Risk Management Remains Financial Priority for Large Businesses

Laurence WebbGuest blogger: Laurence Webb for AMEE (Avoiding Mass Extinctions Engine). Founded in 2007, AMEE (@ameeHQ) uses data and technology at scale to address critical business sustainability challenges and enable more intelligent use of resources. 

New research based on over 250 treasury and finance professionals demonstrates that managing financial risk is by far and away the top priority for major organisations.

Chinese steel manufacturers
News that the financial health of Chinese steel manufacturers is becoming critical demonstrates how financing difficulties and the failure to better manage supply and demand can spell potential ruin for an entire industry

The need to manage financial risk is indicative of the current economic mood, for example political uncertainty in the Eurozone and the latest growth data released by China.  

Such uncertainty undermines the value of cash flows, financial positions and business contracts.  

The research by treasury management firm Kyriba indicates that visibility over global cash flows is integral to dealing with financial risk.  

For example, daily reporting of a company’s bank accounts is no longer sufficient. Instead there needs to be real-time account automation and cash-flow insight, enabling organisations to deal with the risks, costs and barriers of moving cash between regions. 

Supply Chain Management

Another significant risk raised by the treasury and finance professionals pertains to the supply chain.  According to the research one of the most effective ways to mitigate supply chain risk is the ability to accurately predict revenue streams from certain customers. 

This in turn helps to identify potential business exposure, for example: “If supplier x cannot meet production requirement y, we put our relationship with customer z at risk”. 

That is why visibility into future cash flows is one of the most important risk management tools that a treasurer and CFO can have. 

Treasury management technology enabling visibility into financial assets, market liquidity, interest rates, currency fluctuations and commodity prices holds the future for better risk management decisions.  

This post was originally published on the AMEE blog. Tyler Christie, CEO of AMEE, has given permission for republication as Laurence Webb has since left the organisation.

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