FinTechAutomationDeglobalisation: How treasurers are exploiting data to ease pain of supply chain disruption 

Deglobalisation: How treasurers are exploiting data to ease pain of supply chain disruption 

Deglobalisation is creating plenty of headaches for treasurers and many are looking to exploit data and technology to ease the pain of this transition

Treasurers are focusing much more on data-driven treasury innovation such as predictive analytics in an effort to mitigate the impact of deglobalisation and ongoing macro and geopolitical challenges, according to a global survey of treasurers by Deutsche Bank.

The study, based on an Economist Impact survey of 150 treasurers across North America, EMEA and Asia Pacific, reveals that in the post-pandemic world, deglobalisation has become the topmost concern for treasurers, with one-third of those surveyed (33%) anticipating the effects of a reversal in globalisation to persist in both the short and long term.

Christof Hofmann, global head of corporate cash management at Deutsche Bank, says that despite these challenges and the uncertain economic recovery, treasurers are not shying away from prioritising new solutions. If anything, the challenges “have given data-driven treasury innovation a fresh momentum,” he says.

Hofmann explains that by leveraging company data more effectively, treasurers can deploy predictive analytics to identify risks ranging from supply chain inefficiencies to fraud and money laundering that can result in a material financial loss. Using data this way can allow treasurers to locate these risks and collaborate with the right internal teams to take corrective action sooner.

The survey shows that treasurers believe greater leveraging of data can improve in-house banking and netting, as well as exposure identification and management.

Hofmann says that at a more strategic level, companies are looking increasingly to reshore, or in some cases nearshore, their supply chains to avoid global trade disruptions to mitigate the impact of deglobalisation. Examples of this in action include US-based automotive company General Motors working with semiconductor suppliers such as Qualcomm and US semiconductor manufacturer, Intel, investing US$36bn to boost chip-making in Europe and another US$20bn on new plants in Ohio.

The bigger picture

More broadly, Hofmann reminds us that the global shakeout of supply chains is a major deglobalisation headache not just for corporates but also nations.

“You only have to look at Germany’s reliance on Russia for gas as an example of the impact of supply chain dislocations at the country level,” he says.

While treasurers’ and governments’ worries about the future of supply chains are palpable, Hofmann says any fears of a seizing up of their global operation are misplaced.

“The reversal of globalisation as it impacts supply chains will not result in their ceasing to function. We will continue to have global supply chains but corporates and their treasurers will need to manage the risks associated with them in different ways. They must look to ensure they are not putting all their eggs in one basket and that they have the flexibility to react to different situations more quickly,” says Hofmann.

The shifting global supply chain architecture and geopolitical uncertainties, however, does not mean corporates need to suddenly move to a less centralised treasury model.

“Having your treasury function centralised, having that integrated global visibility, is exactly how you gain the opportunity to react to local developments rapidly and effectively,” says Hofmann. “I, therefore, see the trend towards centralisation of treasury and cash management continuing.”

But even as treasurers sweat to make sure they are on top of relatively short-term challenges such as hedging strategies, they are also, thanks to their experience during the pandemic, much more intent on being fighting fit for the longer term.

“At Deutsche, we have seen a clear upward trend in demand for real-time treasury and clients requiring more timely access to information,” he says. “Their key focus here is gaining access to quality data for effective, rapid decision making. API services to support, for instance, real-time account visibility and payments, are now in much greater demand.”

Embracing change

The need for treasurers to be much more agile and imaginative in addressing challenges is further emphasised further by Helen Kane, risk and exposure fellow at Hedge Trackers, the financial risk consulting arm of US-based treasury and risk management platform provider GTreasury.

For Kane, it is precisely when the global economy undergoes substantive change, as it is doing now, that treasury and finance leaders need to review and redefine their strategies and definitions of success.

“Treasury strategies and skill sets that drove success in the 90s were different from those in 2020. My advice for all treasurers is to be open to change, be open to learning, and be ready to flex, all while maintaining those historical controls and implementing new ones to safeguard your assets,” says Kane.

“What you have done in the past may not be the best way forward. At the same time, everything that is new is not necessarily the best way forward. Stay connected, grow your knowledge set, and learn from others’ mistakes so they don’t need to be repeated.”

More broadly, Kane reminds us that deglobalisation sentiment in politics has actually been running high for a good few years now, especially in the US, leaving corporate treasury and tax teams swimming against the tide. The more recent intensification of supply chain risks has only become another major driver for localisation of operations.

“It hasn’t been that long since we saw tariff strategies employed [for instance by the US and China], and I believe they are likely to rear their heads again to promote domestic supply chains. All of these trends are likely to put pressure on margins and reduce corporate profits,” concludes Kane.

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