Treasury procurement cooperation combine risk managementWar makes for strange bedfellows. Casein point: In the corporate battle against currency and commodityrisks, companies are increasing collaboration between, and evenmerging, the treasury and procurement functions.

It's a practice that is sensible and is here to stay. That'spartly because businesses in many diverse industries faceconsiderable exposure to commodity risks through their supplychain. An automaker may take a hit to earnings thanks to anunexpected spike in metals prices. A major manufacturer of cleaningproducts may find its slim margins wiped out due to an uptick inchemical prices. A coffee house chain might fall short of consensusearnings estimates because of higher dairy costs, and so on. Inindustries where pass-through of raw materials prices is difficult,commodity price volatility can have a profound effect on the bottomline. The manufacturing, retail, and food and beverage sectors areparticularly sensitive to commodity price swings.

The other key driver of increased alignment between treasury andprocurement is foreign exchange (FX) risk. Large multinationalstend to be hit particularly hard, but FX exposures can damage thefinancial statements of any company with a supply chain and/ordistribution channels spread across multiple currency zones.

Continue Reading for Free

Register and gain access to:

  • Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
  • Informative weekly newsletter featuring news, analysis, real-world cas studies, and other critical content
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.