Volatility is the only certainty in global markets today. For businesses to stay afloat and grow treasury functions need to be resilient, agile, and proactive. Here’s how to build a treasury that withstands uncertainty.
1. Diversify Banking Relationships
Over-reliance on a single banking partner creates counterparty risk. Maintain relationships with multiple banks across regions to ensure redundancy and access to diverse financial instruments.
- Benchmark: Businesses with diversified banking partnerships reduce counterparty risk by 30-40%.
2. Implement Real-Time Risk Monitoring
Volatility in FX rates, interest rates, and commodity prices can erode profits overnight. Implement a real-time risk monitoring framework that tracks exposures and alerts treasurers to emerging threats.
- Example: One global company reduced FX losses by 20% through automated risk monitoring and early intervention.
3. Strengthen Cashflow Forecasting
In uncertain markets, scenario-based forecasting is critical. Simulate multiple outcomes from best-case growth to worst-case downturns and plan liquidity accordingly.
- Insight: Leading treasury teams review forecasts weekly (or even daily during high volatility) rather than monthly.
4. Implement Robust Hedging Strategies
Protect against market swings by implementing natural hedges or using financial instruments such as forwards, options, and swaps.
- Impact: Companies with formal hedging policies reduce exposure to currency fluctuations by up to 50%.
5. Build a Crisis Response Framework
Resilient treasury teams don’t just plan for the best they prepare for the worst. Establish clear protocols for handling liquidity shortages, sudden market shifts, and operational disruptions.
- Best Practice: Conduct quarterly stress tests to ensure your liquidity buffers can withstand extreme scenarios.
The Takeaway: Resilience is about anticipating risk, preparing for uncertainty, and ensuring your treasury function has the tools and processes in place to adapt. In today’s volatile markets, a resilient treasury is a company’s best defense and its greatest competitive advantage.
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