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.

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