Introduction
In an ever-changing environment marked by challenges beyond mere financial management, treasuries face constant fluctuations and obstacles. These include the volatility of exchange rates, political uncertainty, and economic factors that impact currency exchange. For businesses with international operations or those dependent on cross-currency transactions, these factors pose additional complexities.
The Role of Treasury in a Volatile Landscape
Treasuries are expected to predict the future, navigate uncertainty with confidence, and maximize liquidity while mitigating risks. This is no easy task, especially for companies with international operations where political, tariff, and economic factors influence exchange rates. Interest rates also affect the cost of money, returns, and interests associated with leverage.
Key Recommendations from Banco BASE to Regain Control
Given the potential for increased uncertainty in the short term, experts from Banco BASE suggest treasuries consider these crucial points:
1. Monitor Liquidity
- Ensure internal and external liquidity sources are well-managed: Internal sources, like collections and payments, as well as external ones, such as credit lines or contributions, need careful oversight. Adjusting collection or payment policies can affect sales and negotiations, while external sources may become restricted during uncertain times. Therefore, anticipating and renewing credit lines is vital.
2. Measure and Mitigate Financial Risks
Since factors like exchange rates or inflation are not directly controlled by treasuries, it’s essential to assess their impact on operating margins. Based on this evaluation, utilize financial hedges to minimize their effects. These hedges don’t aim to generate profits but rather align the budget with reality and minimize risks with professional support.
3. Choose the Right Experts
Selecting specialized banks for specific tasks will help treasuries secure the best partner for each job, reducing costs and enhancing daily solution delivery. Banco BASE, with 39 years of experience in assisting businesses with currency operations and international payment tasks, is an excellent example.
Conclusion
By following these recommendations, your treasury will be better prepared to regain control, mitigate risks associated with cross-currency transactions, and navigate uncertainty to ensure the financial stability your company needs to remain competitive.
Key Questions and Answers
- Q: What challenges do treasuries face in today’s environment? A: Treasuries must deal with volatility in exchange rates, political uncertainty, and economic factors influencing currency exchange. Businesses with international operations face additional complexities due to political, tariff, and economic factors.
- Q: How can treasuries ensure adequate liquidity? A: Treasuries should carefully manage both internal (collections and payments) and external (credit lines or contributions) liquidity sources, anticipating and renewing credit lines when necessary.
- Q: What strategies can treasuries use to mitigate financial risks? A: Treasuries should evaluate the impact of factors like exchange rates and inflation on operating margins. Financial hedges can then be employed to minimize these effects, aligning the budget with reality and minimizing risks with professional support.
- Q: Why is choosing the right bank important for treasuries? A: Selecting specialized banks for specific tasks can help treasuries secure the best partner for each job, reducing costs and enhancing daily solution delivery.
