Treasury in the TMT sector: balancing costs and growth

Published: Dec 2023

In 2024, technology, media and telecom (TMT) firms will face the dual challenge of keeping costs under control, while continuing to invest in growth and harness new opportunities. As such, treasurers of TMT companies will play an important role in helping to achieve that balance.

Telecoms tower base station
Vinai Krishnan, Global Head, Technology Media and Telecom Banking, Standard Chartered

Vinai Krishnan

Global Head, Technology, Media and Telecom Banking
Standard Chartered logo

Until recently, the business environment was one that enabled technology, media and telecom (TMT) companies to focus on growth almost at any cost. In the low interest rate environment that followed the global financial crisis, capital was cheap and readily available, especially for a sector as attractive as TMT.

But with the abrupt change in the environment triggered by the pandemic, the sector came under pressure. At the same time, with lockdowns fuelling a shift to remote working, both consumers and businesses rapidly embraced formats which required investment in digitisation. TMT companies had to adjust quickly to secure the resources needed to meet that demand.

Fast forward to today, and a key question in 2024 will be how TMT companies can meet the pressing need for operational efficiency, while at the same time securing the resources required to invest in future growth and keep pace with technological innovations. Treasurers, who are already playing an increasingly strategic role within their organisations, will need to be agile to support this balancing act.

Balancing cost management and growth

The year ahead will bring both challenges and opportunities for firms in the TMT sector. For one thing, the ongoing challenge of inflation and an elevated interest rate environment is likely to have an impact on consumer behaviour and companies’ IT spending patterns. But despite near-term headwinds and subdued economic momentum, TMT companies will also be looking to take advantage of growth opportunities.

Going for growth

Where growth is concerned, companies will be looking to access “the pockets of growth that are out there,” says Vinai Krishnan, Global Head, Technology, Media and Telecom Banking at Standard Chartered. “Companies are venturing into new markets across ASEAN, the Middle East and Sub-Saharan Africa,” he notes. “This is a trend that Standard Chartered is excited about, and well positioned for.”

The sector will also be shaped by tailwinds, including significant evolution in technology as well as investor optimism. “We are at an inflection point when it comes to adopting new technologies such as 5G on the telecoms side, the continued growth of AI and in the medium term, quantum computing,” says Krishnan.

While AI and machine learning have been around for decades, there is a growing interest in how both consumers and enterprises can use AI to achieve productivity gains. At the same time, says Krishnan, “we are seeing the disruption of traditional business models.” In particular, TMT firms will be seeking to recalibrate their resources efficiently in order to drive innovation and R&D, harness opportunities for M&A as well as diversify their products, services and end markets.

Managing cost pressures

But in this competitive environment, companies will also be facing very real pressures around the need for supply chain resiliency and diversification. Considering the macroeconomic and geopolitical climate, firms will need to focus more closely on streamlining their operations and optimising expenses to remain competitive and invest effectively in emerging technologies.

“Leveraging data analytics and technology such as AI is also going to be key when it comes to driving productivity and efficiency,” says Krishnan. “The firms that are going to win are the ones that can show efficiency on cost and create those operating models – that’s going to be a critical differentiator.”

As such, 2024 is likely to bring a greater focus on the role of the treasurer, as well as on strategic sourcing and procurement. “There will also be a continued focus on liquidity – it’s going to be really critical in the next couple of years to make sure that balance sheets are highly liquid, and that capital is unlocked from all possible sources,” Krishnan predicts.

Hot topics for TMT firms in 2024

  • Edge AI: while generative AI may have been the headline story in 2023, the rapid development of edge AI – which combines edge computing with artificial intelligence – is likely to be a major focus in 2024. This is likely to include the use of AI on form factors which are widely used by consumers, and as such will have implications for the entire value chain.

  • Cybersecurity and regulation: the cyber threat will continue to be top of mind, while threats related to cybersecurity will continue to unfold. At the same time, regulatory developments will be front and centre.

  • ESG: TMT companies will be looking for ways to make sure that their growth is sustainable, and that it comes from climate-friendly and carbon neutral sources.

  • Expanding into new markets: many TMT firms will be setting their sights on overseas expansion, with emerging markets often offering particularly attractive opportunities for growth.

Role of the TMT treasurer

With a vantage point that spans different functions across the organisation, together with expertise in risk management, treasurers in the TMT sector have an important role to play in supporting different business functions. As such, Krishnan predicts the role of the treasurer is likely to be particularly critical in 2024.

“Treasurers will play a pivotal role when it comes to achieving the right balance between managing costs to satisfy near-term market pressures, while at the same time continuing to invest in and support long-term growth,” he says. “Inherently, treasurers are effective risk managers, and I think their expertise will be invaluable in helping companies navigate these uncertain times.”

Krishnan adds that treasurers can provide a variety of tools that will play an important role in supporting TMT firms in the coming year. “The first is strategic financial planning and collaboration with business leadership – allocating financial resources optimally is really where treasurers can add most value,” he comments. “Treasury teams have a great vantage point when it comes to having touch points across the organisation, and cross-functional relationships and expertise.”

Treasurers will continue to work with business leadership to align business objectives with their companies’ longer-term strategic goals. At the same time, they will help to balance cost management with investments, while unlocking liquidity and identifying and mitigating financial risks such as currency fluctuations, interest rate changes and credit risks.

“And of course, they will help to maintain financial stability – which is going to be more critical than ever – through capital structure optimisation, and by enforcing discipline around budget and performance monitoring,” Krishnan points out.

Treasurers can support their firms in a number of ways, such as:

  • Providing strategic leadership – treasurers increasingly have much to offer as strategic leaders within the business, not least because of the skillsets they offer. With the prospect of continuing financial uncertainty and economic volatility, treasurers have a key role to play in helping manage risks within the organisation.

  • Supporting decision making – at the same time, core treasury topics, such as liquidity management, are also now squarely positioned as a business leadership priority. “Business leadership is increasingly looking to maximise efficiencies and liquidity to create room for investment and growth,” says Krishnan. “The strategic decision-making and insights that treasurers provide will continue to be that much more important.”

  • Communicating with stakeholders – Krishnan notes that treasurers have much to add when it comes to communicating with stakeholders, including board committees as well as maintaining the confidence of investors and lenders in the current environment.

  • Supporting expansion into new markets – treasurers have a critical role to play in supporting their companies as they expand into new markets, by helping firms understand the local landscape across areas such as potential inorganic growth options, FX risk, counterparty risk and payments. Treasurers have much to offer in helping their companies navigate local requirements and remain compliant with regulations.

TMT treasurers: adding value and supporting growth

Vinai Krishnan, Global Head, Technology Media and Telecom Banking, explains how treasurers can add value in the year ahead.

How would you describe the outlook for the TMT sector in 2024?

On the one hand, the uncertain macro conditions, such as inflation and the elevated interest rate environment, can certainly have an impact on consumer behaviour and enterprise IT spend. But on the other hand, there is plenty of technological evolution and innovation pressure, not to mention genuine investor optimism and interest in the sector.

What will TMT companies be focusing on in the coming year?

It’s really going to be about balancing operational efficiency in the face of near-term margin pressures, while creating the resources to invest in future growth and keeping pace with the innovation and investment needed in this competitive environment.

What role can treasury play in helping TMT firms thrive in this environment?

Inherently, treasurers are very effective risk managers. Their expertise will be invaluable in helping companies navigate these uncertain times and invest in growth. Treasurers will continue to work with their business leadership to align business needs and plans with companies’ longer-term strategic goals.

How can treasurers support their firms’ expansion into new markets?

The expansion into new markets is motivated both by growth and, increasingly, by the desire to build supply chain resilience. Often the markets that TMT firms focus on are emerging markets, which have certain nuances around their regulatory landscapes, capital controls, FX controls and even their business landscapes.

Market analysis and insights into the financial feasibility of business growth and supply chain growth will be critical, as will the treasurer’s toolkit around understanding currency and exchange rate requirements, and compliance with local regulations.

Likewise, ensuring that cash flow is managed optimally to support expansion activities is going to be key. And that’s where building banking relationships can help to demystify some of the more restrictive market dynamics, while making sure that the business is really set up for success.

Choosing the right partner

Overseas markets may offer a lot of promise when it comes to supporting top line growth and building supply chain resiliency. However, these markets also come with numerous challenges and local nuances – and the right banking partner can play a vital role in helping companies demystify some of these nuances.

“A global banking partner like Standard Chartered can really help organisations that are looking to tap into some of these avenues of growth – whether that’s by providing access to global financial networks, identifying inorganic options, delivering valuable insights from the discovery stage to execution, ensuring that funding is available, or providing an overview of the regulatory and business environment in these markets,” says Krishnan.

He notes that the ability to provide “creative and sophisticated financial products and services” across areas such as foreign exchange risk management, cross-border payments, trade finance, working capital and collections is particularly valuable. “The ability for partners to deliver that, while having a standardised platform across various markets, is going to be really critical for treasuries to make sure that they are scalable and sustainable,” he adds.

As such, treasurers are looking for banking partners that have a strong understanding of their businesses, including the growth areas and markets on which they are focusing. In today’s environment, key differentiators include local expertise, a standardised platform across markets and digital capabilities.

“Regional bank failures in the US earlier this year heightened the focus on sound risk management and the counterparty strength of banking partners,” Krishnan adds. “In addition, a bank’s ability to support corporates through their sustainability imperatives – advisory and financing – is going to be important as well.”

How can Standard Chartered help?

At a high level, says Krishnan, Standard Chartered is in the fortunate position of banking “some of the most exciting clients across the most dynamic markets on the planet.” He adds, “We understand these markets intimately, and have built standardised operations and delivery across markets in Asia, Africa and the Middle East.”

Standard Chartered has supported numerous TMT companies across these regions in activities such as financing, FX risk management and payments and collections. The bank also provides firms with treasury advisory across areas such as new market expansion, capital structure, benchmarking and liquidity options. Notable examples of these collaborations include:

  • Helping an Asia-based tech distributor set up operations and manage FX risk in the Middle East in response to market expansion by OEMs.

  • Partnering with a leading data centre company to help assess acquisition finance considerations and funding and FX risk hedging operations options across key markets in Sub-Saharan Africa and Asia.

  • Helping a leading US-based internet company understand the capital, FX risk management, payments and collections landscape in key Sub-Saharan Africa markets. Standard Chartered also worked with the company’s treasury, legal, business and payments partnerships teams to help position the business for success in restricted markets.

  • Supporting a large Asia-based manufacturer with advisory support and solutions relating to equity flows, working capital and FX risk management in India.

  • Helping a large Asia-based telecom operator to change its mix of debt in Africa. This was achieved by putting in place flexible credit facilities which enable different entities to draw down either in local currency or in foreign currency, in line with the company’s capital requirements.

Overall, says Krishnan, the bank is focused on bringing its local expertise, balance sheet and capabilities across risk management, trade finance, payments and collections to support companies across different markets. “This is the case for companies that are looking into restricted markets – but we are also increasingly supporting Asian and US companies in the push for nearshoring,” he adds. “So the bank is playing a key role as the provider of services, partnerships and advisory services across the globe.”

All our content is free, just register below

As we move to a new and improved digital platform all users need to create a new account. This is very simple and should only take a moment.

Already have an account? Sign In

Already a member? Sign In

This website uses cookies and asks for your personal data to enhance your browsing experience. We are committed to protecting your privacy and ensuring your data is handled in compliance with the General Data Protection Regulation (GDPR).