Search
 
Best Practices

Treasury and Procurement: Allies in the War on Risk

Why companies need to manage commodity risks in the same way they manage currency and interest rate exposures.

X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Treasury procurement cooperation combine risk managementWar makes for strange bedfellows. Case in point: In the corporate battle against currency and commodity risks, companies are increasing collaboration between, and even merging, the treasury and procurement functions.

It’s a practice that is sensible and is here to stay. That’s partly because businesses in many diverse industries face considerable exposure to commodity risks through their supply chain. An automaker may take a hit to earnings thanks to an unexpected spike in metals prices. A major manufacturer of cleaning products may find its slim margins wiped out due to an uptick in chemical prices. A coffee house chain might fall short of consensus earnings estimates because of higher dairy costs, and so on. In industries where pass-through of raw materials prices is difficult, commodity price volatility can have a profound effect on the bottom line. The manufacturing, retail, and food and beverage sectors are particularly sensitive to commodity price swings.

The other key driver of increased alignment between treasury and procurement is foreign exchange (FX) risk. Large multinationals tend to be hit particularly hard, but FX exposures can damage the financial statements of any company with a supply chain and/or distribution channels spread across multiple currency zones.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

 

Recommended Stories

The Currency Winds Have Shifted

The Currency Winds Have Shifted

T&R Staff |

After Kyriba’s Q1/2022 “Currency Impact Report” showed FX boosting multinationals’ earnings by more than $9 billion, the Q2 report shows that currency headwinds reduced corporate profits by a total of $4.56 billion in North America alone.

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2022 ALM Global, LLC. All Rights Reserved.