A confluence of macroeconomic headwinds, including the repercussions of recent tariff implementations and persistent geopolitical tensions, are significantly reshaping the priorities of corporate treasury teams in 2025, according to a new report. The Corporate Debt and Treasury Report, jointly published by Herbert Smith Freehills and the Association of Corporate Treasurers, reveals a strong pivot towards prudent cash management strategies as businesses navigate an environment marked by significant volatility and uncertainty.
The report highlights a notable shift in how corporate treasurers view the impact of global events on their debt strategies. This year, a substantially larger proportion of respondents (76%) anticipate that macroeconomic and geopolitical factors will have a considerable influence, a stark increase from the 41% who felt the same in 2024. Notably, 17% reported expecting a “material negative impact” on their business, up from 12% last year, underscoring the heightened uncertainty permeating the global economic landscape, with many citing the ambiguity surrounding tariffs as a key concern for the year ahead.
While earlier optimism existed around leveraging debt for acquisition opportunities (with 14% anticipating increased debt requirements, up from 8% last year), a growing number of treasury teams (11%, up from 8%) are now prioritizing debt reduction, perhaps feeling the strain of sustained higher costs of borrowing. This cautious approach reflects the prevailing economic climate and the less-than-anticipated decline in the Bank of England’s base rates.
Cost of Debt Outweighs Economic Uncertainty as Key Concern
Interestingly, the rising cost of debt has emerged as the primary impediment to raising capital, cited by 28% of respondents. This surpasses concerns around broader economic uncertainty (23%), indicating a direct response to the current interest rate environment, where the anticipated easing has not materialized as quickly as hoped.
However, despite these challenges, corporate treasurers are demonstrating resilience and adaptability. An overwhelming 91% of respondents indicated a strong focus on optimizing cash management strategies to mitigate the impact of higher debt costs. This proactive approach underscores the fundamental importance of liquidity and financial flexibility in uncertain times.
Agility in Debt Management Amidst Volatility
Treasury teams are reportedly monitoring market fluctuations closely to capitalize on favorable windows for debt issuance. The emphasis is on swift execution to lock in optimal pricing terms before further unexpected macroeconomic or geopolitical events can impact the market. Interestingly, the report notes an increase in the number of respondents using FX derivatives to manage FX risk, rising from 27% in 2024 to 32% in 2025, highlighting a proactive approach to mitigating currency volatility.
AI on the Horizon, but Focus Remains on Fundamentals
While the potential of artificial intelligence (AI) in treasury functions is acknowledged, the report suggests that widespread adoption remains some years away. Currently, AI’s role appears limited, with many treasury teams prioritizing core treasury functions and showing hesitancy towards significant investment in exploring AI’s broader applications in the immediate future.
Key Priorities for Corporate Treasurers:
- Elevated Focus on Cash Management: With 91% citing it as a top priority, maintaining strong liquidity is paramount in the current climate.
- Strategic Response to Debt Costs: Adapting to a higher interest rate environment, identified as a key concern by 50% of respondents, is a key priority.
- Emphasis on Nimble Execution: Acting decisively to secure favorable debt terms in volatile markets.
- Prudent Approach to Innovation: Focusing on core responsibilities while cautiously evaluating emerging technologies like AI.
The “Corporate Debt and Treasury Report 2025” paints a picture of a treasury profession acutely aware of global uncertainties and strategically prioritizing fundamental financial principles to navigate the challenges ahead. The overwhelming emphasis on cash management and a measured approach to debt underscore a commitment to stability and resilience in an unpredictable economic environment.
