reassessing their priorities and work-life balance. Technology enabled us to carry on communicating throughout lockdowns, and it’s still influencing how we work. 

Treasurers need an evolving skillset to add value in an increasingly complex business world, and they must be open-minded and responsive to change. This means being curious about everything, from APIs to distributed ledger technology and the metaverse. Using intelligent technologies to model scenarios and present meaningful information to the board is likely to become increasingly important. Embracing the digital world will help treasurers put their company in a position of strength – a strong balance sheet alone is no longer enough.

6) Forge the right partnerships

Forming partnerships will be an increasingly important part of a treasurer’s role in 2022. Both internal and external partnerships will help treasury teams secure that extra mile of value that helps their organisation stand out from the crowd. That’s because collaboration drives progress in the world of finance – for example, Apple Pay wouldn’t have been a success without other banks and merchants adopting it, no matter how great an idea it was. 

Close co-operation between banks and companies helps innovation to happen faster, expertise to be shared, and broader collective thinking to move the industry forward. This benefits everyone. Treasurers must push the boundaries of what’s possible. Planning is harder in a challenging environment of global change and macro instability, but there are plenty of opportunities for treasury teams to shine. 

For more information, please contact your usual Relationship Manager