Markets may be mostly up, but moods are down. That’s according to several reports out recently that show the strain on treasury and finance leaders as they continue to navigate a perfect storm of tariffs, geopolitical tensions, supply-chain disruptions, lingering inflation concerns, and persistently high interest rates.
Grant Thornton’s second-quarter CFO survey found that 46 percent of CFOs are pessimistic about the economy, believing unpredictability and volatility in the markets have made long-term planning increasingly difficult. Similar views were reflected in Deloitte’s latest North American CFO Signals report, which shows growth expectations declining across every key operational metric and projections dipping across the board for revenue, earnings, and capital investments.
Against the backdrop of these macroeconomic pressures and negative sentiments, a necessary evolution is taking place among corporate treasury and finance departments as leaders open their apertures to consider additional methods for optimizing working capital and enabling long-term growth. As a result, the procurement function has gained newfound respect—shedding its previous reputation as a cost center and transforming into a strategic enabler of enterprisewide value creation.
Finance and Procurement: A Strategic Alliance
Historically, procurement and finance operated in their own silos, with treasury and finance professionals largely viewing procurement as reactive, price-driven, or simply a final checkpoint for compliance. Today, however, as markets have globalized and become more interconnected, the boundaries between the functions are dissolving. Treasury and finance groups must work hand in hand with procurement leaders to manage risk, protect margins, and drive sustainable performance.
For the treasury and finance teams, that means playing a more proactive role in procurement strategy, potentially including participating in vendor selection, analyzing contracts’ total cost of ownership (TCO), and assessing suppliers’ financial health. This deeper involvement can enable finance to bring analytical rigor, scenario modeling, and risk forecasting capabilities to bear on procurement decisions.
But before they can increase their contribution to strategic procurement, treasury and finance leaders must understand the key levers they can influence. Here are four areas in which collaboration between treasury/finance and procurement can drive measurable results:
1. Supplier resilience planning. Supply-chain fragility is now a boardroom concern. From shortages to shipping bottlenecks, the pandemic and recent trade wars have laid bare the dangers of over-reliance on single-source or geographically concentrated suppliers. Building more resilient supply chains is a top priority for C-suite leaders—and an area where finance teams can (and should) support procurement.
By incorporating supplier data into enterprise risk management (ERM) systems and scenario modeling, finance can quantify sourcing risks and inform diversification strategies. This sort of joint planning is also helpful in fostering a shared understanding of cost/risk tradeoffs. For example, a dual-sourcing strategy might raise short-term costs but significantly reduce long-term exposure to supplier resiliency risks. Finance teams can use risk-adjusted return on investment (ROI) models to justify decisions that reduce such exposures, enabling smarter and more resilient procurement planning.
2. Contract governance and financial controls. Procurement contracts often contain hidden risks (e.g., off-balance-sheet obligations, ambiguous service-level agreements, unclear performance metrics, etc.). Treasury and finance professionals can help mitigate these risks if they’re brought in early in the procurement process. The treasury and finance groups can help ensure greater predictability of, and control over, procurement spending by aligning contract terms with budgeting cycles and performance metrics. They can also support creation of stricter contract-governance processes, which helps cut costs by reducing leakage from unmonitored discounts, missed rebates, or auto-renewed subscriptions.
This doesn’t mean that procurement should operate under treasury’s purview; that would just transfer the work instead of optimizing it. But treasury and finance groups can help procurement evaluate options for deploying technologies, including those with artificial intelligence (AI) capabilities to boost efficiency in the procurement function. Successful rollout of the right tools may free up the procurement team to tackle more strategic, value-added tasks.
3. Procurement and working capital. Procurement decisions can have a big impact on working capital management. Choices made by the procurement team influence days payables outstanding (DPO), inventory turns, and even the cash conversion cycle. Thus, it makes sense to align procurement decision-making closer to finance. Treasury and finance teams can help guide procurement professionals toward sourcing strategies that balance cost savings with liquidity goals.
For example, negotiating longer payment terms without damaging supplier relationships can extend DPO and free up cash. If a company’s weighted average cost of capital (WACC) is 10 percent, then the payback from extending terms by 15 days on $25 million in payables is $102,000. Likewise, vendor-managed inventory programs can reduce inventory carrying costs without undermining service levels.
When treasury or finance professionals perform these types of calculations, the pros and cons of different procurement decisions become clearer. And in today’s capital-constrained climate, the working capital improvements made possible by integrating finance and procurement are crucial to funding growth, reducing debt, and weathering market shocks.
4. Embedding ESG and compliance metrics. Finance teams should also consider the growing legal, financial, and reputational stakes of questions around environmental, social, and corporate governance (ESG) compliance. New regulations like the European Union’s Corporate Sustainability Reporting Directive (CSRD) require transparent reporting of greenhouse gas emissions, labor practices, and sourcing standards. These rules place procurement squarely in the compliance spotlight. Treasury and finance teams, who may have more experience dealing with ESG questions, can work with procurement to embed ESG criteria into supplier/portfolio evaluations, contract language, and performance reporting.
Organizations that fail to follow clear policies and procedures for tracking ESG data face higher risks of regulatory penalties, reputational damage, and investor backlash. By contrast, companies in which finance and procurement are aligned on the organization’s ESG framework are better able to access green financing, qualify for tax incentives, and attract ESG-conscious investors. Integrating sustainability into procurement policy is no longer optional; it’s become a critical fiduciary obligation.
From Silo to Strategy: A New Operating Model
Unlocking procurement’s full potential requires more than ad hoc coordination—it demands a new operating model, one built on shared objectives, integrated planning, and real-time data sharing. Forward-thinking organizations are implementing joint business planning cadences between procurement and finance, including synchronized budgeting, supplier reviews, and dashboards showing key performance indicators (KPIs). These interactions foster alignment across cost, cash, and compliance metrics.
By embedding finance experts within sourcing teams—or vice versa—companies can ensure decisions reflect both commercial and financial imperatives. The result is more agile, data-driven, and accountable decision-making. This model also builds organizational muscle memory for responding to crises—whether it’s a supplier failure, regulatory change, or market downturn.
Given the speed and variety of change in today’s competitive and regulatory landscape, companies would be hard-pressed to avoid or predict every potential risk. However, true resilience comes from creating an agile organization that is prepared to respond when new challenges inevitably arise. Bringing procurement to finance’s table can unlock new levers for margin protection, working capital improvement, and regulatory readiness. Working closely together, treasury, finance, and procurement teams are better positioned to adapt to our volatile times.
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