Over the past four years, the topic of "corporate stability in times of crisis" has become a recurring element in many board committees and treasury committees. Regardless of whether the overall corporate crisis resilience was on the agenda or, broken down to the financial world, the focus was on the financial stability of companies, the aim was always to identify the causes of possible threat scenarios and to develop a forward-looking approach combined with effective short-term stabilization measures. Today, four years after the start of the pandemic, the challenges have become even greater for most companies due to multiple crisis situations. Public communication spaces reflect precisely this increased relevance of the current absolute necessity to deal with the economically turbulent times:
In our Corporate Treasury News, we have discussed the topic several times in the past year alone (for example in the March issue on "Treasury Policy" or in the November issue on "Treasury requirements in uncertain times"). DerTreasurer has also regularly dealt with the not only perceived, but also measurable state of emergency: one of the findings of the 29th Treasurer Panel2 in October 2023 was that an elaborate emergency plan specifically for cyber attacks is important for 70% of treasurers. The threat situation for cyber security is also currently being addressed by federal politicians. At the beginning of February 2024, Federal Minister of the Interior Nancy Faeser, together with the President of the Federal Office for Information Technology (BSI) Claudia Plattner, opened a new IT Situation Centre, which is intended to provide a secure framework for further digitalization in the state, economy and society3. There are many more examples of similar reports in the latest general reporting, but here is just one more worrying report: in November 2023, FINANCE magazine stated in its Restructuring Barometer4 that the number of restructuring cases is currently hovering at record levels.
In short, the current economic situation is obviously characterized by many uncertainties, some of which are correlated and some of which are independent of each other. Factors such as volatile procurement and sales markets, geopolitical tensions and the current unstable interest rate environment are certainly closely linked. This already tense situation in the global economy as a whole is currently accompanied by increased cyber risks and an unprecedented pace of technological innovation. Companies in general and treasury organizations in particular are therefore facing the major challenge of remaining stable and resilient in a multiple crisis environment. And resilience not only means being able to quantifiably protect against transactional risks, but also developing the ability to adapt quickly and even take advantage of new opportunities immediately.
This overall situation prompted us to conduct a dedicated study on the resilience of treasury organizations and to examine how the current volatile economic situation is affecting companies in Germany, Austria and Switzerland.
In the period from September to December 2023, a total of more than 360 people responsible for treasury from around 250 different companies took part. We drew up six core theses and, thanks to the high number of responses, were able to verify them using standard quantitative statistical methods.
The 6 main theses of the study are as follows:
Cash is king:
In times of crisis, the true importance of liquidity becomes apparent. Companies with sufficient cash reserves overcome unforeseen challenges more easily and tend to get through a financially turbulent phase with less operational stress.
Crisis management increases resilience:
Treasury organizations that have experienced and managed crisis situations in the last five years are subsequently better prepared for unforeseen challenges.
Type of crisis determines measures:
The type of crisis a company has faced also determines the type of action it plans to take to prepare for future crises.
Crisis types correlate with industries:
Certain industries are more affected by specific crisis types than others. Treasury organizations must recognize these industry-specific risks and develop appropriate countermeasures.
Company size vs. effectiveness:
The sheer size of a company is not an indicator of effective crisis management. Flexibility and adaptability of the treasury organization are crucial.
Centralization increases resilience:
Centralized structures enable faster reactions and better decision-making in crisis situations. According to the study, a centralized corporate treasury strengthens respondents' confidence in their company's resilience to crises.
We will publish the findings of the study in a white paper at the end of March 2024. As a participant, you had the opportunity to indicate your interest in receiving it directly. For all others, there will be a free download link on our KPMG Finance and Treasury Management website.
The white paper provides well-founded insights into the success stories of (repeatedly) crisis-tested treasury organizations and also classifies the potential for further improvements identified by the participants. The preliminary results leave us absolutely convinced that the white paper can serve as a guideline for scrutinizing existing strategies and developing them further if necessary. To this end, we will provide specific recommendations for action that can help to make your treasury function more resilient and future-oriented.
Source: KPMG Corporate Treasury News, Issue 140, January/February 2024
Authors:
Nils Bothe, Partner, Finance and Treasury Management, Corporate Treasury Advisory, KPMG AG
Cornelius Bonz, Manager, Finance and Treasury Management, Corporate Treasury Advisory, KPMG AG
______________________________________________________________________________________________________________
1 Resilient Treasury. KPMG® Published in March 2024.
2 https://www.dertreasurer.de/fileadmin/PDF/Panels/Treasurer-Panels-01-2023-L.pdf DerTreasurer® (accessed on 11.02.2024)
3 https://www.bmi.bund.de/SharedDocs/pressemitteilungen/DE/2024/02/bsi-lagezentrum.html Website of the BMI (accessed on 14.02.2024)
4 https://www.finance-magazin.de/wp-content/uploads/2023/11/Restrukturierungsbarometer-23-2023-L.pdf FINANCE® in cooperation with Struktur Management Partner® (accessed on 11.02.2024)
