Managing Risk and Supporting Growth in the E-commerce Era

Treasury and Trade Solutions 17 The world of business is changing rapidly as a result of technological innovation and changing consumer behaviour. While e-commerce is currently a relatively small proportion of overall sales for multinational firms, it is growing rapidly compared to sluggish growth in brick-and-mortar sales. Companies’ boards are unsurprisingly making digital commerce a key priority in order to avoid losing market share and secure the competitive advantages — and efficiency gains — that e-commerce can offer. The temptation for corporates is to give less focus to decisions about payment providers or the financial structures that underpin e-commerce flows in order to accelerate time to market. However, hasty actions can have lasting consequences. Without careful planning, customers’ shopping and payment experience may be suboptimal, and high operating costs arising from fragmented structures may erode margins, harming the long term prospects of e-commerce initiatives. Furthermore, insufficient consideration of FX risk or how cash generated from new markets can be managed has the potential to undermine the revenue benefits of e-commerce. Conclusion Treasury has the expertise, the experience and the relationships to avoid the many pitfalls that lie in wait for new players in e-commerce. It can play a beneficial role in: • evaluating payment providers for e-commerce flows • assessing the impact of payment strategies on working capital • assessing the implications of cross-border sales and the consequencies of managing a wider range of settlement currencies • addressing the downstream impact of e-commerce sales on cash management and Shared Service Centre structures In many companies, treasury already plays a strategic role in advising the business — this needs to be expanded to e-commerce. At corporates where treasury is yet to evolve to a strategic business partner, the growing importance of e-commerce should serve as both a wakeup call and a catalyst for change. High quality, risk-managed e-commerce growth requires the involvement of treasury. As companies pursue e-commerce growth strategies, treasury must become a trusted adviser and collaborator with the business to jointly drive growth. In turn, treasury must be able to rely on dependable partners for the support and insights it needs to help the business thrive in this new e-commerce era.