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Cash & Liquidity Management
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Driving Innovation in a Global Economy

by Lars Millberg, Head of Global Transaction Services, SEB

For virtually every company, of every size, the demands and opportunities of globalisation have had an indisputable effect on the way that business has been done in recent years. While ten years ago, trade with emerging markets may have represented a relatively small proportion of revenue, today over 50% of trade from the Nordics and Germany, for example, is in emerging markets. For imports, exports and services alike, the new economy is global and companies in all industries, and of all sizes, need to structure their business to meet these changing needs. This has implications for sourcing, manufacturing and distribution, but also for treasury, which is becoming ever closer to the business as risks and liquidity management requirements become increasingly complex and the need for a robust and sustainable supply chain is accentuated. Typically, the further the company’s lines of supply and demand, the greater the operational and financial risk, unless treasurers have put in place efficient organisational, technology, risk and liquidity management structures, establishing central control over cash and risk as far as possible.

While effective cash flow forecasting has been on treasurers’ ‘to do’ list for many years, it is now a business imperative.

The changing demands on treasury, and approaches to addressing these, form the basis of this Guide to Treasury Innovation brought to you by SEB. Erik Seifert explores the evolving role of treasury, not least since the financial crisis accentuated pressures on liquidity and counterparty risk, and ongoing currency and commodity volatility sharpened treasurers’ focus on minimising exposures. Hakan Aldrin and Jonny Sander describe the importance of collaboration, both internally and externally, and the vital role that both structured and ad-hoc exchange of information has to play in equipping treasurers with the means to fulfil their transactional and strategic function. A new environment requires a new approach to optimising processes and information flows across treasurers’ expanding horizon, and as Sigrun Fredriksson and Tom Lea outline, the Corporate Financial Value Chain™ pioneered by SEB provides a structured approach to identifying, prioritising and delivering the initiatives that will deliver the greatest value.

The importance of liquidity

Globalisation and the ongoing repercussions of the financial crisis do not only impact on liquidity processes and risk decision-making, however. In an environment where money is more expensive and difficult to obtain, the right capital structure and long-term, sustainable funding are essential to business continuity, as well as working capital. With Basel III approaching, we are seeing a price put on liquidity for the first time, as opposed to being considered an almost costless commodity; today and in the future, however, maintaining access to liquidity is, and will continue to be a key priority for treasurers. This has a range of implications. For example, it is now imperative that treasurers know exactly how much cash they have, where it is located, and how they can make use of it to minimise overall borrowing requirements. While effective cash flow forecasting has been on treasurers’ ‘to do’ list for many years, it is now a business imperative. Treasurers are also increasingly seeking to make better use of their financial assets, using invoices and receivables, for example, as an alternative way of financing the business.