For corporate treasurers, there’s the planning — and then there are the curveballs, the unexpected events that put liquidity and cash flow management to extreme tests.
First, as Silicon Valley Bank and Signature Bank collapsed — and the sudden specter of bank runs loomed — treasury functions were “back into the spotlight,” she said.
Second, with the re-examination of the importance of cash flow management, liquidity and risk management, there has been a reckoning of what’s needed to get financial professionals the tools and staff they require.
“Quite frankly, I don’t remember anything that happened before March of 2023,” she said, with a chuckle.
The months leading up to March had been fraught enough, as treasurers and their partners, Albovias said, had been busy getting their arms around the challenges of post-COVID supply chains and the war in Ukraine.
Headed into a brand-new year, it’s clear sharp and nimble treasury management is essential to the well-being of any firm. Treasurers must make lightning-fast decisions to ensure businesses can continue no matter the pressures confronting the firm, that the working capital is in place to enable operations, and strategic roadmaps stay intact.
The key, she said, lies with “going back to basics,” but with digitization and advanced technologies in the mix.
“It’s digital as a culture,” said Albovias, who added that treasurers must ask themselves new questions.
“How can I use technology better and make better decisions to guide the business?” she said.
With interest rates at decades-long highs, she contended, “we’re reverting back to the fundamentals of cash management. Treasurers, finance organizations and their broader companies are taking on more of a ‘cash mentality.’”
That means working with customers to optimize payment terms in a strategy that gets cash “into” a business more quickly, while simultaneously optimizing inventory levels. It’s a strategy that goes beyond a “just in time” pursuit to a “just in case” one, buffering against unanticipated shocks to supply chains. It has become critical, too, for treasurers to ensure they always have access to cash — and that they know, ideally in real time, how much liquidity is on hand.
That’s easier said than done, given the fact that so many firms operate globally and have cash held up in different jurisdictions.
The treasurers, in other words, “need to be able to pivot on a dime,” as Albovias said. Against that backdrop, treasury management solutions providers and consultants, including J.P. Morgan, have been helping corporate clients rationalize their bank account structures, consolidating them wherever possible. Liquidity, and specifically “sweeping solutions,” can help pull cash out of distant jurisdictions.
There’s a third level of dialogue that J.P. Morgan is having with clients tied to data and how it can be harvested and used to improve operations, she said.
“Data is everything,” she noted. “Treasurers are asking if there are solutions out there that can help them get the data they need — in real time — so that they can better position their cash in the short term” and gauge how much they need to invest and how much to borrow.
Traditionally, investments in tech may have been harder to come by, but now there’s a growing recognition stretching back to the pandemic of the value inherent in eliminating manual processes tied to cash management and improving accounts payable (AP) and accounts receivable (AR) functions.
“When most people had to stay home and run finance and cash functions from home, that changed the game,” Albovias said. “We’ve seen treasury’s mindset around technology change.”
Data fluency now is a valuable skill in the back office, she added.
But sharing (and unlocking) data across departments is a challenge.
“If you’re lucky enough to get all of that data, how do you normalize it?” she said.
Account statements, codes and analysis make it tough to compare something as basic as bank fees across countries, business units and enterprise resource planning (ERP) systems, she said. Efforts to consolidate, standardize and analyze that data are getting a boost from advanced technologies such as artificial intelligence (AI).
With those digital tools in hand, she said, treasurers’ roles are evolving rapidly.
“The focus has expanded beyond just looking at their bank partners,” Albovias said. “And now they’re working with procurement teams, sales teams and others to create a framework where they manage risk exposure to suppliers, vendors and customers. It’s a holistic dialogue.”
As she told Webster: “It’s incumbent on treasury in these times of disruption to become the leaders in any pivot and make sure that the company is able to survive and navigate different turns of events as best they can.”