Cash & Liquidity Management

Tackling working capital challenges with technology

Published: Apr 2023

In our latest podcast with Standard Chartered, Tarek El-Yafi, Regional Head of Cash Management Sales, and Karen Hom, Managing Director of Transaction Banking, discuss working capital solutions, the importance of technology, and what a well-run treasury should look like.

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Supply chain challenges continue to be rife for companies around the world. Alongside ongoing supply chain disruptions and political tensions, many businesses are holding onto a higher level of inventory than in the past, which is putting considerable pressure on their cash on hand. As such, there’s a growing need for companies to forecast their future cash flows as accurately as possible.

In this environment, companies are seeking greater flexibility – whether that means diversifying their supply chains, consolidating bank relationships to negotiate better terms, or taking advantage of working capital solutions to access alternative sources of funding. So how can treasurers navigate the latest supply chain trends and take advantage of new technology?

Supply chain trends in 2023

In times of disruption, companies are keen to avoid putting all their eggs in one basket – so while markets like China continue to play an important role in global supply chains, many companies are looking to shift their supply chains closer to home. “For example, we’ve seen some of our US clients looking at bringing their manufacturing to the US or Mexico, where you don’t have to worry about a long logistics period,” says Tarek El-Yafi, Regional Head of Cash Management Sales at Standard Chartered.

Nevertheless, says Karen Hom, Managing Director of Transaction Banking at Standard Chartered, “We’re looking for positive growth globally in 2023, and we’re hopeful that will help free up supply chains.” She also cites continuing growth in solutions such as receivables financing and distributor financing as companies seek to monetise their outstanding assets.

On another note, the heightened focus on ESG is also leading companies to rethink how they can make their businesses more sustainable – whether that’s by incorporating sustainability into working capital solutions, or directing deposits into sustainable cash management funds.

Harnessing partnerships

It’s no secret that technology has a crucial role to play in supporting liquidity and working capital management. For banks, the ability to partner effectively with fintech firms is increasingly key to providing companies with the solutions they need.

“Many years ago, banks used to build a lot of these technology solutions themselves,” says El-Yafi. “But today, we partner with fintech firms to co-provide solutions to our clients around working capital.” One example of this approach is the bank’s recent partnership with supply chain solutions provider Taulia, which has enabled the bank to provide working capital solutions that reach significantly more suppliers.

Where payments are concerned, the bank is working with fintech providers to offer payment solutions via a company’s website, adds Hom. This approach, which involves providing either a white labelled solution or a direct link into Standard Chartered, “gives the company’s customers more opportunities to take advantage of new payment methods.”

Accessing technology

In order to access the new technologies available, El-Yafi recommends that corporates should bring their banks, fintech providers and commercial partners into the conversation – “because what we’re talking about is integrating some of these capabilities into the commercial process of our clients.”

One route might involve exploring how to leverage APIs as a way of connecting quickly and easily with banks and fintech providers, and thereby gaining real-time access to newer capabilities. Where instant payments are concerned, says El-Yafi, “the best way to access those instant payments is by leveraging an API which allows you to connect and get feedback on the status of that instant payment.” In many cases, he adds, local clearing requires an instant connection in order to execute this type of transaction.

Moving treasury forward

In the coming months, treasury teams will continue to face significant risks, including geopolitical challenges, market volatility and high inflation. Where the latter is concerned, companies are focused on ensuring they have the cash needed to withstand any slowdowns.

Meanwhile, the treasury team continues to evolve, with treasurers increasingly regarded as strategic leaders able to bring consultative business ideas to the company. “They can help guide the business on what might be realistic projections on how soon they can generate revenues,” notes Hom. She adds that investment in technology is “a core differentiator for top treasury teams, which are generally more on top of their cash forecasting, and spend less manual time on reconciliation.”

Returning to the importance of working capital, El-Yafi notes the need to have full visibility over accounts and optimising liquidity across global operations. “In my experience, a centralised treasury means you have access to over 90% of the cash within the company, and you’re finding ways to optimise that cash so that you don’t need to borrow as much,” he says.

Last but not least, El-Yafi highlights the importance of talent management when it comes to ensuring that treasury is at the forefront of technology and able to leverage innovative tools. “You need to make sure you have the best talent – not just accountants, but technologists that can be part of the treasury team. That’s what I think a well-run treasury looks like.”

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