5 Challenges to Corporate Treasury & Risk Management (2023)

Corporate Treasury & Risk Management

As a corporate treasury or risk management professional, you’ll face all kinds of demanding—and constantly evolving—challenges. With everything from inflation and new types of payment systems, to unprecedented world events disrupting the market, the global business environment is in constant flux.

Treasury risk management aims to protect the company’s financial resources through strategic planning and lowering risk exposure. But constant changes in the economic environment create unique challenges that can impact your ability to meet your company’s cash flow goals. By proactively identifying these challenges and implementing the best treasury risk management strategies, you can prepare for whatever comes next.

1. FX & Interest Rate Volatility

Companies that exchange goods and services internationally are prone to volatility in the exchange of foreign currencies. If you invoice an international client today and payment isn’t due for 30 days, there’s a very high chance that the foreign exchange rate will change in the meantime. The amount you invoice for may be more or less than what you eventually receive.

Interest rate volatility affects a company’s ability to borrow money to finance its operations. Suppose you borrow money for a 10-year project at a low interest rate today. The interest rate could be significantly higher in five years, limiting your ability to borrow additional funds.

To mitigate risks from FX and interest rate volatility, many companies purchase financial instruments called hedges. There are several types of hedges a company can buy, including fair-value hedges and cash-flow hedges. Apart from hedging, companies have little power to mitigate interest rate volatility and must invest more of their ow