2024 corporate treasury trends

M&A, spin-offs, and divestitures bounce back

M&A activity has the potential to bounce back in 2024 as inflation moderates, companies adjust to the higher cost of capital, and the stock market regains its footing. This may include an uptick in cross-border M&A as companies seek broad market access and a wider talent pool. Spin-offs and divestitures will also likely continue as companies seek to strengthen their balance sheets and prioritize core business functions. Treasury teams considering their M&A strategies should prepare to address the transaction risks, integrate the organizations’ operational, technology, regulatory, and accounting processes, and optimize their post-transaction capital structures.

Savvy corporations prepare for commodity volatility

Many organizations are under-prepared for commodity price volatility. This is not a new phenomenon; corporations are typically reactive to commodity price whipsaws, only addressing them when prices rise. In fact, less than 30% of U.S. companies with commodity exposures are managing that risk. Yet, Chatham sees dramatic increases in inbound inquiries when prices rise for fuel, metals, and other commodities. Heading into 2024, proactive treasury teams who serve as navigators, rather than passengers, in managing commodity risk stand to enjoy significant competitive advantages.

Treasury weighs the role of AI

As AI mania explodes across the globe, practitioners are assessing the role of artificial intelligence in corporate treasury. In a role valued for stability and careful progress, we see incremental adoption of AI in the treasury function. Three areas we’ve identified include:

• AI-powered data cleansing, where businesses train models to discern accurate data and flag any inaccuracies or inconsistencies.
• AI-enabled scenario analytics, where AI models examine potential outcomes, including their repercussions, and make tailored recommendations for navigating each scenario.
• Seamlessly accessible data and analytics, with technology platforms prompting interactive inquiries that return instant responses.

While adopting these gradual transformations, treasurers will continue to evaluate advances in treasury technology propelled by AI, robotic process automation (RPA), and machine learning.

Capital markets challenges breed innovation

To navigate the capital markets challenges posed by a sustained high-rate environment in 2024, treasury teams will increasingly employ data-driven scenario planning and adopt innovative refinancing and financial risk management approaches. Planning and forecasting should encompass different scenarios, such as the Fed and other central banks successfully engineering a soft landing without negatively impacting labor markets, markets experiencing sustained high inflation and elevated interest rates, or central banks overcompensating and inadvertently triggering a recession. Financial risk management scenario outcomes will influence the composition of the fixed-float mix, currency mix, and hedge ratios. To address the impact of the high-rate environment on corporate financing, corporates will increasingly consider alternative financing, such as private debt and mezzanine finance.

Global paradigm shifts require advanced scenario planning

Advanced scenario planning will also support decision-making as treasury teams navigate the global paradigm shifts expected in 2024. Corporations will weigh the impacts on capital flows stemming from the real estate bubble and recession risks in China, which could result in China exporting deflation, rather than inflation. They will also focus on managing risks from geopolitical instability in Ukraine and the Middle East, the consequences of expected rising interest rates in Japan for the first time in four decades, and potential impacts to FX programs stemming from trends brought on by these shifts, such as near-shoring and friend-shoring. Rather than expecting the status quo, corporate treasury teams should review their capital markets strategies to ensure they continue to meet objectives in this changing environment.

In the face of uncertainty, global corporations must prepare for a financial marketplace that demands proactive scenario planning and adaptability. The good news is that today’s treasury practitioners and platforms are more than up to the challenge. We’ve partnered with treasury and accounting teams as they’ve tackled many of these issues and look forward to empowering our clients to make the best capital market decisions in 2024 and beyond.