On-Demand Liquidity for Corporate Enterprises: Treasury Management

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No one understands the implications of globalization better than corporate treasury management teams that manage internal capital flows across borders. 

Corporate treasury operations help ensure funds flow smoothly and on time throughout an organization, in sync with business needs and economic environments. Like a fleet manager at an airline responsible for aircraft optimization and up-time, it guarantees money is in the right place at the right time to fund obligations and maximize opportunities. 

Cross-Border Treasury Management Challenges

For multinationals that operate across borders, treasury management takes on exponential importance and complexity. 

Consider the challenges faced by a hypothetical mid-sized pharmaceutical company with research and development labs in the United States, production facilities in Mexico, and sales, marketing and distribution operations across multiple continents. Or an Italian luxury goods retailer that sells its products throughout Europe, the U.S. and Japan. The responsibility of running an efficient global business is treasury management. 

Small- to medium-sized enterprises (SMEs) must pay employees overseas, collect revenue from international markets and pay vendors that want to be billed locally rather than by a foreign corporation—all in different currencies, time zones and individual banking structures. These tasks necessitate an incredibly complex web of money movement that must be timed to minimize taxes and fees, avoid shortfalls and optimize revenue. 

Treasury forecasting challenges for multinationals are heightened by the slow and expensive legacy payment rails companies have traditionally used to manage and move their capital across borders. Oftentimes it takes 3-5 business days for funds to fully settle which requires moving money well before payment is actually needed. Legacy systems also require companies to pre-fund accounts in local currencies on each side of a transaction. This forces treasury departments to tie up increasingly scarce working capital, straining forecasting efforts and preventing alternative uses for these funds. 

In addition, it’s become increasingly challenging for companies to send funds to and from certain countries and regions like Brazil, Mexico, India and Southeast Asia. Even major banks are finding it difficult to maintain funding in certain payment corridors. Without readily available, highly liquid connections to these areas, treasury departments can be caught flatfooted when paying employees and vendors or collecting revenue from these markets. 

Speed, Savings and Liquidity with ODL 

Ripple’s On-Demand Liquidity (ODL) payments solution eliminates these challenges, enabling just-in-time treasury operations. With real-time global settlement, ODL closes transactions in fractions of a second, while dramatically reducing both costs and the need to pre-fund foreign destination accounts. Increased transparency is also a key benefit for corporations and their customers, both for pricing and payment tracking. This enables better upfront visibility and tracing of all costs involved.

ODL also offers superior liquidity for cross-border payments—including complex corridors—by virtue of its strong global payments network and ability to use XRP as a neutral bridge for various fiat currency pairs. Ultimately, corporate treasury teams can leverage crypto solutions for business like ODL to improve cash flow planning, enhance commercial terms and help suppliers factor their receivables.  

Boost Treasury Operations with Line of Credit 

Beyond these core transaction advantages, companies using ODL also benefit from access to Ripple’s Line of Credit (LOC) to cover their own capital needs, extend lines of credit to partners and offer flexible repayment terms. 

Liquidity is business-critical as many SMEs face capital constraints due to the time gap between when they must pay suppliers or employees and when they collect revenue. Sourcing credit through a traditional bank is a slow, expensive process that can take months, requires onerous covenants or guarantees, and often necessitates using high-priced bank services for cross-border payments. Further, many SMEs are unable to acquire credit through legacy systems because they are at the discretion of risk-averse traditional banks.

Ripple’s Line of Credit feature offers relief with quick approvals, an affordable source of capital and no hidden fees. 

Critically for multinationals, Line of Credit works across various markets through one single arrangement. That means no added negotiations or credit management obligations in each individual country. This is especially impactful for SMEs that are looking to expand into new markets and grow their business but have been unable to do so through traditional credit sources.

The Future of Treasury Management 

For companies seeking simpler, more optimized treasury operations, ODL offers superior liquidity, faster and more affordable settlement with reduced pre-funding and access to value-added services like Line of Credit. The resulting speed, savings and flexibility prime treasury teams to maximize the power of their capital while still meeting all their core business requirements—all while making it easier for the business to expand into new markets.

To learn more about how to enhance treasury operations using ODL, contact our team today.

*The availability of Ripple’s products and services and their respective features varies by jurisdiction.*

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