WATCH: Now is the time to diversify the cash funding profile


Cash managers should look to diversify their cash funding profiles in response to the current interest rate environment, according to industry experts.

The use of other assets — including receivables financing, commercial paper and letters of credit — should all be considered, according to Bob Stark, head of market strategy at technology company Kyriba.

Stark appeared alongside Tarek Elyafi, Managing Director of Standard charter and Saad El Hachimy, Risk Manager for Nestlé, as part of Global Treasurer’s next episode of its Future in Focus series.

In response to the pandemic, central banks have released masses of liquidity alongside stimulus packages. While necessary, the support suppressed borrowing rates, making it increasingly difficult for investors to generate yield.

While in the past treasury managers could rely on money market instruments to generate reasonable safe returns, today’s environment means they have had to get more creative. During the discussion, Elyafi asked participants how cash managers should approach this opportunity – diversification emerged as a potential strategy.

“The levers that are available to treasurers are quite advanced compared to the past,” Stark says. Issuing commercial paper and letters of credit, Stark continues, when done well, can help raise funds more efficiently compared to traditional means that are becoming more expensive.

Hachimy notes that multinational corporations are already taking advantage of diversification and using these alternative assets in their cash management strategies as a way to navigate today’s volatility in the global financial market. “Interest rates will go up for everyone and everyone is looking to optimize costs,” he says.

The panel also discussed the importance of cash management forecasting tools to help treasurers better understand cash flow. Hachimy notes that many multinational organizations have started to put “more pressure” on their cash forecasts due to rising interest rates.

“It’s one of the only things that can help optimize the financial costs of many of these multinationals,” he says. Stark also says cash and liquidity forecasting has become “pivotal” for cash management to understand what the cost of liquidity is and what it can do to reduce the cost.

Accurate long range cash forecast has been a major challenge for cash flow and to date most improvements in cash forecasting have been incremental. However, advances in new technologies – especially with the artificial intelligence space – could mean that cash forecasting accuracy is no longer an issue.

The use of AI and ML has been shown to both increase forecast accuracy – through the removal of human biases and reduce the time required to produce forecasts compared to manual processes. As a result, treasury teams are more likely to realize larger monetary gains.

AI and machine learning have high potential for cash management and forecasting, especially when reconciling yesterday’s bank files with yesterday’s expected cash position.

To watch the latest episode of the Future in Focus series in full, click here: WATCH: How Low Interest Rates and the Pursuit of Yield Affect Cash Management (


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