Optimising cash and liquidity in the new world

Treasurers have been proactive in unlocking liquidity during the crisis. How will this role change in a digital world?

Tarek El-Yafi

Head of Cash Management Sales for the Americas

Victor Penna

Global Head of the Treasury Solutions Team

Marion Reuter

Regional Head of Transaction Banking Sales in Europe

Despite current and future uncertainty, treasurers have proved resourceful, proactive and often pre-emptive in supporting their organisations through the crisis, allowing them to think ahead to a new post-crisis cash and liquidity environment.

A universal challenge

Whether companies’ experience of the crisis has been positive or negative in cash flow terms, treasurers have had to deal with very different cash and liquidity dynamics than in the past, creating new challenges and points of friction.

While the COVID-19 crisis has been very different to the global financial crisis of 2008-9, treasurers’ experience of the earlier crisis meant that they were ready to act quickly, moving excess liquidity to highly rated banks, and hedging early. Treasurers leveraged existing and new sources of liquidity to build up cash buffers to support the business, and extended liquidity structures to unlock in-house cash. Many set up or extended accounts payable and receivables financing programs, and accessed government stimulus schemes.

Consequently, when the crisis started to deepen, and liquidity dried up, many treasurers had already positioned their business to weather the storm.

Two thirds of clients we asked in a recent poll said they had experienced liquidity challenges during the early stages of the crisis.

As government funding programs came into effect, and markets started to normalise, treasurers could focus on longer-term resilience, mobilising trapped cash and digitisation. This included digitising internal processes, but also managing the implications of a shift or acceleration towards digital business models, including embracing digital engagement, payment and collection models at pace.

Optimising cash and liquidity in the new world

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Post-crisis cash and liquidity management

Treasurers are now preparing for a new reality that has digitisation at its core, impacting how they work, and how they do business. Many are now finalising the move away from manual processes, developing greater automation, e.g. through robotic processing automation (RPA), and building better data analytics.

From a liquidity standpoint, treasurers are shifting from “just in time” liquidity to “just in case”. Cash buffers are likely to remain at record levels, and treasurers are expanding their scenario analysis capabilities by stress testing the potential impact of extreme and seemingly unlikely scenarios. Treasury has already proved to be at the forefront of business continuity and transformation during the crisis; as we move post-crisis, this role will be as important as ever.

The full feature, Cash and Liquidity in the ‘new world’, appeared in Treasury Today.

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