Treasury and Payments
Harnessing Digital Transformation to Manage Disruption
Lessons from the COVID-19 crisis: In an uncertain environment, the key watchwords for treasury and payments professionals are agility and resilience. Here’s how treasurers are harnessing the power of digital tools.
The repercussions of the global crisis triggered by COVID-19 have been felt everywhere. On the macroeconomic front, we have seen output indicators fall sharply across the world. This in turn has invited fiscal and monetary support at levels not seen since the global financial crisis.
Since the onset of the global crisis at the start of March, governments have unveiled trillions of dollars of fiscal stimulus (approaching 2.7% of global GDP)1 whilst G42 central banks are set to substantially expand their balance sheets (from $15 trillion to $23 trillion)3 as they widen their scale and scope of interventions in sovereign and credit markets. Following disappointing Q1 US and Europe GDP prints, our economists project global GDP to shrink by 4.7% in 2020, underscoring the severity of the challenge ahead.4
While the above is in some ways reminiscent of the global financial crisis of 2008-2009, there are aspects to this period that set it distinctly apart.
As “social distancing” became a byword for mitigation in the absence of a vaccine, companies across a broad swathe of sectors rapidly transitioned their operations and staff into remote and virtual-first terrain.
This external shock has tested the most thorough business continuity plans, and has taken place as companies simultaneously navigate a highly disrupted environment that has impacted cross-border supply chains, interaction with consumers and access to cash.
Taken together, these challenges have thrown the task of treasury into sharp relief. In such an environment, the key watchwords for treasury and payments professionals have been agility and resilience in the face of an uncertain and fast-evolving situation. This in turn has driven a sharpening focus on managing liquidity, safeguarding business continuity, cybersecurity and fraud and optimizing working capital to manage disruption.
Harnessing digital capabilities: lessons from COVID-19
Whenever this crisis subsides, it is clear that certain modes of doing business will fundamentally change. For example, the broad shift from offline to online (whether in the form of work from home arrangements, cinemas to streaming or a shift from in-store purchases to e-commerce channels) appears to be an acceleration of underlying trends that pre-date the current crisis. Driven by emerging technology and shifting consumer behaviors, it is clear that these structural trends are here to stay.
This suggests that digital transformation, broadly defined, will increasingly rise on the corporate and treasury agenda. In our recent COVID-19 client webinar, 64% of participants chose “increased focus on digital” as a key takeaway from the unfolding crisis.
Rather than an aspirational statement of intent, we are seeing this priority backed up by concrete actions taken by clients. In this article, we summarize key learnings from the ongoing crisis and showcase a number of case studies wherein clients have collaborated with J.P. Morgan to help them surmount challenges and unlock opportunities.
As the name suggests, the priority here is for corporates is to protect the financial core of the business in the face of unprecedented demand destruction and squeeze on liquidity. While there are no unmitigated winners in such an environment, it is also clear that companies that can tap into internal financial resources are better positioned to withstand the rolling disruptions to cash flow.
As a pre-requisite to this, treasurers have doubled down their priority on enhancing cash visibility and access, real-time where possible. In achieving this, treasury can better pool available resources to meet outstanding obligations, forecast positions and determine the level of external funding as needed.
To achieve this, a number of clients have deployed API-powered plug-ins to achieve real-time visibility on account balances – a key priority in a fast-evolving cash flow environment. By working with J.P. Morgan, an automotive parts manufacturer was able to go live in 9 days from the initial kick-off, with minimal IT requirements.
With many locations in lockdown, businesses have moved to remote work arrangements. It is critical that treasury not only ensure BAU payments are made but that strategic initiatives are not disrupted.
J.P. Morgan has worked with clients to rapidly activate e-signature capabilities and helped others shift to a digital platform for check printing and deposits, to rapidly replace disrupted physical processes and sustain operational continuity.
Finally, we have seen examples where clients not only solve for challenges today but also simultaneously build towards their overall digital agenda and future-proof their organizations.
A consumer tech marketplace worked with J.P. Morgan to implement API-enabled payment options (including RTP and ACH) to provision suppliers and vendors with payment 24/7 and in real-time beyond their previous standard weekly batch payment.
While obviously serving a critical need now, this capability will help support a significantly enhanced user experience and potentially act as a compelling and enduring strategic differentiator for the business.
Beyond deploying digital capabilities to streamline current business models, we also expect to see treasurers increasingly joining forces with the C-suite and digital strategy counterparts to think through what the “post-COVID” world looks like. Are the existing models fit for purposes or should e-commerce/marketplace/direct-to-consumer models be built as a way to build resiliency?
Helping clients harness the power of digital tools is a key strategic priority for J.P. Morgan. Wherever you are on your digital journey, we stand ready to support you with tailored and efficient solutions.
In these uncertain times, we thank you again for your continued trust in J.P. Morgan. Please contact your J.P. Morgan representative for further information.
Managing Liquidity in a Challenging Environment
In times of economic stress, maintaining robust access to liquidity is a top priority. Here we explore some of the key liquidity challenges on the horizon, how companies can leverage the benefits of cash management centralization through multicurrency pooling and other innovations.
How treasury and payments can lead in a
What are the strategic challenges triggered by COVID-19 and what are the implications for treasury? Hear real-life case studies about how you can deploy digital capabilities to turn crisis into further opportunity.
How do you ensure sufficient liquidity and access to it? How do you direct liquidity to the right place, at the right time and in the right currency?
How has the triggering of business contingency plans impacted treasury, business and operations as staff shift to back-up or remote locations?
What are the immediate risks around cybersecurity and fraud? What are the best practices to safeguard treasury and payments flows?
What are the working capital pressures in the current environment? What are the best practices to consider in payables, receivables and inventory management and financing?
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