Building Financial Resilience in the Face of Tariffs

By Kyriba November 26, 2019

Tariffs and trade wars are nothing new. What is new, particularly in the current political environment, is how quickly a change in policy can affect the balance of trade.

Such abrupt changes can put CFOs and treasurers on edge — and leave them scrambling to adjust everything from banking relationships to hedging, to supply chain financing.

This forces a change in thinking about cash and liquidity. The crucial issue here is how a company can strategize and make informed decisions in light of uncertainties. CFOs need to up their game in terms of having access to the right data at the right time so that they have their hands firmly on the controls with regard to cash, risk and liquidity.

This is why Kyriba recently introduced the notion of Active Liquidity, a new approach that automates cross-functional processes that connect treasury, payments, working capital and risk management. Active Liquidity allows companies to see, move and protect financial resources across a connected network of internal functions and external partners, all in real-time.

Active Liquidity is also a mindset: financial executives should be able to have the data, the analysis and the levers at their disposal to protect their cash and liquidity, but also to be proactive and take advantage of the volatile trade landscape.

Because when outside forces – like new tariffs – affect your company, they undoubtedly affect your competition. So, the question is, can you out-wit and out-strategize your competition using smarter financial controls and liquidity management?

The answer is yes through risk management, cash mobility and the ability to bring agility to supply chain operations.

Make It Your Priority to Manage Risk

Let’s consider financial risk management. Tariffs can have such a strong and immediate impact on currencies. That’s why CFOs should have accurate, complete and timely visibility into FX exposures. Sounds easy, but the truth is that most organizations simply don’t have it.

Implementing a risk management solution is a simple fix – that is if it’s a SaaS solution. With a solution like Kyriba’s risk management offering, validated FX risk can become a daily input to a CFO’s calculus.

Perhaps the most important benefit is being able to understand the impact of currency volatility on earnings. But it also gives a CFO the mechanisms to closely monitor and adjust hedging strategies, both of which are important for being responsive when abrupt changes in trade policy cause currency fluctuations.

Focus on Cash Mobility

The currency implications of tariffs affect different parts of a company in different ways, especially across different countries and regions.

So, cash mobility comes into play. CFOs need visibility to strategize, and the flexibility to execute cash mobility to actively manage liquidity in smart, strategic ways.

CFOs should be able to quickly consider and act on the following considerations, given impending tariffs:

  • Do we have sufficient cash mobility to where it’s needed most?
  • Does our cash management structure have the flexibility to support changes in the supply chain?
  • Do we have daily, accurate short term forecast capabilities?
  • Can we implement early payment incentives?
  • How can we optimize the cost of capital across different countries and currencies?

Money in motion is an advantage to those who have the data-driven insights to make the right decisions, especially in light of unpredictable trade policies.

Supply Chain Agility is in Your Favor

Recent events in global trade have ushered in a new reality: supply chain disruption is inevitable.

Supplier costs may go up abruptly, they may go out of business, currency rates may change. With these dynamics, Kyriba offers differentiating value by helping provide clarity and decision support so that CFO’s can build flexibility into their supply chain planning. Customers can be better prepared to change banking structures, move cash from one currency to another and implement working capital strategies like supply chain finance (reverse factoring) or dynamic discounting.

Turn Trade War Uncertainties to Your Advantage

Here’s the net: In business, the best defense is a great offense. Kyriba’s Active Liquidity Network provides highly efficient, streamlined processes that deliver liquidity as a lever. CFOs can use the network effect of combining treasury, payments, risk management and working capital to strategy for an ever-dynamic trade and tariff environment.

For more information, download Kyriba’s 15-Minute Guide to Active Liquidity.

 

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