Treasury Priorities for Multinational Corporations - Middle East and Africa

Treasury Priorities for Multinational Corporations | 11 The survey interestingly reveals a higher priority placed on reducing Days Sales Outstanding (DSO) at 27.80% compared to increasing Days Payables Outstanding (DPO) at 18.97%. This strategic choice reflects a proactive approach to managing financial health and risk. • Proactive Stance on Cash Conversion: The focus on lowering DSO reflects a “proactive stance on cash conversion and a lower tolerance for credit risk”. In a volatile environment, converting sales into cashmore quickly is paramount for maintaining healthy liquidity. • Mitigating Counterparty Risk: The MEA region presents varying levels of counterparty risk. A shorter collection period (lower DSO) directly mitigates the risk of payment defaults. This is particularly evident in Sub-Saharan Africa, where perceived risk drives a higher use of secure payment methods like Letters of Credit. • Supporting Sales and Relationships: While extending payment terms to suppliers (increasing DPO) can be a source of short- term financing, the report’s emphasis is on optimizing customer relationships. MNC’s can effectively reduce DSO by leveraging various financial products. This approach allows for the maintenance of flexible payment terms for customers, thereby supporting sales and fostering strong client relationships • The low priority given to “implementing treasury technology” (13.15%) is surprising at first glance, but reflects a pragmatic response to the specific challenges in the MEA region. Treasurers are not avoiding technology, but rather prioritizing more immediate and foundational needs. Here is a concise explanation of why this might be the case: • Focus on Urgent Needs Over Long-Term Projects: The top priorities are gaining cash visibility (53%) and optimizing liquidity (50%). These are critical, “fire-fighting” activities. A full technology implementation is a long-term, strategic project that takes a backseat when immediate control and survival are the main concerns. • Prohibitive Cost and Lean Teams: As the report indicates, many companies surveyed are smaller enterprises with lean treasury teams. The high upfront cost, implementation fees, and significant manpower required for a new Treasury Management System (TMS) are major barriers for organizations with limited budgets and staff. • Regulatory Complexities: Regulatory complexity around documentation and capital controls can make deploying automation more challenging. Treasurers are prioritizing practical, immediate solutions for visibility and control before committing to expensive, high-risk technology overhauls.