Already facing high expectations as they try to spur growth and manage unprecedented risk, treasurers rely on legacy technologies that cannot handle the complexities of modern commodities trading. Fortunately, the same technological innovations that have quickened the pace of commodities trading and transformed the market can also provide treasurers with the full visibility they need to be strategic leaders at a time of heightened uncertainty on the global stage.
A cloud treasury solution harnesses information from all corners to provide complete, in-the-moment visibility of an organization’s financial flows. Enlightened by this enterprise-wide view of cash positions and commodity exposures, treasurers can quickly analyze, strategize and act with confidence at a time when informed decisions separate organizations.
Brexit and tariff war increase volatility
Look no further than the news to see the steady pace of real and potential disruptions that threaten global markets and make the job of the treasurer immeasurably more complex.
For one, as the United Kingdom negotiates its exit from the EU, the unknown status of trade relationships for agricultural and processed food commodities keeps markets on edge. Beyond the headlines, no day — or no moment, is predictable in commodity trading. Commodity markets are, by nature, volatile. Market participants have to analyze and make decisions on market shifts in the shortest time possible. Hesitating even slightly to act on a market fluctuation can set back a commodity-driven business, especially one that depends on commodities to create end-products. These businesses always require a full understanding of their exposure to volatility on raw materials and commodities trades in order to best manage risk.
The Herculean task of risk management falls on the shoulders of the treasurer. But many treasurers are still burdened by the shortcomings of on-premises, legacy technologies. These tools sometimes are not always electronic, with many treasury departments still analyzing data on spreadsheets.
Organizations nowadays make commodity purchases on long-term contracts that bring a high degree of cash exposure. Between everyday market volatility and the potential for further turbulence caused by any number of macroeconomic factors like Brexit and retaliatory tariffs, treasurers are under even greater pressure to accurately lock in forecasts for the long term. They have to make purchases with as little risk as possible.
Increase stability with a single view of truth
An automated solution unifying the many separate systems that handle cash flow, interest rates, foreign exchange (FX) information and other data can provide treasuries with the complete transparency needed to make fast, informed analyses and decisions.
The advantages of having complete visibility over cash globally across a range of dimensions, including bank, currency, country and counterparty category, and then being able to measure that information against exposures in an aggregated and calibrated fashion. With a complete view of this information readily available and at their fingertips, treasurers can, for example, guarantee the availability of a shortfall, should prices either decrease or increase during a long-term contract. Similarly, with quick access to a unified stream of data, treasurers can manage their cash flows with confidence during stressed market conditions.
The cloud also provides treasurers with unprecedented computing power. It allows users to quickly scale without having to purchase new on-site equipment and worrying about the inevitable delays of technology integration. With this type of flexibility always available, treasurers ey have the time and resources to focus on more meaningful business outcomes while leveraging a system that provides a singular view of vital data.
Treasurers today cannot afford to hunt down data in separate systems that could take weeks to analyze. They have to quickly identify relationships and risks, and just as quickly and accurately analyze their options. They need to manage in an uncertain world with a single view of the truth.
To learn more about how Openlink Solutions can work to improve ROI and streamline operations in your business, contact us for a free consultation or no obligation demo.