Kyriba’s Guide to Overcoming Economic Volatility

Organizations around the world are grappling with economic uncertainty. Businesses struggle to adapt to shifting market conditions and inaccurate forecasts, leading to significant challenges for business leaders.

To help address some of these issues, SAPinsider recently sat down with Thomas Gavaghan, VP of Global Presales at Kyriba. He shared insights from his years of experience helping customers bolster their liquidity performance, highlighting some of the largest issues facing cash management organizations and the solutions they can implement.

What are the biggest pain points that organizations have when it comes to forecasting cash flows?

First and foremost, the biggest challenge for forecasting cash is often the access to it, and accuracy of the data itself. Over time, corporations’ technology stacks have grown exponentially with the advent of point solutions, and inorganic growth by acquisition and mergers. This only further amplifies the ultimate challenge of trying to centralize key pieces of liquidity performance data that is disparately sitting across various systems, which is what we at Kyriba called Liquidity Gridlock.

What actions can companies take to improve their cash management and liquidity status?

Continuously evolving the forecasting process. This is a cornerstone of effective cash management and liquidity management. It’s an endless pursuit of perfection in an ever-changing world.

We continue to see an emphasis from organizations implementing working capital programs to accelerate their receivables through factoring and invoice discounting programs as well as an increase in payables financing programs to increase their days payable outstanding (DPO). While the current high-interest rate environment will probably see a cut or two, we will remain at high levels and these programs are an effective and more cost-effective way of impacting liquidity.

Another common practice in the run up to the ever-looming recession that continues to remain an imminent threat, companies have bolstered cash reserves. In fact, early this year, Kyriba produced its Liquidity Performance Report based on publicly available financial data and found that total short-term liquidity, encompassing cash and other highly accessible assets, reached a record $3.4 trillion. We are seeing an increase of this liquidity going back into corporate investment programs as banks and third-party platforms continuously bring new technologies and investment tools to market with lower barriers to entry.

What technologies can companies implement to help them be better prepared for economic volatility?

There are many technologies companies can utilize to prepare for economic uncertainty. For the last two decades many might have answered that the answer lies in having either a “TMS” (Treasury Management Systems), or Treasury Risk Management Systems as they’ve been called in more recent times, however this is not the case anymore. You need a more complete robust system that allows you to connect, protect, forecast and optimize your liquidity.

In the market today, there are two primary types of treasury management systems (TMS). Large, on-premise legacy systems offer deep customization but struggle to adapt to changing corporate needs. In contrast, newer point solutions are easily procured but often limited in scope, focusing primarily on cash management. While legacy systems provide tailored functionality, their inflexibility hinders their ability to address evolving corporate challenges. Conversely, point solutions offer accessibility to cash, but fail to provide a comprehensive view of liquidity.

Liquidity Performance Platforms are a key part of the winning formula for corporations to weather economic volatility and thrive in times of stability. What is this and why is this different? First, a true liquidity performance platform’s technology is easily integrated with financial institutions, where liquidity is ultimately stored, and with integral enterprise technologies like SAP without the need for significant IT development. In addition, these technologies comprise, within a single solution, the elements for cash management, credit structures, capital markets, investment portfolio, and cash pooling as a means to see liquidity.

Within the single solution, the ability to facilitate payments with modern payment rails to move liquidity in an effective and safe way. Within the single solution the nimbleness to manage interest rate, foreign exchange, and commodity risk management programs to protect financials and liquidity. And lastly the ability to impact the levels of liquidity through receivables and payables finance programs with the support of working capital technologies to optimize liquidity.