As we turn the corner on 2018, most CFOs are simultaneouslyfocused on helping their chief executives exploit the opportunitiesthat come with a booming economy and buffering their organizationfrom a handful of risks that loom on the horizon. These include thepossibilities that 2019 will bring economic deceleration, increasedcurrency and/or interest rate volatility, and an ever-growingregulatory and compliance burden.

If global economic decline settles in, as some experts predict, uncertainty will onlyincrease in the new year. The party certainly isn't over yet formost businesses around the world, but economic indicators suggestsome guests have already left. GDP growth in Europe is slowing, andsome expect the world economy to follow suit. Global growth reached3.1 percent in both 2017 and 2018, but the World Bank predicts thatit will decelerate over the next two years due to thedissipation of global slack (unused economic resources) and tightercentral bank monetary policies, among other constraints.

The U.S.–China trade war and Brexit compound the growing economicuncertainty. Geopolitical tensions are on the rise, reflected insanctions against countries such as Iran and individuals andbusinesses in Russia. All these factors point to the strongpossibility of choppy waters ahead.

That's why, as 2019 dawns, CFOs are expecting their treasuryteam to provide both practical and strategic advice on managingfinancial risks. In fact, a recent survey sponsored by Kyriba found thatCFOs want their treasurers to focus more on optimizing theirfunction's activities in three key areas: risk management, cashmanagement, and working capital management.

Risk management.  Among the150-plus senior finance executives who participated in theresearch, 42.7 percent said their organization's treasury functionneeds to do a much better job of supporting business objectivesthan it currently does. This is likely related to two macroeconomictrends that are increasing CFOs' emphasis on risk management.

The first macro-level trend, the intensification of geopoliticaltensions, may lead to volatility in the foreign exchange (FX) andcommodity markets, as well as sudden shifts in trade flows. Allthese changes make it more important for organizations to havehedging strategies in place that mitigate currency and pricefluctuations. Treasurers also need to make sure their company hasaccess to capital markets so that if its trading volumes decline inone part of the world, it can secure funding to offset the lostrevenue.

The second macro-level trend is rising inflation, whichincreases the likelihood that additional countries will follow thelead of the U.S. Federal Reserve and begin hiking up interestrates. If they do, funding will become more costly around theworld, and companies will see their margins squeezed.

Ultimately, the combination of inflationary pressures and a morechallenging environment for international trade could reverse thebenign economic conditions we are enjoying today. Properlypreparing for this possibility requires visibility into bothfinancial and operational risks. Treasurers need to be able to seetheir organization's vulnerabilities and whether theirrisk-mitigation techniques are working. In an uncertain world, CFOsshould ensure their treasury teams have full transparency around FXexposures, sales trends, and funding options.

Cash management. One of the most surprising findings of the recent Kyribasurvey was that 40 percent of the respondents believe treasuryteams need to do a better job of cash management. In someorganizations, it seems, cash management activities are notstrategically aligned with business objectives. Rather, cashmanagement appears to be treated as a side activity that takesplace independently of whatever else may be happening in theorganization.

One explanation of this finding is that some cash managers maysimply be falling behind the accelerated pace of business today.For example, when the CFO asks for a cash forecast to support amerger or acquisition decision, the report should be ready inhours, not days. Treasury teams that still handle cash managementand cash forecasting tasks through manual or spreadsheet-basedprocesses may not be able to keep up with expectations ofexecutives and line-of-business managers.

To ensure they have the support they need from treasury, CFOsneed put a strategic lens on cash management in 2019. They alsoneed to use all the levers at their disposal to maximize theavailability of working capital.

Working capital management. Cash is the lifeblood of a company. Intimes of slowing economic growth, especially, organizations need toconserve cash to ensure they have the funds they need if revenuedrops. Reducing days sales outstanding (DSO), while at the sametime increasing days payables outstanding (DPO), is a popular meansof corporate coping with geopolitical and financial-marketuncertainty. However, 39 percent of respondents in the Kyribasurvey said they think their treasury function needs to be muchmore strategic at working capital management.

The same visibility needs that underlie effective financial riskmanagement and cash management also underpin working capitalmanagement. Treasury teams need accurate cash flow forecasts tomake decisions around the value of extending payment terms, eitheras a buyer or a seller.

CFOs who want their treasury team to optimize working capitalmanagement need to focus on enhancing the quality of forecastingthat takes place within their organizations. Our survey indicatesthat there is a significant amount of work to be done here, since40 percent of respondents said unreliable cash visibility andforecasts are big concerns. Moreover, The Hackett Group's “2018 U.S. Working Capital Survey” estimatesthat $1 trillion remains trapped on large companies' balance sheetsglobally. This indicates that CFOs do not have the insights theyneed to confidently draw down their cash reserves in theseuncertain times.

As we enter 2019, the time is right for CFOs to reconsider howtheir treasury teams complete fundamental activities aroundmanaging the organization's cash, financial risks, and workingcapital. Does the treasurer have the information necessary toeffectively inform business decision-making in a timely manner? Isvisibility into cash exposures and idle cash adequate to give theCFO confidence to use treasury's analyses to drive businessstrategy?

No one can predict the future with absolute accuracy—not eventhe World Bank. Perhaps global economic growth will hold up, ormaybe it will slow more than anyone's predicting.

Given the uncertainty that exists, a CFO's best bet is toempower treasury with the tools they need to drive strategicdecision support in real time. If the treasury organization istreated only as an isolated, back-office function, the company willnot be prepared to navigate the evolving economic andfinancial-markets landscape of 2019.

Alex Wolff is seniorvice president of strategy for Kyriba. He is responsiblefor corporate strategy and messaging, marketing sizing, analystrelations, and product/pricing strategy, in liaison with theproduct team. Wolff has more than 20 years of experience intreasury, banking, and financial software development.