Insights by Nitor

The war in Ukraine and the resulting comprehensive trade sanctions targeted against the government of Russia (and to a limited extent Belarus), along with companies domiciled in or with ties to Russian entities, and individuals tied to Putin’s inner circle have unleashed a flurry of “What Ifs” as it relates to counterparty risk within the supply chain and customer base. As the conflict unfolds, more and more sanctions seem to be leveled daily by a multitude of countries in an attempt to cut off the flow of funds to Russia. Within this global landscape, companies are now having to manage the risk of compliance against a rapidly changing list of prohibited counterparties, in multiple languages, that may or may not be fully comprehensive or accurate. Unfortunately, balancing this risk is no guarantee that you won’t violate a sanction or inadvertently deny legitimate counterparty access to their own funds. Understanding how to protect your company from the financial, reputational, and ethical risks in this veritable minefield of sanctions will be critical in the “New Normal”.

Leveraging purchasing power to capture volume-based pricing within a competitive supply chain builds solid relationships with reputable suppliers, cuts costs, and acts as a hedge against inflation. Your organization’s total spend is a dynamic tool. If we apply the adage of, “Whomsoever holds the gold makes the rules”, we can further leverage this purchasing power to unlock working capital, improve capital efficiency, and deliver savings.

Over the next five years, there will be a seismic shift in the enterprise software space. Before the decade is over, a majority of companies will need to migrate their on-premises ERP software to the cloud as older versions of the applications will cease to be supported. Within a narrow timeframe, the demand from companies needing conversion services will surge and create capacity constraints for their respective ERP software providers and the third-party system integrators tasked with facilitating this massive undertaking. This perfect storm of having to complete a multi-year project within a narrow conversion window means that implementation services will be stretched thin and at a premium.

The Treasury and Working Capital Survival Guide

The world has changed rapidly in the last 30 days.  The US economy went from setting a record for the length of the expansion to setting a record for the fastest recession in the history of the United States.  Navigating through this gut-wrenching reversal requires decisive management action, focus, and speed.  A critical component of this process is successfully managing working capital.  Management teams must evaluate working capital needs and utilize working capital as a key resource to sustain ongoing business activities.

As discussed in Part 1 of this blog series, companies strive to maintain margins and maximize cash flows by managing the variables over which they exercise control. Efforts from the Procurement team focus on maintaining competitive bidding for the material and service inputs needed in the production and delivery of goods or services to market. Once suppliers are identified and contracted by the buyer, a balancing act occurs to negotiate favorable payment terms and/or capture discounts and rebates. In return for these concessions, the buyer can now offer options to facilitate expedited payments utilizing technologies that offer processing efficiencies.  As with all trading relationships, the underlying dynamics are needed for both the buyer and supplier to manage counterparty risk, remain competitive, and maintain individual profitability.

This is the third in a series of three blogs focused on how to develop and implement an effective working capital optimization initiative. Our last blog concluded with options for achieving internal alignment within procurement, finance, and treasury, with the goal of optimizing working capital. Here, we’ll look at the importance of change management.

Working Capital Context – Which parts of the Cash Conversion Cycle do Procurement, Finance and Treasury teams care about?

This blog is the first of a 3-part series focusing on how businesses can get started on an effective Working Capital optimization initiative.

There is an old adage that you cannot manage what you do not measure. In response to this conventional wisdom, numerous Key Performance Indicators (KPI’s) have been developed in the core Working Capital functional teams of Procurement, Finance, and Treasury. The overarching goal in mind is simple: Strong Supplier Relationships AND Operational Efficiency AND Strategic Value. All three? That’s a challenge as each team has a different set of tactical and, at times, strategic goals, that often compete with each other.