White Paper

Unavoidable trends for any resilient treasury plan

Last year, the world had to cope with the first impact of the pandemic. COVID-19 is a confirmation of the grim reality that black swan events continue to have an enormous impact on our lives. But is there a way to be better prepared for the unforeseeable? In this article, we look forward to the coming months and share the most relevant treasury trends for 2021 with you. What needs to be at the center of your company’s treasury plan to optimize resilience?

It all starts with cash!

In regards of financial planning, COVID-19 has created an environment where one can no longer rely on past trends and historical data. The unforeseen impact brought by this pandemic has revealed the importance of accurate real-time cash flow forecasting. Due to the increased volatility, it is vital to anticipate cash shortfalls in a prompt manner. Therefore, it is vital to assess the cash position on more frequent basis than before. This way, the treasury has the right information to make timely insightful decisions.

Traditionally, using the direct cash forecasting method in a large company with high volume of cash flows was a very time-consuming exercise and thus deemed inefficient for longer time horizons. Since a lion share of decisions are data-driven these days, many enterprises decided to refine their data governance.

A trend we expect to see in 2021 is that companies with a good handle on data governance that use predictive analytics will be using the direct method for longer time horizons more efficiently, pushing the standard rolling 13 weeks forecast to longer time horizons. As a consequence of well-established data governance, the accuracy of forecasts prepared using the indirect method should be positively impacted as well.

“It is fundamental to assess the cash position on more frequent basis than before”

Another trend for 2021, and a consequence of the COVID-19 related crisis, is that we should observe a growing number of companies using ‘what if’ scenarios in relation to their long-term, indirect method forecasts, in order to stress test the company’s financial resilience.

A trend that was already observed in 2020 and is bound to continue well into 2021, is companies increasing their leverage by taking on more debt. The favorable interest rate environment coupled with high demand from investors created incentive for the companies in search of refinancing their debt. With 2020 being a record-breaking year for debt issuance, some claim that 2021 might be record-breaking for companies struggling to service their debt.

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