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As recent news makes strikingly clear, today’s world is becoming increasingly volatile and fraught with risk. Being part of the trade industry in this unstable geopolitical environment requires adaptability, resilience, and risk management, making insurance more necessary than ever.

At the annual Women in Trade, Treasury, and Payments Conference on 27 February, Trade Finance Global (TFG) spoke to Sanda Blanco, Head of Structured Credit, Political Risks and International Bonding at Howden, about the most important political risks of our time and how bespoke insurance can help businesses thrive in face of them. 

A new world order

While the international geopolitical landscape is inherently volatile, the last few years have seen unprecedented shifts at breakneck speed. From conflicts to regime change and economic shocks, constant change has made it more and more difficult to predict what’s coming next and adjust to it. “I have witnessed this – conflicts, wars, financial crisis – but not all at once with this global reach,” said Blanco.

In the past 20 years, the world has also become more interconnected than ever – meaning shocks in one region quickly send waves across entire industries around the world. The world’s growing reliance on international trade, for example, meant that the Russia-Ukraine conflict had profound consequences on food supply around the world, from Europe to Africa; other conflicts near crucial trade routes or economic shocks in large economies can also have immediate, almost unpredictable effects on countries thousands of miles away. 

This change has effectively led to a “new world order” and caused a decline in trust among nations, institutions, and politicians. Fear of change has increased polarisation – as recent US and German elections show – and eroded trust between people, making the global situation even more precarious.

Bespoke risk management: the way forward

With more unpredictability comes more risk, which businesses must monitor and mitigate to stay afloat. Insurance brokers and underwriters, like Howden, can help by forging relationships between companies and insurers and helping companies find the coverage they need to continue working. 

Howden focuses on long-term insurance, creating bespoke solutions for clients tailored to their specific needs. This means the Howden team must get to know the client, insurer, and the underlying transaction thoroughly to create a solution that addresses the client’s needs and risk appetite. This is what makes the relationships between brokers and clients so crucial, especially in a world where trust is dwindling: only through strong, collaborative relationships can brokers understand the client’s needs and how underwriters’ products can match up with them. 

The future of risk: tech, diversity, and inclusion

As insurance becomes increasingly important, so does ensuring that all companies have access to the right type of coverage. Leveraging technology is crucial to connecting firms to insurance providers, enabling them to find solutions that work for them without having to go through long, inefficient processes. 

Howden has been building a range of platforms to provide businesses, especially small and medium-sized enterprises (SMEs) with specific insurance cover, like a recently announced platform to protect UK firms against renewable energy risks, or two unique digital platforms: Tepfin X, a Lloyd’s of London approved trading platform and a completely new way for its clients to access the Structured Credit & Political Risk Insurance market for their high volume businesses. The aim of this was to overcome the traditional inefficiencies of the insurance market in quoting and placing these business lines, to give clients instant certainty and speed of access to available insurance capacity, which they can leverage to maximise the value of their commercial opportunities and Dynamite, a data management system for Structured Credit & Political Risk Insurance.

Increasing accessibility will only become more important in the next few years as demand for political risk insurance is set to soar. Even though many businesses are slowing down on globalisation, instead resorting to nearshoring and restructuring supply chains to decrease geopolitical risk, global uncertainty remains high. 

This is likely to lead to a boom in political risk insurance, an inherently countercyclical industry: “The safer the world looks like to banks, traders, and investors, the less the clients feel they need to buy political risk insurance,” said Blanco. Vice versa, increased risk means increased demand for insurance cover; the industry’s profits will depend on the insurers’ appetite, capacity, and prices, as well as the different types and levels of coverage they offer. These may need to change over time, adjusting to new risks cropping up globally and adapting to clients’ demands.

Looking inward, the insurance industry must also continue in its progress to include more women in leadership roles: a recent survey found that only 37% of boardroom positions in Europe’s top insurance companies are held by women, and 80% of insurance companies have women make up less than a third of executive teams. Diversity, Equity, and Inclusion policies are doing some of the work in drawing attention to and decreasing the gender gap. 

Some women, however, have taken matters into their own hands: Blanco founded a group for women working in international bonding and guarantees, which grew to have 50 members just a year after its founding. The group lets women in all positions, ages, and areas of the sector meet each other and offer advice and support: “It’s so rewarding to see the impact that your own experiences, the good and the bad ones, can make in someone that is only starting in the sector as a woman,” said Blanco. 

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AI holds the power to transform trade, offering opportunities to enhance efficiency, reduce costs, and empower smaller players in the global market. However, it also introduces complexities and ethical dilemmas. The question remains to be seen: will it bridge gaps, lower barriers, and drive innovation? Or will it create hurdles, deepen inequalities, and exacerbate existing challenges?

The promise of AI reshaping trade and services

When most people imagine AI in a business setting, they picture large tech giants or multinational firms leveraging cutting-edge AI tools to optimise processes and outpace competitors. While larger firms tend to be at the vanguard of the technology’s development, the potential benefits reach smaller businesses as well.

Ganne said, “AI can transform raw data into actionable insights, whether it’s optimising logistics, automating customs and compliance processes, or predicting supply chain disruptions.”

At the state level, countries with limited resources can expand their role in international trade by reducing inefficiencies and cutting costs. This creates opportunities for smaller economies to compete in markets traditionally dominated by larger, wealthier nations.

Ganne said, “AI can reshape countries’ comparative advantages. New competitive advantages could emerge from factors like educated labour, digital connectivity, favourable regulations, or even abundant energy.” Such factors can help them emerge as leaders in this transformative space. The potential for growth and innovation is immense as nations work toward a more connected and equitable global marketplace.

Facing the challenges that come with AI

The technology’s inherent complexity introduces risks, particularly the opacity of its decision-making processes. This “black box” phenomenon of traditional models makes understanding or predicting how AI arrives at its conclusions difficult. Such uncertainty can undermine trust and lead to unintended consequences.

Ganne said, “There is a big challenge to regulate AI and ensure that it is trustworthy, meaning that it meets expectations in terms of reliability, security, privacy, safety, and accountability.”

Ethical concerns also loom large. AI systems are prone to biases that reflect the limitations or prejudices of their training data. These biases can perpetuate stereotypes and create disparities, especially in regions already struggling with inequality. 

This is where regulatory challenges come to the fore, as existing frameworks were designed for human decision-making, not the evolving behaviours of machines. The question of intellectual property further complicates the picture. When AI generates content, who owns it? 

Ganne said, “AI systems rely on vast amounts of data to learn and improve. If that data includes copyrighted material, like books, images, and software code, was permission obtained to use it?”

Balancing innovation with oversight requires a delicate approach. Policymakers must craft regulations that encourage AI’s development while protecting against its potential misuse. Without such balance, the challenges could overshadow the opportunities.

The growing gap between those with AI and those without

While AI opens doors for some, it risks shutting them for others. 

Advanced economies, with their robust digital ecosystems, skilled workforces, and substantial investments in research and development, are able to fully exploit the potential of AI. These countries are not only developing AI but also controlling the data and technology needed to fuel it, consolidating their advantages in trade and economic growth.

Meanwhile, lower-income countries face significant barriers. Without reliable high-speed internet, advanced computing power, or adequately trained professionals, these nations struggle to integrate AI into their economies. This lack of access prevents them from benefiting from the efficiencies and opportunities AI creates, leaving them further behind in the global market.

Ganne said, “The concentration of the AI value chain, with players like NVIDIA, TSMC, or ASML controlling 80% of the market, raises significant concerns about equity and access.”

Moreover, the concentration of AI expertise and resources in a few countries exacerbates this inequality. 

Ganne added, “Only a few players control the rich datasets that actually fuel AI. Without cooperation to address these issues at a global level, the gap between AI haves and have-nots is likely to grow wider.”

This is why targeted and collaborative global efforts to democratise AI are needed.

Why the world needs to work together on AI

The world needs to work together on AI to prevent disparities and inequalities from becoming more pronounced because AI’s potential benefits are immense, but they risk being unequally distributed. 

By collaborating, nations can share knowledge, expertise, and best practices to ensure AI technologies are accessible to all. Unified global standards and regulatory frameworks would help smaller and developing countries adopt AI in ways that align with ethical guidelines, data privacy, and safety measures. 

Trade rules, while technology-neutral, already cover aspects of AI, such as eliminating tariffs on critical components or supporting cross-border services. However, the fragmented approaches taken by individual countries create inefficiencies and inconsistencies.

Ganne said, “What we urgently need is cooperation to promote regulatory convergence.”

By fostering dialogue, sharing best practices, and creating unified standards, nations can avoid the pitfalls of regulatory fragmentation. Equitable access to AI technologies depends on proactive policymaking that prioritises inclusivity and shared progress.

Ganne said, “The WTO, as a global forum for cooperation, dialogue, and exchange of good practices, can play an important role in fostering global convergence.”

By working together, countries can ensure AI serves as a tool for uniting rather than dividing the global trading system.

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AI has the potential to redefine international trade, unlocking new opportunities and transforming the way economies interact. Yet, this transformation is not without its challenges. The hurdles, from ethical dilemmas to growing inequalities, are significant but not insurmountable.

The future of AI in trade depends on how nations and organisations approach these challenges today. Cooperation, inclusivity, and thoughtful regulation will be key to ensuring AI’s promise outweighs its risks. 

Whether AI helps or hinders international trade will ultimately be determined by the choices made now. The opportunity to shape a more connected and equitable global market is within reach, but it demands collective effort and vision.

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Germany’s outdated system for handling negotiable instruments – crucial documents used in trade finance – has become a significant obstacle. While German businesses push ahead with digitalisation, the legal infrastructure supporting trade documentation remains rooted in the paper age.

“For individually issued receivables, there is still no reliable legal structure in place”, said Melih Esmer, a legal researcher at EBS University who specialises in electronic negotiable instruments. In Germany, the problem runs deeper than simple modernisation, and into the fundamentals of bills of exchange: should Germany update its century-old bill of exchange law or create entirely new legislation for the digital era?

Non-negotiable: the DNI solution

Bills of exchange represent abstract receivables that banks can buy and resell, providing vital liquidity to businesses. But the current paper-based system has become impractical, according to Silja Calac, head of Private Debt Mobilisation for SCF and Doc Trade at Banco Santander and board member of the International Trade and Forfaiting Association (ITFA).

“We can no longer wait for documents to be mailed,” said Calac. “There’s also the risk that these documents might get lost.” The solution lies in digital negotiable instruments (DNIs), which would allow secure electronic transfer of these vital trade documents.

Technical solutions already exist. Several fintech companies have developed viable platforms, including Traxpay and Enigio. The latter has already completed live transactions in the UK market. Yet Germany’s regulatory framework lags behind the technical capabilities. Although the country introduced electronic transport documents in 2013 and updated its capital markets law for dematerialised stocks and bonds, the crucial area of individually issued receivables remains stuck in regulatory limbo.

Esmer identifies two key challenges. First, lawmakers must decide how to structure the legal framework. Options include amending the existing bill of exchange law, replicating its rules in new legislation, or creating an entirely new instrument that serves the same purpose without traditional formalities.

MLETR implementation

The second challenge involves implementing the UN Commission on International Trade Law’s Model Law on Electronic Transferable Records (MLETR). This requires establishing clear standards for digital originals that all parties can recognise and trust. “It’s about finding communication standards,” Esmer explained. “The law must clearly define concepts like integrity, authenticity, uniqueness, and control.”

Germany could learn from international examples. The UK’s Electronic Trade Documents Act 2023 established specific criteria for electronic document equivalence, maintaining continuity with existing practices. The United States took a more radical approach through its Uniform Commercial Code Article 12, allowing receivables to be linked directly to ledger entries.

Market adoption presents another hurdle, though a manageable one. “Bills of exchange involve fewer parties than bills of lading and are largely controlled by banks”, Calac notes. “If banks are well informed, the adoption of such a solution could progress much faster than with bills of lading.”

The key to successful implementation may lie in maintaining familiarity with existing processes. Calac draws a parallel with digital signatures: “I can see my document, and I see that I can place my signature on it, and then I get a signature that looks like mine. So, I feel comfortable with it.” This principle should guide the development of DNIs. Creating digital instruments that mirror their paper counterparts could accelerate adoption by making the transition more intuitive for users.

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The reform process must also consider the broader international context. Germany needs a system flexible enough to accommodate both traditional documents and emerging digital instruments. “A foundation needs to be created that allows companies and banks to digitise their existing documents and also combine them with new digital instruments”, Calac emphasised.

The pressure to modernise grows as other nations push ahead with digital trade documentation. The UK’s reforms have positioned it to become a hub for digital trade, while Asian financial centres like Singapore have made similar moves.

German lawmakers face a complex task in balancing innovation with legal certainty. They must create a framework that enables digital transformation while maintaining the security and reliability that have made German trade documentation trusted worldwide.

The success of this reform could impact Germany’s future competitiveness in international trade. With technical solutions ready and businesses eager for change, the country’s ability to establish an effective legal framework for digital trade documents has never been more critical.

Ansätze zur Einführung von MLETR in Deutschland

Deutschlands veraltetes System für den Umgang mit handelbaren Instrumenten – entscheidenden Dokumenten im Handelsfinanzwesen – ist zu einem erheblichen Hindernis geworden. Während deutsche Unternehmen in der Digitalisierung voranschreiten, bleibt die rechtliche Infrastruktur zur Unterstützung von Handelsdokumentationen im Papierzeitalter verhaftet.

„Für individuell ausgestellte Forderungen gibt es noch immer keine verlässliche Rechtsstruktur“, erklärt Melih Esmer, ein Rechtswissenschaftler an der EBS Universität, der sich auf elektronische handelbare Instrumente spezialisiert hat. In Deutschland geht das Problem über einfache Modernisierungsfragen hinaus und betrifft die Grundlagen von Wechseln: Soll Deutschland sein jahrhundertealtes Wechselgesetz aktualisieren oder völlig neue Gesetze für das digitale Zeitalter schaffen?

Unverhandelbar: die DNI-Lösung

Wechsel repräsentieren abstrakte Forderungen, die Banken kaufen und weiterverkaufen können, um Unternehmen wichtige Liquidität zu verschaffen. Doch das derzeitige papierbasierte System ist laut Silja Calac, zuständig für Private Debt Mobilisation für SCF und Doc Trade bei Banco Santander und Vorstandsmitglied der International Trade and Forfaiting Association (ITFA), unpraktisch geworden.

„Wir können nicht mehr darauf warten, dass Dokumente per Post verschickt werden“, sagt Calac. „Es besteht auch das Risiko, dass diese Dokumente verloren gehen.“ Die Lösung liegt in digitalen handelbaren Instrumenten (Digital Negotiable Instruments, DNI), die den sicheren elektronischen Transfer dieser wichtigen Handelsdokumente ermöglichen würden.

Technische Lösungen gibt es bereits. Mehrere Fintech-Unternehmen haben praktikable Plattformen entwickelt, darunter Traxpay und Enigio. Letzteres hat bereits Live-Transaktionen auf dem britischen Markt abgeschlossen. Dennoch bleibt der regulatorische Rahmen in Deutschland hinter den technischen Möglichkeiten zurück. Obwohl das Land 2013 elektronische Transportdokumente einführte und sein Kapitalmarktrecht für entmaterialisierte Aktien und Anleihen aktualisierte, bleibt der entscheidende Bereich individuell ausgestellter Forderungen in einem regulatorischen Schwebezustand.

Esmer identifiziert zwei zentrale Herausforderungen. Erstens müssen die Gesetzgeber entscheiden, wie der rechtliche Rahmen gestaltet werden soll. Optionen umfassen die Änderung des bestehenden Wechselgesetzes, die Übernahme seiner Regeln in neue Gesetze oder die Schaffung eines völlig neuen Instruments, das denselben Zweck erfüllt, jedoch ohne traditionelle Formalitäten auskommt.

MLETR-Umsetzung

Die zweite Herausforderung betrifft die Umsetzung des Modellgesetzes der UN-Kommission für internationales Handelsrecht über elektronische übertragbare Aufzeichnungen (Model Law on Electronic Transferable Records, MLETR). Dies erfordert die Festlegung klarer Standards für digitale Originale, die von allen Parteien anerkannt und akzeptiert werden können. „Es geht darum, Kommunikationsstandards zu finden“, erklärte Esmer. „Das Gesetz muss Konzepte wie Integrität, Authentizität, Einzigartigkeit und Kontrolle klar definieren.“

Deutschland könnte von internationalen Beispielen lernen. Das britische „Electronic Trade Documents Act 2023“ hat spezifische Kriterien für die Gleichwertigkeit elektronischer Dokumente eingeführt und dabei die Kontinuität mit bestehenden Praktiken gewahrt. Die USA verfolgten einen radikaleren Ansatz durch Artikel 12 des Uniform Commercial Code, der es ermöglicht, Forderungen direkt mit Buchungseinträgen zu verknüpfen.

Die Markteinführung stellt ein weiteres, jedoch überschaubares Hindernis dar. „Wechsel betreffen weniger Parteien als Konnossemente und werden weitgehend von Banken kontrolliert“, merkt Calac an. „Wenn Banken gut informiert sind, könnte die Einführung einer solchen Lösung viel schneller voranschreiten als bei Konnossementen.“

Der Schlüssel zum Erfolg könnte in der Vertrautheit mit bestehenden Prozessen liegen. Calac zieht eine Parallele zu digitalen Signaturen: „Ich sehe mein Dokument und erkenne, dass ich hier unterschreiben kann. Dann erhalte ich eine Unterschrift, die wie meine aussieht. Dadurch fühle ich mich sicher.“ Dieses Prinzip sollte die Entwicklung von DNIs leiten. Digitale Instrumente, die ihren Papier-Pendants ähneln, könnten die Akzeptanz beschleunigen, indem sie den Übergang für die Nutzer intuitiver gestalten.

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Der Reformprozess muss auch den breiteren internationalen Kontext berücksichtigen. Deutschland benötigt ein System, das flexibel genug ist, sowohl traditionelle Dokumente als auch neue digitale Instrumente zu integrieren. „Es muss eine Grundlage geschaffen werden, die es Unternehmen und Banken ermöglicht, ihre bestehenden Dokumente zu digitalisieren und sie auch mit neuen digitalen Instrumenten zu kombinieren“, betonte Calac.

Der Druck zur Modernisierung wächst, da andere Länder mit digitalen Handelsdokumentationen voranschreiten. Die Reformen im Vereinigten Königreich haben es zu einem Zentrum für den digitalen Handel gemacht, während asiatische Finanzzentren wie Singapur ähnliche Schritte unternommen haben.

Die deutschen Gesetzgeber stehen vor der komplexen Aufgabe, Innovation mit rechtlicher Sicherheit in Einklang zu bringen. Sie müssen einen Rahmen schaffen, der die digitale Transformation ermöglicht und gleichzeitig die Sicherheit und Zuverlässigkeit bewahrt, die deutsche Handelsdokumentationen weltweit vertrauenswürdig gemacht haben.

Der Erfolg dieser Reform könnte die zukünftige Wettbewerbsfähigkeit Deutschlands im internationalen Handel beeinflussen. Mit verfügbaren technischen Lösungen und unternehmensseitiger Bereitschaft zur Veränderung war die Notwendigkeit, einen effektiven rechtlichen Rahmen für digitale Handelsdokumente zu schaffen, noch nie so groß.

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A red wave swept over the USA on 5 November 2024 as the Republican Party under former president Donald Trump won the presidential race and claimed a majority in both houses of Congress.

If Trump’s campaign rhetoric is to be believed, then his return to the White House will bring with it a renewed commitment to protectionism, an upheaval of trade norms, and significant implications for economies worldwide. 

To discuss these potential implications and explore how a second Trump presidency will reshape global trade, finance, and geopolitical dynamics, Trade Finance Global spoke with Rebecca Harding, Economist at Rebeccanomics; Robert Besseling, CEO at Pangea Risk; Alisa DiCaprio, former Chief Economist at R3; and Simon Everett, Trade Policy Expert on the day the results were announced.

A rising tide of protectionism and its ripple effects on trade finance

Throughout the 2024 presidential race, Trump campaigned heavily on the promise of putting American workers and industry first by imposing sweeping protectionist tariffs on goods entering the country. 

DiCaprio said, “The first big shift under a second Trump administration is around more restrictive tariffs for everyone. The campaign has suggested 10 to 20% tariffs on all imports, as well as increased enforcement of trade rules. So we’re going to see trade become much more restrictive.”

For some foreign businesses that rely on US markets to sell their products, these campaign promises, should they materialise, will introduce considerable strain on their margins and may require them to rethink their entire approach to global commerce. 

Everett said, “Companies exporting from those countries would be well-advised to consider what alternative plans they have for supplying the US market should trade tensions deteriorate.”

Companies dealing in low-value imports, in particular, will face steep hurdles due to stricter de minimis limits, effectively increasing the costs of doing business with the US.

But it’s also important to remember that just because something was promised on the campaign trail, doesn’t necessarily mean that it will become policy once the new administration takes power. 

DiCaprio said, “Even though the campaign says that there is going to be all these restrictions, Congressional Republicans are likely to moderate his most extreme proposals. Not the direction, but certainly the magnitude. So it remains to be seen exactly how these will play out.”

Harding added, “There’s also an extent to which he won’t necessarily use all of these measures. Some of them, because he’s transactional, will be used as bargaining chips.”

Regardless of what extent the campaign rhetoric materialises into actual policy, Trump’s election has already and will continue to have on the ground implications on how business is conducted in and around the US – including for the trade and supply chain finance industries.  

Supply chain finance may experience an increase in demand as businesses look to reorganise their supply chains and require assistance to cover the capital investment that will entail.

On the trade finance side, demand may be about to decrease. The types of transactions in the US that use instruments like letters of credit are often conducted between an American firm and either one in an emerging economy or a new exporter. These will be the types of businesses most negatively impacted by rising tariffs. 

A battle for control over commodities and currencies

The competition for economic dominance extends beyond trade policies to the critical resources that underpin modern economies. Trump’s election is likely to reshape commodity markets through a renewed focus on fossil fuels, heightened trade fragmentation, and changes to the value and use of the US dollar. 

His administration’s strong support for oil and gas development positions the US to play a more dominant role in global energy markets. Potentially, these resources could be used as leverage in geopolitical negotiations and within commodity markets.

Harding said, “We are seeing trade fragmentation and the separation of the critical mineral supply chains. All of those types of things will affect our transition, and we’re going to see a much more complicated commodities picture in the years ahead.”

By prioritising traditional energy over renewables, the US could alter supply dynamics and create volatility in pricing. At the same time, the fragmentation of global trade, driven by protectionist policies, could disrupt the flow of commodities and force regions to reconfigure their trade networks. This shift may further complicate the movement of critical resources, amplifying uncertainties for businesses and economies worldwide.

And then there is the role of the greenback.

Besseling said, “A stronger US dollar seems to be the outcome of a Trump administration, and that will have an impact in terms of global trade tensions… and may also inflate the borrowing costs for many countries in emerging markets, like in Africa and Asia.” 

Higher borrowing costs amplify existing debt crises, compelling these economies to explore alternatives. That’s why initiatives like BRICS Pay and local currency trade systems are gaining traction as nations look to bypass traditional reliance on the dollar. 

These movements underscore a growing desire among emerging markets to assert greater independence and resilience in an era dominated by economic uncertainty.

Besseling added, “The BRICS Club is expanding. We’ve got more partners across emerging markets now joining the BRICS organization. Similar, we’ve seen these emerging markets seeking alternatives to make trade happen in local currency, pushing ahead with a local currency clearance system called BRICS Clear.”

While much remains to be seen in the world order, it seems that there is at least a growing interest, and now perhaps even need, among the nations of the world to find alternatives to a US-centric system.

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A second Trump presidency signals a return to protectionist measures and unilateral decision-making. From the restructuring of supply chains to the shifting balance of power in commodity markets, businesses and governments alike must brace for significant change. 

The ripple effects of these policies, should they come to fruition, will test the resilience of existing systems and drive innovation in trade, finance, and geopolitics. 

The post PODCAST | Tariffs, trade wars, and transformation: The next four years of Trump appeared first on Trade Finance Global.

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Rumour has it that the elves start making toys for next Christmas almost immediately after Santa returns from his magical trip around the world each December.

With an estimated 2 billion children in the world, the elves need to produce around 5.5 million toys every single day of the year just to have enough for every child to find one under their tree on Christmas morning.

At the International Trade Forfaiting Association’s (ITFA) 2024 Christmas party, Trade Finance Global (TFG) spoke with Sean Edwards, Chairman of ITFA, and Dhiresh Dave, Chief Legal Officer and Managing Director – Legal, Compliance and Governance at Falcon Group, to discuss a financing tool that might come in handy for Saint Nicholas: inventory finance.

Filling the inventory finance gap

For businesses, that same bursting warehouse as Santa’s at the North Pole represents not only a logistical puzzle but also a financial one. How can these goods be funded without locking up precious capital? 

That’s where inventory finance comes into play. 

Inventory finance is a financial tool that helps businesses fund goods in the production or storage stages, bridging the gap between supplier payments and sales receipts. It enables companies to manage inventory without tying up working capital, ensuring operations run smoothly and supply chains remain resilient.

Dave said, “There’s a whole range. From the simplest end being the typical loans or repos to the other end of the spectrum, which is bespoke solutions where someone like Falcon would slip into a supply chain and own goods where you need them for when you need them.”

The result is a way for businesses to adapt to the inventory requirements of a post-COVID world.

The post-COVID wake-up call: warehouse disruption, just in case, holding extra inventory

During the pandemic, factories ground to a halt, shipping delays stretched endlessly, and businesses learned hard lessons about vulnerability. Suddenly, just-in-time supply chains didn’t feel so smart anymore, and the idea of buffer inventory went from being a luxury to a necessity almost overnight. Companies needed to keep their operations running, no matter the disruptions.

Dave said, “The interest in inventory really piqued post-COVID, as people were interested in developing a stronger supply chain, and so resilience was initially the driver. How can we stop this from happening again?”

But keeping extra stock can be expensive. It ties up capital and strains resources, which is why so many businesses have turned to inventory finance. With it, they found a way to hold the necessary buffers without breaking the bank. 

Edwards said, “The underlying problem that we’re trying to solve here is the ownership of inventory and the operational issues about managing that and dealing with that inventory.”

This shift has also created new opportunities. Bulk buying from suppliers at a discount became a feasible option with the right financing in place. Consider that a typical motor vehicle can contain up to 25,000 component parts; bringing this material together creates an intricate and sprawling supply chain. Similar industries to automotive, like tech, have embraced this approach. 

Why banks can’t handle inventory alone

Banks are great at handling numbers on paper, but when it comes to dealing with physical goods, they’re out of their depth.  

Edwards said, “I remember years ago, we had to take possession of a warehouse full of cocoa beans. That was not a happy experience. Banks are not very good at doing that. All of that practical management is usually dealt with by an intermediary, and in many cases, banks can’t do it anyway for legal reasons.”

This is where non-bank entities step in. These players have the specialised expertise to manage inventory and supply chain logistics. Acting as intermediaries, they bridge the financial and operational worlds, letting companies focus on their goals without worrying about the details of inventory. These types of non-bank entities can add value for clients by providing support on both the financial and physical dimensions.

Dave said, “When you’re stepping into a client supply chain, the risk to them of you not performing is that the entire manufacturing chain goes down. If you don’t perform properly, they don’t get the parts they need to sell their own product. The upside is phenomenal, but the downside is great as well.”

Non-banks are often better suited to balance these risks, providing reliability and expertise where it’s most needed. 

The future of inventory finance

Inventory finance is a solution for today’s problems and tomorrow’s challenges, but it may still have a lot of room to grow. The market has grown 40% between 2018 and 2023, and is estimated to grow at a CAGR of 10.5% from 2024 to 2033, from $205.7 billion to $558.7 billion.

Dave said, “[The inventory finance market] is still very much in its infancy, given that the interest in it has been driven by supply chain disruption. In current times, the only thing that is certain is uncertainty when it comes to global trade, and a solution to ensure that you have the inventory where you need it and when you need it is something that corporates cannot afford not to have in their toolkit.”

The next step is scaling these solutions. For that, banks and non-banks will need to find common ground. Banks prefer structures that feel familiar, while non-banks push the boundaries with innovative approaches. As these partnerships evolve, inventory finance will likely become more refined and accessible to a broader range of industries.

Awareness is also key. Many organisations still don’t realise the benefits inventory finance can bring. Success stories and growing adoption will help spread the word. Competition among providers will encourage new ideas, making these solutions even more effective over time.

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By addressing the inventory gap, companies can face challenges head-on, keeping their operations steady and their goals within reach. In the aftermath of the pandemic, flexibility and adaptability have become cornerstones of success. and inventory finance delivers both. 

With banks and non-banks working together to refine these solutions, the future for businesses ready to embrace this powerful tool looks as bright as a glowing red nose on a foggy Christmas Eve.

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As global supply chain disruptions and geopolitical tensions continue to impact trade routes, boardroom discussions are also changing. Corporate insolvencies are yet to return to pre-pandemic rates in the UK and other major economies, and inflation remaining high. Meanwhile, businesses are starting to redefine success beyond just financial performance.

How will the future workforce navigate the evolving trade and credit landscape? Beyond shareholder value, how can large financial institutions, credit insurers, and multilaterals address their social responsibilities? How do we manage systemic risks while supporting the communities involved in global trade?

As part of our C-Suite Leadership Series, Deepesh Patel, Editorial Director at Trade Finance Global (TFG) spoke with Angela Duca, Global Specialty Head, Credit Specialties at Marsh, to help answer some of these and other pressing questions.

Navigating a poly-crisis and adapting to systemic risks

Right now, the world feels like it’s dealing with crises on multiple fronts. Some call this a “poly-crisis”—a term that captures the web of economic instability, political upheaval, and environmental challenges all happening at once. 

But while the word crisis might suggest nothing but trouble, there’s another way of looking at it.

Duca said, “With poly-crisis, there’s poly-opportunities.”

The credit specialties sector, in particular, has stepped up to meet these challenges head-on. Far from being deterred by the complexity, it has proven capable of managing these overlapping risks and finding opportunities for growth and resilience.

Credit specialties have become key players in supporting global trade amid these uncertainties. According to the World Bank, trade has been a significant catalyst for economic growth and poverty reduction, which highlights the importance of financial support in revitalising economies post-crisis.

Duca said, “I’ve seen the credit insurance market take on more sophisticated risks, provide solutions in more challenging places, and have a closer partnership with multilaterals.”

These collaborations have enabled credit providers to share risks and contribute to a more stable economic environment. 

Another example of this adaptability comes from new approaches like parametric insurance. Under this type of insurance, rather than waiting for damages to be calculated and processed, policy payouts are based on predefined triggers, such as rainfall exceeding a specific threshold or wind speeds hitting a certain mark. 

This solution allows for almost immediate payouts, which means that communities, businesses, and governments impacted by disasters can start their recovery efforts quickly.

Balancing profitability with social impact

While navigating a poly-crisis is crucial, the conversation around the purpose of financial institutions has also been evolving. Today, profitability alone is not the benchmark for success. Increasingly, businesses are judged by their social impact within their immediate sphere and in the wider community. 

Duca said, “Our firm defines our key stakeholders as clients, colleagues, communities, and our stakeholders. Our CEO is very passionate about ensuring that our initiatives create an impact for those four key stakeholders.”

This embodies the notion that credit specialties extend beyond providing insurance and mitigating risk to building meaningful connections with communities and ensuring that activities contribute to societal well-being.  One way this is done is through corporate social responsibility initiatives, which have increasingly become part of everyday business. 

Duca said, “It’s about creating a culture that values the human side of finance: the people and communities that lie behind the numbers.”

This balance between financial outcomes and social impact becomes especially critical during periods of crisis. When economies falter, conflict disrupts supply chains, and natural disasters strike, it is the responsibility of these institutions to remain steadfast—not to withdraw at the first sign of trouble. 

They need to innovate, find new ways to structure deals, and continue to support the communities they serve. This dual focus on social and economic value sets a benchmark for how financial institutions can truly contribute to broader societal goals.

Developing future leaders and building resilience

With so much in flux, the question arises: Who will lead us through these challenges? The industry is increasingly recognising the importance of developing future leaders who are skilled, resilient, and passionate about what they do. 

Duca said, “Leadership today is not just about knowing the business inside out; it’s about being adaptable, empathetic, and open to new ways of thinking.”

One of the most intriguing aspects of this evolving leadership model is the emphasis on collaboration and innovation. The World Economic Forum reports that the future of work will require a workforce that is adaptable and skilled in new technologies, emphasising the need for leaders who can foster such environments. The idea is that the best solutions often come not from individuals working in isolation but from teams working together across different areas of expertise. 

For instance, bringing together credit specialties, energy, and construction teams to create holistic solutions for clients allows financial institutions to think beyond their traditional boundaries and create the kind of leadership that we need for the decades ahead. 

Duca said, “I’m lucky that I’m probably interacting with the future CEO of Marsh, but I don’t know who it is at this point. One piece of advice I have for that person is don’t lose the passion for what we do and the value that we provide.”

Passion is hard to teach, but it can be cultivated. Employees who are inspired by their leaders—who see them excited about their work and genuinely engaged—are likelier to feel that same passion. 

This kind of culture builds resilience. When people feel connected to their work and inspired by their leaders, they are better equipped to handle challenges and adapt to change.

Role of credit specialties in supporting communities post-disaster

One of the most impactful roles that credit specialties can play is supporting communities that have faced conflicts or natural disasters. In times like these, financial tools need to provide a lifeline and deliver quick, effective relief to the affected regions so they can begin to rebuild. 

Credit specialties also work alongside public agencies and multilaterals to facilitate economic recovery in these challenging environments. Their role is to encourage broader investment by creating an environment where others feel confident enough to also invest. The United Nations reported that hunger numbers have remained persistently high for three consecutive years, emphasising the critical need for financial interventions that can address both economic and social challenges in these regions.

Duca said, “From an underwriting perspective, from a broker perspective, from an FI perspective, how can we not shy away from being in post-conflict [and] post-disaster [areas], take a little bit more risk?”

This approach is about creating jobs, supporting local economies, and ensuring communities have the resources to rebuild sustainably. It’s about being more than just a financial entity; it’s about being part of the fabric of these communities, helping them move forward after experiencing severe setbacks. As highlighted in a recent article, Africa is projected to experience a youthquake by 2050, with a rapidly growing population that will require innovative solutions to ensure economic stability and job creation. This highlights the importance of credit specialties in fostering sustainable development in these regions.

—

Financial institutions are learning to juggle an array of systemic risks while focusing on the social impact of their activities. From adapting to crises with innovative solutions like parametric insurance to balancing profitability with meaningful contributions to society to nurturing passionate, resilient leaders—each element plays a crucial role in future-proofing the industry.

What stands out most in this journey is the shift in mindset: from a purely profit-driven approach to one that values social responsibility and community impact. 

As the line between crises and opportunities blurs, the institutions that understand the importance of adaptability, collaboration, and compassion will lead the way. 

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At the 2024 Trade Finance Investor Day (TFDI) conference in London, TFG’s editor Deepesh Patel spoke with Nick Stainthorpe, Partner at Reed Smith, on ways to unlock capital investment into the trade finance and receivables world. As banks’ distribution capabilities plateau, the trade and receivables finance industry is constantly on the lookout for alternative sources of investment capital but often faces challenges due to its perceived complexity compared to traditional asset classes. 

Compared with other asset classes—mortgages and bonds, credit cards, student loans, collateralised loan organisations (CLOs), and so on—trade finance assets are unusual for their lack of consistency. These assets vary significantly in risk and tenor.

Securitising trade finance assets could fulfil the unmet demands of the trade finance gap, lowering barriers to entry for prospective investors (including funds, capital markets, etc.). The risks and complexities of trade finance securities, though real, can be overcome and are often outweighed by the benefits for both investors and originators.

From receivables to securities

In traditional asset-backed securitisation, securities are sold on the public capital markets or privately placed to a smaller group of investors. Private securitisation, however, offers a tailored approach compatible with the unique needs of the trade finance industry.

By creating entities to buy receivables and separate these assets from sellers, investors can buy exposure to a firm’s debtors in the form of tradeable security, letting them access less easily traded assets than traditional methods. Private securitisation structures are handled as off-market transactions and are not listed on a stock exchange, unlike public securitisation structures. In both structures, the receivables are shielded from a seller’s potential bankruptcy by being transferred to a special purpose vehicle (SPV). This ensures that investors face lower risk exposure related to the seller’s financial stability. 

This is especially attractive for those wanting to invest in trade and receivables finance but who are deterred by the risks of instability and insolvency. Through securitisation, investors can obtain credit ratings.

Securities in non-traditional sectors can be attractive to diversify investors’ portfolios, said Nick Stainthorpe, Partner at Reed Smith. “Trade and receivables finance securities are uncorrelated to things like real estate values or equities; their underlying assets are relatively short-dated, which allows structures to be wound down quickly where there are signs of trouble, making for a great asset class”. 

Security provides protection by ring-fencing specific assets from other creditors, while securitisation goes further by removing those assets from the company’s balance sheet entirely, offering additional protection from the company’s potential bankruptcy.

Unique risks in trade finance securitisation: credit, fraud, and dilution

All securities involve some risk, but investing in the trade finance asset class presents unique challenges. Investors must consider both general risks, like credit exposure to underlying debtors, and specific risks, like dilution and fraud. The latter is a particularly tricky aspect of trade finance securities, as fraud is inherently difficult to detect and mitigate.

Double invoicing, misinvoicing, and carousel fraud (operations involving nonexistent goods) are all risks unique to trade finance and can seem difficult for investors to protect themselves against. Because insurance against fraud can be hard to get, and getting full coverage is almost impossible, investors and lenders must focus on prevention instead: background checks on exporters and importers, KYC checks, and increased awareness of the risks all protect investors against potential losses due to criminal activity. Companies such as MonetaGo are addressing these challenges by developing solutions like a Secure Financing platform, which prevents duplicate financing fraud by creating unique digital fingerprints of trade documents.

Credit risk

Beyond the risks of fraud, trade finance securities are vulnerable to non-payment because of the inherent complexity of trade transactions. This would generally be non-payment by the underlying debtor, who might pay late or default entirely, but could also arise at the level of the originator if the originator becomes insolvent while holding collections or fails to properly transfer/assign the receivables. 

In addition, businesses must consider exposure to insurers and account banks, rethinking their approaches to adapt. Long approval timelines further hinder efforts to streamline processes.

Luckily, this is a much easier risk to protect against. Some mitigants include:

• Due diligence and monitoring, such as reviewing a supplier’s financial health and performance.
• Credit ratings to evaluate how likely a company or entity is to repay their debts.
• Financial instruments like letters of credit, bank guarantees, and so on.
• First loss pieces, in which one party agrees to take the first set of losses before others are affected.
• Over-collaterisation, providing more collateral than the value of the loan/obligation for extra security.
• Recourse to legally claim or demand compensation.
• Assets pledged as security.
• And, of course, credit insurance to protect against non-payment.

Taking out credit insurance cannot completely offset the various vulnerabilities within trade finance-backed securities but is a useful buffer to help manage non-payment risk. 

Credit insurance contracts can be intricate and require buyers to understand the terms necessary to avoid claim disputes. Most insurers will not cover the entire risk, requiring investors to have some “skin in the game” to incentivise them to have high levels of oversight and diligence. 

Securitisation: a bridge over the trade finance gap?

By unlocking sources of funding that have remained inaccessible until now, securitisation could play an important part in narrowing the estimated $2.5 trillion global trade finance gap, which disproportionately affects small and medium enterprises (SMEs). Financing SMEs through securitisation offers the potential for high returns with relatively low risk. 

“In some cases, you’re getting, for example, SMEs who are prepared to pay the financing cost that an SME will pay, but whose credit risk is much more creditworthy than that cost of finance would imply,” said Stainthorpe. 

However, this is not easy – particularly given the unique challenges of SME financing. Large portfolios of small, diverse businesses and the relatively higher default rates among SMEs lead many lenders to be wary of financing this sector. Though automated systems have emerged to handle the large volumes of data processing needed for SME financing, portfolio management and information sharing between stakeholders remain key obstacles. A promising approach is to focus on SME suppliers to larger corporations, provided the debtor’s credit risk and structure are carefully assessed.

The learning curve is steep but worthwhile for investors considering entry into this space. Before taking on these assets, investors should “take time to educate themselves about the product, look at different partners and investors who are operating the market already, and compare and contrast the ways they do it,” said Stainthorpe.

—

For those investors who do their homework, trade and receivables finance offers an emerging avenue for capital deployment in the sector—a market where the promise of high risk-adjusted returns and unique diversification benefits awaits. 

Securitisation could also be a powerful tool in trade finance, providing much-needed funding to close the trade finance gap. With proper education and resources, securitisation has the potential to transform the trade finance market, providing new opportunities for funding and reducing the global trade finance gap.

The post PODCAST | Securitising trade finance: Unlocking hidden potential appeared first on Trade Finance Global.

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The Mesopotamians were factoring in 1700 BC. But they didn’t have to contend with changing regulation, increased cybercrime, and geopolitical challenges – all which have made the recent period a particularly turbulent one for the industry. However, new technology and untapped markets in emerging economies provide exciting opportunities for growth.

Resilient but stagnant

Trade, factoring, and receivables have proven themselves resilient industries, growing by 3.1% in 2023 despite macroeconomic and political challenges that threw many other industries off course. Despite relatively slow growth, factoring is attractive to investors due to its countercyclical nature: in times of crisis, organisations want to secure their cash flow positions, and receivables are a safe way to do that. “We’re in an industry that actually grows when there is trouble happening around – organisations feel safer in moving into receivables finance during that time,” said Borgmeyer. 

However, there are signs of a slowdown: the German factoring market, which has seen years of constant growth and reached almost €400 billion in size, is forecasted to stop growing in 2024 for the first time ever. This might be a sign of a mature market, although Germany’s 9% factoring ratio sits well below its neighbours’ (21% in Belgium, 16% in France). Germany’s lacklustre GDP growth, the lowest in the EU at a forecasted 0.1% in 2024, could be another reason for the decline. 

This continues a pattern of modest growth in the factoring industry in the EU as a whole, with especially Western Europe experiencing low or negative growth in the last few years.  Developing economies might be the ticket to more impressive numbers: factoring companies are eyeing Africa, India, and the Middle East, whose small- and medium-sized enterprises (SMEs)  are in dire need of financing lifelines, as opportunities for expansion. 

Untapped emerging markets can benefit most from new technologies in the factoring and receivables sector, especially digital solutions that expand access to financing. These markets can be important drivers of growth when the European market is stagnant.

Digitisation for growth

The single biggest enabler of growth in the factoring and receivables business in the next few years will be digitisation, which will make producing the documents necessary for trade much easier and faster. Even though the underlying document is basically the same, moving from paper to digital trade documents will enable larger volumes of documents to be moved around the world at unprecedented speeds, representing the biggest change in the factoring industry since the shift from stone tablets to paper thousands of years ago. 

While the technology is there, and some countries have been proactive in passing legislation that promotes the use of digital trade documents, as the UK did with the Electronic Trade Documents Act (ETDA) in 2023, adoption has often been sluggish. As more countries adopt legal standards for electronic documents and more firms start using them, the factoring industry could see widespread growth and increased efficiency in the next few years.

Challenges ahead

While legislation can enable growth, like ETDA, there are fears it can also stifle it—as upcoming regulation on new technologies might. “AI regulation will most likely prevent the development of tools that are relevant and important to manage millions of receivables that are out there, to reduce risk and fraud,” said Borgmeyer. 

New regulation proposed by the EU intended to address the problem of late invoice payments would mandate payments within 30 days without any exceptions. If passed, this would significantly reduce the European market for trade and receivables financing. The EU has also been worrying the industry by imposing heavy tariffs on electric cars from China, sparking fears of a trade war that would further stifle the market; the upcoming US election and the Republican plan of increasing tariffs on many foreign goods have made the landscape even more uncertain. 

Some risks, on the other hand, are more theoretical than real for now, like cybercrime. Digital trade documents are seen as more vulnerable to cloning or manipulation than paper documents, leading many in the industry to cite cyber security as the biggest risk in the coming year. 

However, for now, this has not been a significant concern, said Borgmeyer. “Cybercrime is something that we have been registering, not because of attacks on our systems or on the systems of our clients, but rather because of the requirements that are being placed to us. It’s not that we’re seeing it happening, but we’re seeing that people are becoming more and more concerned.”

Cybercrime is bound to rise as the trade and factoring industry becomes more and more digital – but firms are prepared. A joint initiative by efcom and other tech firms in the industry being launched in 2025 will focus on fighting back against fraud and preventing cybersecurity risks to promote digital expansion without compromising security.

The factoring and receivables industry is looking strong despite regulatory, macroeconomic, and political challenges. New technologies and emerging economies are important opportunities for growth, especially as companies work together to mitigate the risks involved.  

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Big data, small data, metadata – you’ve heard it all. From your workout to your wine fridge, massive amounts of information are being collected and shared globally. If data is the new gold, then the collection, management and access to it has never been more valuable (Finextra). According to McKinsey, cross-border data flows are nearly doubling every two years, a clear sign of rapid digital transformation in global commerce. 

Hoffman has recently produced a research paper entitled ‘The unseen side of trade digitisation: Data inequality and the global economic divide’. It focused on the sustainability and equitable growth of digital trade in a disparate global market.

The data goldrush

The rapid tide of digitalisation promises enhanced efficiency, reduced costs, and streamlined operations, but the glimmer of new knowledge – shared with more people and utilised to greater effect than ever before – hides a growing disparity that will impact global trade dynamics.

The UK’s recent passing of the Electronic Trade Documents Act 2023 suggests that regulators the world over are hoping to secure and democratise the process of trade digitalisation. The bill should bolster the position of small to medium enterprises (SMEs) in developed nations, especially for those hoping to secure their position internationally, but Hoffman can see other stakeholders being left behind. 

The growing digital divide

Data inequality, as defined by Hoffman, encompasses three critical dimensions: 

• access to data;
• control over data infrastructure, and;
• representation within data. 

“Representation often goes overlooked, despite its significant implications for trade development and economic growth,” said Hoffman. “From a trade context, countries that have strong digital data infrastructure, that ability to gather and use data, are generally going to have a lower cost of market entry for foreign businesses”.

LDCs unseen 

Hoffman’s study is concerned with the consequences of data inequality in those classified as least developed countries (LDCs), landlocked developing countries (LLDCs), and small island developing states (SIDS) 

Internet access is a major driver of data inequality, with only 20% of people in LDCs having connectivity, compared to 90% in developed countries. The UN largely defines LDCs by their agricultural and export strength, but strong digital infrastructure (for instance, stable and widespread internet connection) is fast becoming the defining asset of a nation looking to grow into prosperity. 

Looking at “digital differences,” Hoffman’s study revealed a 3% rise in the gap between LDCs and the rest of the trading world over the last decade, despite significant advances in digital capacity, such as the introduction of 5G and blockchain technologies.

Regions like Africa or Latin America and the Caribbean (LAC) are strong in population and consumer growth, but lack market representation. Africa alone accounted for less than 1% of digital service exports in recent years. While LAC is hot property right now for superpowers such as China and the US, metrics like internet penetration suggest connectivity is highly centralised in metropolitan areas. These regions are largely dependent on foreign data storage.

“If we look at where a lot of this infrastructure exists, it’s really in the developed world,” said Hoffman. “Seven of the ten largest technology companies globally are based in the US… It really amplifies their relative control over that global data infrastructure.”

The Global Circling the Local

The “trickle-down technology” approach is yet to yield any equitable results, although China is making waves with a new $3.6 billion outpost at Peru’s Puerto Chancay. The investment is a key aspect of their Belt and Road Initiative which, in part, aims to enhance global trade connectivity. The investment includes new 5G communication systems previously unseen in Central LATAM, courtesy of Chinese firm Huawei. This integration will give Peru an edge in a region lacking in scalable digital infrastructure. But the landmark trade agreement is not without controversy – with serious concerns now being raised over Peru’s data sovereignty.

“We need trade agreements that work for everyone, not just for data-rich countries”, insists Hoffman. “This means making sure that agreements include provisions that support fair data sharing and really help those developing nations benefit from the digital economy so that they’re not just left on the sidelines.”

Success stories like Ualá in Argentina and TradeDepot in Nigeria demonstrate local hunger for digital innovation, but for Hoffman, the onus rests with us all. 

—

The outlook can only be equitable if key international bodies (like the UN or Aid for Trade) and trade stalwarts in the Eurozone and North America step up to carry some of the weight in removing barriers for LDCs. Hoffman sees data inequality as the major challenge, one that can be combated in a three-prong approach:

1. Establish monitoring of data inequality and producing regular reporting on digital divide metrics.
2. Developing local data centres and storage capacity to improve internet access and connectivity
3. Enshrine this in policy by creating inclusive digital trade policies and fair cross-flow data-sharing agreements, supporting data sovereignty in LDCs.

Hoffman sees potential for the cross-flow of data to embolden smaller players on the international stage, those who need it most. “It’s really everyone’s issue to deal with this. Trade is inherently a global process, a global phenomenon. We need everyone involved, and we all benefit more when everyone’s involved.”

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Estimated reading time: 6 minutes

Treasury is not what it used to be, and that’s all thanks to a convergence of new technologies, changing values, and the push for more inclusivity. Formerly a primarily back-office function where treasurers focused solely on the numbers, treasury is becoming more of a strategic, tech-driven role. 

As we get ready for 2025, Trade Finance Global (TFG) spoke with our Editorial Board Member Eleanor Hill to explore the biggest trends in the world of treasury: technology, ESG, DEI, and the power of people.

Treasury meets technology: the new normal

In the past, treasury was defined by its heavy reliance on spreadsheets and manual calculations. Tedious processes often made it difficult to innovate, leaving treasurers with the same set of challenges year after year. 

Now, all of that is changing. 

Technology, particularly artificial intelligence (AI), is transforming the way treasurers do their jobs and also the expectations placed upon them. AI has evolved far beyond just automating mundane tasks; it is helping treasury teams dive deeper into forecasting, risk management, and even policy formulation.

Hill said, “If you speak to treasurers about what they want to fix with AI, it’s cash flow forecasting. The cash flow forecasting has been the number one issue for people for as long as I’ve been writing about treasury.”

These innovations have led to impressive strides in real-time liquidity forecasting, predictive analytics, and even making AI a kind of personal assistant—offering insights and drafting preliminary strategies. 

But with great power comes great responsibility.

Hill said, “There’s a lot of interesting applications of AI going on for sure, but always with caution.”

AI isn’t just a set-it-and-forget-it solution; it brings with it ethical concerns and new complexities. Questions about energy consumption and inherent biases in data are critical to the conversation, especially when AI usage is scaling across industries. 

As technology becomes more deeply embedded in treasury functions, treasurers must embrace the potential of AI while staying vigilant about its broader impacts. This new normal requires an ability to think critically about the role of technology in corporate finance, making it crucial for treasury teams to build robust governance around data use, privacy, and AI implementation. 

ESG: the comeback story?

Two years ago, it felt like ESG (environmental, social, and governance) initiatives were at the heart of every corporate conversation, especially within treasury. Sustainability was a priority, and treasury teams were eager to align their financing and supply chain solutions with broader ESG goals. 

But in 2024, the enthusiasm seemed to fade. The conversation around ESG was more subdued, with companies appearing to step back from their earlier commitments. 

Hill said, “There’s been a lot of concern around greenwashing, and there’s this new trend of green hushing. There are a couple of ways of it people might hush up what they’re doing as a defensive move, or people are just doing it passively. But it is filtering into treasury.”

Despite this dip, there are reasons to believe that ESG could make a strong comeback in 2025. Regulatory pressure is mounting, and treasurers are realising that sustainability is more than just a checkbox on a form. 

When viewed through a strategic lens, ESG doesn’t have to mean sacrificing profits or adding a layer of bureaucracy. Instead, it represents an opportunity for long-term growth, resilience, and alignment with stakeholder expectations.

Hill said, “When you look at ESG investments, people tend to think that, ‘Okay, I’m going to be compromising my investment performance by choosing an ESG investment.’ But that is not necessarily true.”

The regulatory environment, particularly in Europe, is pushing companies to rethink how they report on and integrate sustainability into their core operations. Treasurers have the unique role of linking these regulatory requirements with actionable, finance-driven solutions, helping their organisations turn ESG from a buzzword into a core business strategy.

The hope is that 2025 will see treasury teams once again leading the charge towards more sustainable finance. They have the ability to shape corporate behaviour, influence supply chain practices, and ensure that financial products align with a company’s long-term ESG goals. 

Diversity in treasury: still a long road

When we think about the treasury sector, it’s impossible to ignore the lack of diversity. Treasury, particularly at the leadership level, has long been dominated by men. Despite more women entering the industry in recent years, there is a clear drop-off in senior positions.

Hill said, “If I look back at the panels that I’ve moderated over the last year or so, they were 90% men, and it’s probably 80% white. There’s a huge discrepancy in terms of the general population and the people that are coming into treasury.”

The pipeline is there, but the glass ceiling remains a significant barrier. Diversity, Equity, and Inclusion (DEI) initiatives are crucial for ensuring that a diverse range of voices is not only heard but also represented in decision-making roles.

Diversity is not just about getting women and underrepresented groups into treasury roles; it’s about ensuring they stay, thrive, and lead. One of the ways to achieve this is through increased visibility. If young professionals cannot see themselves in leadership roles, it’s hard for them to aspire to them.

Hill said, “If you can’t see it, you can’t be it. It’s that element. Making sure that we really are showcasing the talent that’s out there.”

Interestingly, the rise of AI adds another layer to the diversity challenge. Studies show that men are using AI tools at work more frequently than women, which is starting to create a gap in productivity and opportunity. If this trend continues unchecked, the treasury sector may see further disparity, rather than progress, when it comes to DEI. 

Skills for the future: it’s about the people

Once, the treasurer’s role was defined by technical skills—deep knowledge of cash management, risk, and balance sheets. Today, the job is evolving into something far more dynamic. 

Treasury professionals are no longer hidden in the back office; they are sitting at the table with the C-suite, making strategic decisions that impact the entire company. The skills required for this transformation are not purely technical; they are increasingly about the ability to communicate, connect, and think strategically.

The role is now less about crunching numbers and more about asking what these numbers mean for the business and how they can be used to drive strategy forward.

Treasurers are now tasked with telling the story behind the numbers, and translating data into insights that support business growth. This makes skills like data storytelling, emotional intelligence, and the ability to influence stakeholders absolutely crucial. 

The treasurer’s role has never been so people-focused. Investing in human capital, ensuring well-being, and prioritising continuous learning are no longer nice-to-haves; they’re essential elements of a thriving treasury team. 

The future of treasury is about balancing technical acumen with a deep understanding of people—both the teams they lead and the stakeholders they serve.

Hill said, “Focus on your people. They are the ultimate corporate asset, not your data.”

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Treasury is changing, and fast. The days of being confined to spreadsheets are long gone. Treasury professionals are stepping into a broader, more influential role within their organisations, driving strategy through technology, sustainability, diversity, and people-centric leadership. 

The challenges are many—ethical AI use, bringing ESG back to the forefront, ensuring diversity truly becomes embedded in corporate culture, and adapting to an ever-expanding skill set. But these challenges are also opportunities for treasury teams to reshape their roles and, by extension, the future of their organisations. 

As we look towards 2025, it’s clear that the future of treasury isn’t just about managing finances; it’s about leading change—in technology, in sustainability, and in people.

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