Treasury Today November/December 2020

Published: Nov 2020



Purpose in a volatile world

The idea of corporate purpose is still relatively new, but companies’ ability to combine profits and purpose is increasingly on the radar as corporate stakeholders, particularly employees and ESG-minded investors, demand more than just shareholder primacy. Rather than knock purpose off the agenda, the pandemic has pushed many companies to revisit their social purpose and role in society, encouraging more to act in the interests of all their stakeholders.

In this edition, we speak to multinational food manufacturer Danone about how its purpose to inspire healthier and more sustainable consumption and its core belief that a healthy planet and people are intertwined, has shaped its funding strategy.

Indeed, as companies struggle to navigate unprecedented challenges which most recently include stricter lockdowns in Europe and a spike in political risk following Trump’s refusal to concede Biden’s US election victory (ongoing at the time of writing), corporate purpose could act like a North star on a rough sea.

It is these challenges – and others – we focus on in this month’s Insight & Analysis, offering a deep dive into what 2021 could hold, with insight from Drax’s Group Treasurer Chris King. COVID-19 and Brexit will continue to dominate, while King flags that the transition to a low carbon economy and only a year to go until LIBOR’s demise, should also be high on treasury’s agenda. Elsewhere, we find that relentless regulatory and technological change will continue to drive and shape treasury in the year ahead.

Regulatory and technological change are key factors that should have propelled open banking, the initiative to get banks to share customer data, mainstream. However, in our Back to Basics feature we report that banks, primarily focused on their retail customers, have been slow to offer open banking products to corporates. We urge banks and companies to look afresh at its transformational impact around cash management and liquidity planning, as well as easy onboarding, and to view open banking as an opportunity, allowing them to compete with tech groups and other API driven companies.

In the Corporate View, Flex’s Anita Bubna talks about how today’s heightened risk has pushed treasury centre stage in a coming of age. Reflecting on the importance of data and technology in successful treasury function, she suggests treasury teams develop coding skills to enable simple modelling and better connected data sources. Noting the importance of persuasion when it comes to leading change, she adds that a team effort and strong relationships with colleagues are also key to success.

Finally, this edition explores how volatility is encouraging more companies to hedge their developed market FX risk. However, we also note a reluctance amongst companies to take out long-term FX hedging strategies, such is the enduring volatility. As financial markets continue to swing around in response to news out of the US and the second bout of COVID lockdowns, it is a cautious sentiment that will prevail for a while yet.

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