What The Pandemic Taught Us About Liquidity

One of Covid-19’s biggest lessons for finance chiefs is the need to be on top of data around cash, says Kyriba CFO Hamza Benamar.

Kyriba CFO Hamza Benamar

Covid-19 has brought into focus the importance of cash management like few other experiences in recent years. More than ever, organizations need to make sure they can survive sudden liquidity crunches.

So says Hamza Benamar, CFO of Kyriba, a treasury management software company based in San Diego, California. Benamar spoke with StrategicCFO360 about how technology can help, why CFOs need to work closely with CIOs and why he’s concerned with currency fluctuations—but not for cryptocurrencies.

What can CFOs do to tackle their immediate and long-term liquidity problems?

We know the recent crisis stands out as one of the most significant global impacts to liquidity in recent history, but it’s not over and volatility continues to emerge unexpectedly. Now more than ever, it is crucial for CFOs to invest in real-time liquidity planning to project liquidity survival in days, weeks and months. With treasury management, CFOs have the ability to dynamically analyze and see their cash, so they know if they need to borrow to survive pockets of instability or another crisis in the short term. Alternatively, in good times, CFOs can see with this same data modeling how to finance various growth scenarios for their company.

As companies of all sizes migrate their ERP platforms to the cloud, ERP-to-bank connectivity trips up many organizations. Budgets and schedules can be dragged down by unexpected bank connectivity complexities. Open bank connectivity platforms allow finance teams to rapidly connect to banks anywhere in the world.

How can the industry’s C-Suite adopt the latest technology in this space? And how can this be navigated past the pandemic?

Modern CFOs are being asked to make decisions across a broader swath of data, demonstrate the complexity of their analysis with a simple and insightful visualization, and do this in a reduced timeline. To unify systems across the organization, today’s CFOs and CIOs are working closer together than ever before. As the leader and chief auditor of the corporate technology stack, CIOs have a critical role to play to empower the finance team with valid, secure technologies.

To become truly insightful, CIOs must provide their finance stakeholders with new, emergent technologies to ensure data becomes structured and intelligent information. CIOs can do this by looking at artificial intelligence and machine learning, which offers improved predictability and exception identification.

Leveraging real-time data is critical. And, up to now, few technologies have had the ability to connect systems across finance that touch all aspects of the organization. APIs bring together the data from ERP, treasury, payments, risk and working capital solutions that uplifts the value of all these disparate systems to give CFOs a unified financial view.

This business intelligence gives CFOs the capability to examine the financial health or headroom of their company—a full view of the gap between cash obligations and revolving cash—by addressing multiple scenarios at the same time and realizing their outcomes. This is an exciting new capability for data-driven CFOs, adding strategic visibility atop historical performance trends that corporate leaders will demand as table stakes moving forward.

Lastly, CFOs should collaborate with CIOs to provide insights into technology needs and requirements such as automation. Automation frees up precious staff resources from tedious manual work, enabling treasury and finance teams to perform more value-added analytical tasks that improve decisions and outcomes at every level of the business.

How concerned should CFOs be about currency fluctuations and payments?

As a CFO, I don’t want to be continuously concerned about currency volatility. Ideally, I’m able to manage our business so that currency headwinds, or tailwinds, comprise only 1% of my earnings—positively or negatively. Even if I gain through currency movements, that means I just as easily could have lost. Regardless of currency directions, we want to reduce our net exposure to the currencies we operate in, so our bottom line is driven by operating results and not external currency movements.

Yet this is the challenge for many CFOs. They do not have sufficient transparency into their balance sheet accounts, recorded within their ERP system, to know what currency exposures exist. They don’t have enough information to be able to hedge effectively or change business processes to construct natural hedges. There are multiple ways to reduce net exposure and they all are dependent on capturing and understanding your balance sheet exposure.

It’s definitely a concern: according to Kyriba’s October Currency Impact Report, reported organizations lost more than $4.25 billion in earnings due to currency headwinds in the second quarter. In the trailing nine months, this totals more than $20 billion in lost value. There is clearly a lot of opportunity for improvement.

Payments fraud and cryptocurrency are making headlines. What are your thoughts on this?

It only takes one weak link in any department to make a poor judgment call and allow fraud to occur. Best in class fraud prevention must be top of mind for everyone in a company—whether it be multinational or local—and it necessitates more than awareness of fraud schemes. CFOs need strong, consistently applied payment controls and a way to automate identification and management of exceptions from their payment policy.

As for cryptocurrency, the swings in valuation of digital currencies like bitcoin are entertaining, but we’re not seeing significant adoption of any cryptocurrencies, as there are many questions still to answer about liquidity and the ability to protect against price volatility.