Corporate treasurers expect stability but brace for uncertainty

Russia’s invasion of Ukraine in 2022 was a geopolitical shock that brought an inflation spike. We’re now almost three years into a brave new world of higher interest rates and greater uncertainty. Will we go back to the economic growth, low inflation and low interest rates of the “good old days,” or is this world with volatility and supply chain disruption the new normal?

We asked treasurers and CFOs from over 150 Nordic large corporates to share their outlook for the coming five years in our 2024 Treasury Survey. The results show that, while treasurers expect a relatively benign economic environment, they have also learned a lesson from recent years’ turbulence. 

“They seem to expect smoother sailing, but they’re also shoring up for worse,” says Johan Trocmé, head of Nordea Thematics and co-author of the study. 

Moderate growth, lower interest rates and high FX volatility

When it comes to the global economy, the majority of respondents expect low-to-moderate GDP growth in the period 2025-30. They also expect policy interest rates to go down.

“Despite deglobalisation and free trade becoming more constrained, which could add to inflation pressure, large corporate treasurers generally expect interest rates to be materially lower in 2030 compared to today,” Trocmé says.

Nordic corporates don’t expect investors’ risk appetite to change much over the next five years, with credit spreads generally expected to remain near their current levels. 

They do show a strong consensus in expecting FX volatility in the coming years, with over 50% foreseeing moderate FX volatility and close to 45% expecting high FX volatility in 2025-2030.

How do you see general FX volatility in 2025-2030?

Risk management mode

Close to 40% of Nordic large corporates expect to have higher liquidity levels in 2030 compared to today. In addition, while companies expect interest rates to fall, around 20% say they intend to increase their hedge ratio in the coming year. 

Corporates’ average debt maturity has remained fairly stable, compared to past years’ surveys, with the majority having a 2-3 year maturity for their debt. Over 40% of respondents said they intend to increase their average debt maturity in the coming years.

Around one-third of companies report that they are considering reducing or have already reduced their leverage target. 

“While companies expect a stable economic environment and lower interest rates, they also say they want to reduce their leverage, raise their liquidity, lengthen their debt maturity and hedge more,” says study co-author Viktor Sonebäck. “It suggests companies have learned their lesson from the past couple of years and are willing to spend a bit of capital to reduce their financial risk.”

Sustainable financing on the rise

This year, we also asked Nordic corporates about the role sustainable financing plays and how that’s expected to change in the coming years. The results show that the focus on sustainability continues to climb – both at the corporate and treasury levels. 

“When we hear about a sustainability hangover or ESG backlash, we’re not seeing it in the companies’ reported focus,” says Trocmé.

Almost 60% report using some kind of sustainable financing, and 37% currently have a sustainability-linked loan – “a surprisingly high penetration level,” according to Trocmé. In addition, 66% of companies say they are considering or planning to obtain funding by sustainable finance products in the next 1-3 years, with the majority in the sustainability-linked loan category.

Asked about their reasons for obtaining sustainable financing, companies report brand, reputation and access to funding as main drivers. Potential reduction in funding costs comes lower down on the list. 

If you ARE using any sustainable finance products, how would you rate the following drivers on a scale from weak to very strong?

“It’s clear that it’s the big picture, high level arguments driving companies towards sustainable financing: brand, reputation, perception of the company’s sustainability journey and being able to tap as many capital sources as possible. That’s striking,” says Trocmé.

See more of the sustainability-related findings from the survey.

Geopolitical risk a top concern

When it comes to the current risk management concerns, geopolitical risk is the highest priority, followed by interest rate risk, funding and FX risk. 

What are your current key risk management concerns?

Each year, we also ask treasurers which areas they spend the most time on compared to how they would like to be spending their time. The usual contenders top the list of current focus areas: cash management, liquidity and funding. Respondents say they would like to spend more time on advising the business and management as well as automation and efficiency improvement. 

Difference in time spent vs time want to spend

Regarding treasury administration, a notable 23% of treasuries report plans to upgrade their treasury management systems (TMS) in the coming year, showing that the TMS replacement wave continues. Over 40% also say they expect their treasury’s headcount to be higher by 2030. 

When asked whether they have implemented or plan to implement any artificial intelligence (AI) tools for treasury, close to 60% said no. For those planning to use AI, it’s in the cash flow forecasting, financial reporting and FX risk management areas. 

Have you implemented, or are you planning on implementing any AI tools for treasury?

“These findings show it’s still early days for finding use cases for AI in treasury. That’s not that surprising as it’s a highly specialized and bespoke function,” says Trocmé.