Optimizing liquidity solutions

The possibility of rising interest rates puts the focus back on liquidity. Treasurers need to ask: Do we have global solutions? Visibility? Control? Are we concentrating all available liquidity? Visibility and accessibility of group liquidity will become a top priority, and liquidity optimization will help treasurers achieve control and improve their working capital. Doing so can help ease liquidity and funding pressures.

Virtual account management

Treasurers are also turning to virtual accounts for comprehensive cash management. Virtual accounts can help simplify, centralise, and rationalize account structures across regions and entities. Businesses can streamline reporting thanks to real-time visibility across multiple currencies and use data to strategically deploy cash. Additionally, simplified structures can lead
to greater control and decreased operational risk, which is paramount when working to do more
with less.

Efficient payment processing

In general, Nordic companies have innovative and efficient payment processes, leveraging ISO XML, Swift centralized connectivity and POBO for the majority of their payments. The focus has shifted to manual payments, where cash management systems and treasury management system (TMS) functionality can further increase efficiencies. Automating where possible can minimize human error while freeing up valuable resources for strategic work.

Securing working capital

Implementing a structed working capital solution is of increasing importance to unlocking liquidity and building resiliency within the supply chain. Supply Chain Finance and Inventory Finance are two working capital solutions that can work together to help protect supply chains from turbulent market conditions, providing agility to ensure long-term financial stability for businesses.

Additionally, consumer buying habits are changing, leaving many businesses with an excess of inventory. Inventory finance can help businesses hedge and expand, moving from inventory “just in time” to “just in case.” Building inventory buffers allows for critical stock levels to be maintained to overcome disruptions by reducing supply chain risk. Though a business may have a surplus of inventory now, it is important to have the inventory available in the event that market conditions rapidly change. Inventory financing solutions provide businesses with the ability to take inventory surplus “off-balance sheet,” freeing up working capital with the assurance that inventory buffer is available to pull in when needed.

Real-time treasury

Nordic companies are typically trailblazers when it comes to treasury and cash management innovations and digitalization initiatives, but that isn’t the case when it comes to leveraging real-time transactions and API reporting. The main reason these real-time capabilities haven’t been universally adopted by Nordic companies is that they have efficient ERP, TMS and Cash Management System setups for direct connectivity between banks and these systems. They need banks to work with system providers to use real-time transactions and reporting.

Trapped cash

Unlocking trapped cash is a priority for many Nordic treasurers and cash managers. For example, it is becoming a key consideration for companies expanding their renewables footprint to new markets in Asia where capital controls make funding and liquidity management challenging. Local expertise is becoming critical, and it is even more important to select a partner that can help advise corporates in these markets. J.P. Morgan has a history of supporting clients with solutions in such markets, including developing a cross-border cash pooling solution in Saudi Arabia.

B2B corporates enter B2C spaces

There are many Nordic companies that are on a journey to transition the business model from a distributor model to a direct to customer model. For instance, Volvo Cars has announced that it will sell all cars online in an effort to automate the buying process.³ This trend isn’t limited to consumers; J.P. Morgan is seeing B2B sales moving away from distributor models to interact directly with buyers. Some, like truck manufacturer AB Volvo, have an online presence to promote their own products. Others like Vestas are creating marketplaces where they sell third-party products and services in addition to their own.

Interregional expansion

For Nordic businesses eyeing expansion opportunities, interregional growth may be an appealing option. From increasing your existing international footprint to establishing a new presence in LATAM, APAC or North America, treasury is a crucial cornerstone to expansion. To create synergy, establish strong connections with partners across lines of business, including HR, payroll, and legal and compliance.

Treasurers must also focus on specific payments in local markets, which may be more time consuming than other automated payment types. For example, tax payments are often a manual and time-consuming process. Similarly, cross-border payments in regulated markets are often manual and can require supporting documents, which local finance teams need to provide. Such support is time consuming and inefficient. J.P. Morgan has developed global and regional solutions that can help automate payments for both tax payments and cross-border payments in markets like Brazil, Mexico and India.