J.P. Morgan: Treasurers Are Critical To Helping Firms Plan For Business Resiliency

With the global pandemic tossing many organizations into a digitization crash-course, business continuity has remained top of mind for the C-suite. It will continue to be a focus, too, as businesses gradually reopen and as employees begin to return to the office.

But there will also be a shift toward a new challenge for corporates that have endured months of volatility. With so much uncertainty still plaguing the markets, organizations will have to balance their business continuity measures with a focus on not just surviving but thriving.

Business resiliency will be key to helping organizations maintain financial stability and add value to their firms, even amid the potential of an additional coronavirus wave and more lockdown measures.

Speaking with Karen Webster, J.P. Morgan Head of Wholesale Payments Product Delivery Jennifer Barker discussed what some of those business resiliency conversations will look like as companies consider how to take the lessons they’ve already learned from the disruption of the past and wield them to their advantage in the future. Corporate treasurers, she noted, will be key to promoting this resiliency.

“It’s obviously a very timely topic, and ‘resiliency’ can cover a lot of different situations,” Barker said. “But whether it’s a pandemic or a natural disaster, it’s really important to think through your resiliency plan.”

Asking the Right Questions

Just as with business continuity strategies, developing a resiliency plan must include an enterprise-wide scope and take into account the many unknowns that create only one certainty: Volatility will continue. According to Barker, organizations need to begin by asking the right questions about where their current resiliency plans stand, and how to best proceed.

Understanding the current responsibilities of various team members, developing communication channels and chains of command, and understanding what an organization’s infrastructure must look like going forward — from cloud-based portals to physical seating arrangements in the office — are all vital.

Many of these questions are essential to the chief financial officer, treasurer and finance departments within an organization as they map out their own liquidity and cash flow resiliency strategies. Understanding how every dollar is being spent today, and whether that spend can be strategically adjusted to promote resiliency into the future, are conversations businesses are beginning to hold with their financial services providers, said Barker.

“Regardless of where you are geographically, or where you are in your recovery cycle, these questions are critical for a treasurer to be at the table,” she said. “Treasury is in a really unique position to help the company think through those questions because of its role in forecasting cash and managing cash, and because many financial functions report up to the treasury.”

Liquidity Resiliency Through Technology

Embracing the cloud and adopting technologies that promote business continuity in a remote working environment were essential to the survival of many firms. Today, within the business resiliency conversation, Barker noted that treasurers must continue to consider which technologies will best promote financial resiliency as well.

Digital and automated tools that provide accurate and real-time cash forecasting and visibility into financial standings will be valuable, but as Barker said, cash flow management isn’t simply about understanding where money is in one moment.

“The other element of the conversation is that cash flow forecasting isn’t entirely about where the money is and how much a company has to deploy,” she noted. “It’s also taking it a step further in this environment and looking at your vendors and customers in terms of cash flow forecasting.”

Optimizing payment channels to pay vendors is one example in which an organization using paper checks may need to consider commercial card and virtual card adoption to not only ensure accounts payable (AP) can continue to operate while working from home, but also to elevate spend strategy by taking advantage of capital float and card program rebate.

Mitigating Risk

Planning for the future within an organization means mitigating risks that may or may not come to fruition. That’s never been clearer than it is today, with the pandemic continuing to open up an ecosystem of uncertainty.

Third-party risk management will emerge as an essential component of business resiliency for corporate treasurers, said Barker. Understanding counterparty risk might include assessing whether one supplier’s geographic location might expose that partner to a greater impact from the global pandemic than another vendor in a different location, or it could include the discussion about which vendors are willing to accept partial or late payments.

Mitigating fraud through the supply chain, ensuring AP and accounts receivable (AR) teams continue to operate seamlessly while working from home, and maintaining a chain of authorization for the proper professionals to sign off on purchase orders and invoice payments are also all part of the risk mitigation effort.

And while businesses are tightening their belts, Barker noted that for many treasurers, the financial risk of not investing in technologies that can support these resiliency initiatives is much greater than the cost of acquiring these tools.

In the short term, asking these risk questions and developing metrics-based scorecards can support a real-time assessment of where organizations stand today. Looking ahead, Barker said longer-term resiliency plans will look at potential supply chain diversification or geographic disbursement of employees.

These are enterprise-wide discussions to be had, but as Barker noted, the corporate treasurer should have a strong voice to promote financial stability and cash flow resiliency ahead.

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