Cash & Liquidity ManagementWATCH: Time for cash funding profile diversification is now

WATCH: Time for cash funding profile diversification is now

During Global Treasurer’s latest Future in Focus episode, treasury experts from Standard Chartered, Kyriba and Nestle discuss why the use of other assets should be considered in 2022 to combat rising interest rates

Treasury managers should look to diversify their cash funding profiles in response to the current interest rate environment, according to industry experts.

The use of other assets – including receivables financing, commercial paper and letters of credit – should all be considered, according to Bob Stark, head of market strategy at technology firm Kyriba.

Stark appeared alongside Tarek Elyafi, managing director at Standard Chartered and Saad El Hachimy, a risk manager for Nestle, as part of Global Treasurer’s forthcoming instalment of its Future in Focus series.

In response to the pandemic, central banks unleashed swathes of liquidity alongside stimulus packages. While necessary, the support suppressed borrowing rates which has made it increasingly difficult for investors to generate yield.

While in the past treasury managers could rely on money market instruments to generate reasonable safe returns, today’s environment means they have had to become more creative. During the discussion Elyafi asked participants how treasury managers should approach this opportunity – diversification emerged as a potential strategy.

“The levers which are at the treasurers’ disposals are quite advanced in comparison to the past,” Stark says. The issuance of commercial paper and letters of credit, Stark goes on to say, when done well can help to raise cash more efficiently over traditional means which are becoming more expensive.

Hachimy notes multinationals are already leveraging diversification, and are using these alternative assets within their cash management strategies as a means to navigate current volatility within the global financial market. “Interest rates are going to get higher for everyone and everyone is looking to optimise costs,” he says.

The panel also discussed the importance of cash management forecasting tools to help treasurers gain better insight over cash flows. Hachimy notes many multinational organisations have begun to put “more pressure” on their cash flow forecasts as a result of rising interest rates.

“This is one of the only things which can help optimise the financial costs many of these multinationals have,” he says.  Stark also says cash and liquidity forecasts have become “pivotal” for treasury management to understand what the cost liquidity is and what they can do to reduce the cost.

Accurate long-range cash forecasting has been a major treasury challenge, and to date, most improvements in treasury forecasting have been incremental.  However, the advancements of new technology – particularly with the artificial intelligence space – could mean cash forecasting accuracy is no longer an issue.

The use of AI and ML has proven to both increase forecast accuracy – through the removal of human biases, and reduce the time taken to produce forecasts than manual processes. As a result, treasury teams are more likely to realise larger monetary gains.

AI and machine learning have high potential for cash management and forecasting, particularly when reconciling prior-day bank files with yesterday’s expected cash position.

To watch the latest episode of the Future in Focus series in full, click here: WATCH: How low interest rates and the pursuit of yield impact cash management (

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