Balancing Act: Achieving Liquidity Diversification with Unified Treasury Solutions

Navigating the financial terrain in a post-pandemic, geopolitically influenced global economy poses unique challenges for businesses. Currency fluctuations, volatile exchange rates, and geopolitical uncertainties have made cash management and forecasting increasingly difficult. Recent failures of challenger banks, such as Volt and SVB, have further strained banking relationships and jeopardised business continuity.

The interconnectedness of global markets introduces additional complexities, impacting liquidity management strategies. Adapting to the liquidity of global supply chains becomes imperative, requiring a proactive and collaborative approach. In the pursuit of diversifying liquidity risk, businesses often find themselves working with multiple financial institutions, leading to data fragmentation and operational blind spots. This article explores the importance of liquidity diversification, the flexibility it brings to financial operations, and the role of unified treasury solutions in addressing these challenges.

Diversifying liquidity risk means diversifying liquidity sources to mitigate the impact of market fluctuations and unexpected events. Proverbially, it’s about not putting all eggs in one basket. For any growing business, it's essential - especially if you operate globally. With your cash diversified with different institutions, you are more prepared to weather unexpected crises and ensure business continuity. Consider these two scenarios:

Whenever a business banking provider suspends operations or closes, your financial operations are put at risk. If your Treasury is well diversified, you can continue to transact without issues as you can still use other providers and currencies while you wait for funds from the other bank to be released.

As a result of the pandemic, cross-border businesses were concerned about maintaining smooth operations despite disruptions in supply chains, currency fluctuations, lockdowns, and staff shortages. Unfortunately, lack of visibility across all businesses prevented them from timely distributing funds where they were needed most. In today's volatile global markets, diversifying liquidity risk not only helps manage uncertainties, but also makes financial operations more flexible.

Diversifying funds allows companies to move funds between subsidiaries quickly and seamlessly, capitalise on favourable foreign exchange rates, and take advantage of early payment discounts. The quick movement of funds enables organisations to respond promptly to market conditions and optimise working capital. Diversifying liquidity also allows organisations to access funding from a variety of sources. As a result, borrowing costs may be reduced, resulting in increased financial health. The ability to tap into a variety of funding options enhances financial resilience.

Technology advances have made it possible for Treasury Managers to diversify liquidity risk without relying on multiple banking relationships and fragmented data. The Unified Treasury Solutions are designed to address these specific pain points. These tools are designed to provide a centralised and consolidated view of Treasury across the business and all Treasury and cash management operations including budget allocation and liquidity management.

By providing treasury managers with access to transactional and financial data, unified Treasury systems simplify financial tasks such as payments and fund allocation. They can track where money is going and coming from and analyse cash positions from one place. A unified view of the financial health of the company, covering different currencies and financial institutions, makes moving funds between subsidiaries, currencies, and accounts easier.

A treasury system grows with a business as it expands. Treasury Management System continues to provide visibility across the business as new accounts and subsidiaries are added. There are some providers, such as Fyorin, that make financial operations across the entire business easier. That encompasses not only diversification of liquidity risk but also, streamlining banking relationships and unification of compliance.

For better liquidity risk management, consider collaborating with technology partners that can tailor the solution to your specific business needs. The vast majority of Unified Treasury products on the market are aimed at large, enterprise-level businesses, which may not be suitable, if not overwhelming, for SMBs. In contrast, Fyorin specialises in providing Unified Treasury and Diversification solutions to small and medium-sized companies operating in international markets.

We understand the pain points of scaling operations cross-borders with often constrained working capital as well as the need for simplicity and operational efficiency. As you choose a Treasury Management Solution with an aim to diversify liquidity risk, you should also consider these features:
At Fyorin, we give you access to a robust network of global financial institutions from one platform, the ability to connect your pre-existing banks for 100% visibility of funds and one commercial and compliance process so you can multi-bank as easily as you would with one institution.Interested in diversifying your liquidity risk with Fyorin? Get in touch.