HSBC announces Corporate Risk Management Survey, 2024

Published: October 07, 2024

HSBC announced today the findings of its latest global Corporate Risk Management Survey of 300 chief financial officers and more than 500 senior treasury professionals from multinational corporates across a range of sectors, covering Americas, Asia and EMEA.

The Treasurer’s role is ever more complex

Chief Financial Officers and Corporate Treasurers face more complexity compared to just three years ago, amid changing trade and economic corridors, ongoing macroeconomic headwinds and geopolitical risk.

While managing an international business is not always a straight line, many firms remain optimistic about their organisation’s growth prospects as new technologies enable them to unearth and map opportunity from uncertainty.

Rahul Badhwar, Global Head of Corporates Sales for Markets & Securities Services, comments: “Companies continue to face multiple challenges that can impact their finances. Navigating interest rates, inflation and volatile FX markets, while also deploying risk management strategies to address them, has increasingly become an essential role of the corporate treasury function. In a world of uncertainty, we see companies wanting to mitigate risk and benefit from it, too.”

68% of those surveyed agree that treasury plays a key role in strategy decisions, up from 41% in 2021, when HSBC conducted its last corporate risk management survey.

Almost half (47%) of survey respondents say managing currency risk is an area where they feel their business is least well equipped. They also say the impact of inflation, and economic policies to help manage it, have made their projected revenue and cost volumes in some cases inaccurate, with disruptions to supply chains and sales logistics delaying cash flow timing.

According to 93% of respondents, cash flow forecasting data inaccuracies have led to avoidable losses over the past two years alone, either due to overborrowing or liquidity shortfalls.

Rahul Badhwar explains: “There are times when the primary force driving foreign exchange markets is not macroeconomics. This year, with a record number of nations going to the polls, elections as well as geopolitics have at times been the dominant factor behind currency valuations. Unlike economic variables, geopolitical outcomes can be even more difficult to predict, making it harder for corporate treasurers to hedge FX risk and make long-term decisions.”

Nonetheless, many businesses are optimistic about revenue growth prospects in the near future. Key factors for achieving that include rising customer demand and quicker adoption of new technologies (both 75%), as well as a reduction in geopolitical tensions (52%). Some challenges are likely to remain, however, with 58% of respondents concerned about inflation and 55% worried about a prolonged economic downturn.

Holger Zeuner, Head of Thought Leadership, EMEA, Corporate Sales, says, “Many treasury teams were caught off guard by a sharp rise in interest rates seen in 2022 and 2023, as central banks sought to tame soaring inflation, resulting in higher financing costs. Companies are looking to find a structural balance between fixed and floating-rate debt to manage their interest rate risk, so it aligns with both their business profile and the market environment. Such an approach would potentially help them better protect their businesses against a worst-case scenario while also enabling them to benefit when rates come down.”

A sharpening focus on ESG and supply chain

The HSBC survey also finds that ESG risk in supply chains is increasing in importance for treasurers. A growing number of respondents also expect to work with banks or other financial partners to support suppliers in their ESG efforts, but 27% also anticipate cancelling supplier contracts because of ESG issues over the next three years.

Vivek Ramachandran, Head of Global Trade Solutions, says: “It takes years to build up a trusted supplier relationship, so making sure that you don’t have too much concentration risk and you have a resilient supply chain can be at odds with changing suppliers due to their ESG scorecards. That’s the trade-off that companies are working through, but the fact you now have companies willing to take steps towards more accountability for practices through their supply chain is potentially encouraging from an ESG perspective.”

99% of respondents say they are at least somewhat concerned about ESG visibility on their suppliers, while 56% are very concerned about their ability to meet ESG reporting requirements – something that is more prominent in Europe where ESG regulation is more advanced compared to other regions of the world. However, the HSBC survey finds only one-third of companies globally have to-date incorporated ESG guidelines and policies into their supply chains.

Will AI be positive for the Treasurer?

Tailwinds for businesses and their treasury function are expected to come from the emergence of artificial intelligence (AI). Some 61% believe AI will positively benefit their company’s profitability over the next three years, while another 61% believe it will become very useful for risk management decisions over that time frame. Some 62% of respondents are concerned that a lack of access to talent and skills could slow AI adoption, while respective funding is only seen as a main challenge by 5%.

Success is not a straight line

The HSBC Corporate Risk Management report concludes that the adaptability of a corporate treasury is essential for positioning a multinational corporate for growth in an ever-changing risk environment.