As we draw to the end of 2021, many of us are reflecting on the year and – thanks to the current era of abundant data – are enjoying analysing the statistics and trends of our activity in the past twelve months. At CTMfile, we’ve been observing which articles have most intrigued our readers, and we wanted to share the trends that emerged.
Supply Chain Finance
Just from the titles of these articles, one theme was clearly of particular interest to treasury professionals in 2021: supply chain finance (SCF). And no wonder. The local grocery store is proof enough that the supply chain problems that started two years ago have continued throughout 2021. These widespread struggles have sparked curiosity about many tactics and solutions that can strengthen supply chains, SCF included.
If this need-based interest were not enough, however, the collapse of SCF provider Greensill brought on a number of questions regarding the wisdom of SCF and concerns about how to do it well. Indeed, the most popular article of the year was a piece on “The Greensill paradox”. This article described the factors that brought on Greensill’s abrupt failure and discussed how these factors might play out going forward.
The author argued that a key contributor to Greensill’s collapse was their financing’s dependence on credit insurance, but that the current concerns and tightening around credit insurance will actually drive more SCF by making it harder than ever for suppliers to get financing through other means: “But what if lenders decide that credit insurance may not provide the protection that they were relying upon? Suppliers will have to put up more collateral against buyer receivables or may even find they can no longer offer deferred payment terms economically. It means a liquidity squeeze in supplier markets and it means the cost of trade finance will go up. And here is the paradox: The Greensill default is likely to lead to more supply chain finance going forward.”
In addition to contemplating the reasons for the Greensill incident and the feasibility of SCF going forward, CTMfile readers showed high interest in understanding how SCF works and how to ensure an SCF program is robust. In the wake of Greensill, many accounting departments audited their company’s SCF programs, and the 5th most popular article of the year, “Five things to consider when accounting for supply chain finance”, detailed several questions to ask to ensure your program is run in a way that will pass both an audit and the test of time.
International Trade & International Markets
With many supply chains spanning multiple regions, it is not surprising that international trade was another topic of heightened interest. The third most viewed article of the year reported on decreasing use of letters of credit and the opportunity this creates for banks to fill the gap with other resources such as supply chain trade finance, and #6 explained how these solutions work and how they differ from both traditional trade finance and supply chain finance. In brief, supply chain trade finance offers the same benefits as regular SCF while also assisting with the flow of documentation, making the documents necessary to verify shipment easily accessible to the relevant parties.
Meanwhile, according to a survey run at the very end of 2020, treasurers and CFOs are showing increasing interest in international markets. Indeed, 42% of treasurers saw their company’s best opportunities for growth as being outside their home market.
Supply chain trade finance was not the only technological solution discussed as a way of alleviating cross-border payment struggles. SWIFT’s payment pre-validation service, a part of SWIFT’s ongoing strategy for payment transformation, was noted as being particularly welcome for the often-troubled arena of cross-border payments in an article that took second place in the views this year.
ESG & Treasury
While only one of the top ten articles addresses this issue, it was certainly an oft-discussed topic in 2021, and this article summed up many of the struggles. Environmental, social and governance (ESG) issues have been important to many industries and roles for some time, but this year seemed to see an uptick in treasury’s attention to the topic – and in the expectations placed on treasury to be doing something about it.
This article covers many of the reasons for this, such as the interest of investors in a company’s sustainability. Even for treasurers eager to get involved, however, the role of treasury in ESG is not necessarily intuitive. The article summarized several points from a webinar from the ACT, which offered guidance on both the why and the how of treasury’s role in ESG.
Employment concerns now are not the same as they were when our ninth most viewed article (“There are still new treasury jobs, even in pandemic times, but inactivity doesn’t work”) was published a year ago, but its place among the top ten reflects the continued concerns surrounding the workforce. Employment in treasury was far less impacted by the events of the past two years than in many industries, but the regular availability of roles was still impacted.
In addition, treasury professionals are continuing to adjust to the still largely remote environment in many ways, from networking to recruitment and interview processes. For the most part, roles are available for those looking. However, job seekers are learning that they are not always posted where they used to be, and the processes for landing the roles have changed.
Cash Balances & Shifting Investment Strategies
A couple of the top ten articles drew attention to overall elevated cash balances in the wake of the initial crisis of 2020. At the same time as historic growth for the Fed’s balance sheet and the U.S. money supply, treasurers increased their stock holdings: ‘”Corporate cash stabilised at historically high levels during the second half of 2020,” commented Anthony J. Carfang, managing director at The Carfang Group. “Following a tumultuous first half in which the COVID pandemic shut down global economies and central banks massively intervened, corporate cash soared.”’
Another article detailed some of the findings from an ICD survey, showing similarly elevated cash balance plans alongside some indicators of treasury’s investment plans: ‘“This year’s survey respondents indicated cash levels would remain elevated into 2021, but they are also opportunistic, looking to go out further on the curve to find yield,” commented Tory Hazard, CEO of ICD. “Treasury workflow optimisation is also a major theme this year as investors look to technology to drive efficiency.”’
The survey showed some regional differences in the investment plans, with U.S. government/treasury MMFs proving the most popular in the Americas, while short-term, non-government CNAV MMFs were more popular in Europe. In addition, while the survey did reveal some differences between the challenges treasurers were most concerned about, many from all areas were interested in investing in treasury transformation and technology.
Indeed, addressing the varied challenges of 2021 through careful use of sophisticated technology seems to be an overarching theme of the year: Supply chain problems are met with extensive interest in supply chain finance and executing those programs well. International trade issues are met with technological solutions tailored to alleviate them. General challenges, regardless of region, are met with plans to invest in digital transformation.
It’s been an exciting year at CTMfile, with new resources and support from our acquisition by Strategic Treasurer, and we’re looking forward to bringing you more to learn about and share next year. Thank you for walking through the twists and turns of 2021 with us, and whatever 2022 brings, we look forward to discussing it with you at each step of the way!