The challenges posed by, among other things, COVID-19, protectionist sentiment and ongoing trade disputes, means that “traditional” treasury tasks are once again the priority, from liquidity to supply chains – though new challenges are waiting on the horizon.
In a COVID-19 world, nothing is guaranteed. The unpredictability of the economic environment means that traditional treasury activities have come back into focus for CFOs, and that cash is once again king. As many as 82% say that keeping sufficient cash buffers has become a more important treasury duty in the past three years, with 84% saying the same for optimising working capital.
The priorities of CEOs in the current environment have also shifted. According to CFOs in our survey, more CEOs ask questions relating to cash flow and liquidity or hedging strategies now than they did three years ago. This shift away from more strategic topics such as financing and M&A speaks to the pressures the pandemic has put companies under.
For many CFOs, their attention has turned to supply chain-related risks: commodity prices (37%) and supply chain risks (30%) are cited as the top risks (among many) occupying the largest proportion of their attention.
A return to the traditional
Supply chains have been massively disrupted by pandemic restrictions and forecasting complications, the ongoing global semiconductor shortage caused by a stronger bounce-back in demand not met by supply-side investments being a case in point.
Without the requisite materials and components, companies relying on them are unable to sell and distribute their products at their targeted volumes and delivery schedules. This reduces revenues while raising costs to secure scarce materials, resulting in worsening cash flows, squeezed margins and the weakening of a company's financial position.
Supply chain and commodity prices are likely to be risk priorities for CFOs based on whether or not they believe their organisation is able to cope with them.