Secondary sanctions are increasingly relevant for corporate treasurers, not as a compliance matter, but as a financial and operational risk that sits at the heart of how cash moves, how forecasts are built and how organisations remain resilient.
Unlike primary sanctions, secondary sanctions are designed to influence the behaviour of companies that are not located in, or directly subject to, the sanctioning country. For Treasury, this means the risk is often indirect, transmitted through the supply chain and the network of counterparties, intermediaries, currencies and clearing systems involved in a transaction.
The central question is therefore not only "are we legally permitted to make this payment?" but also "will it be processed, and could it jeopardise our access to the banking system, US dollar clearing, trade finance facilities or capital markets?"
Cash visibility and forecasting accuracy
One of the most important insights from a treasury perspective is that secondary sanctions can make cash visible but immobile. A payment may be delayed or returned, a receivable may arrive late, or balances may become trapped within particular entities, jurisdictions or channels, while remaining perfectly visible on the balance sheet.
Treasuries will increasingly need to distinguish between available, restricted and potentially at-risk liquidity, and ensure that cash concentration structures, sweeping arrangements and liquidity buffers are resilient to these disruptions.
Secondary sanctions introduce a new source of forecasting error. When payments fail to settle on expected dates, or suppliers require alternative arrangements, forecast assumptions can quickly become unreliable. This is significant because forecasting accuracy is one of Treasury's most important capabilities, and sanctions-related disruption can undermine it in ways that are difficult to anticipate.
Preparedness and resilience
Treasury cannot control geopolitical events or sanctions developments, but it can determine how effectively the organisation responds when financial connectivity is disrupted. Just as treasuries stress test for FX volatility, cyber incidents or funding shocks, financial fragmentation and sanctions-related disruption should be part of that preparedness framework. Resilience needs to be built before disruption occurs.
In practical terms, this means having clear visibility that connects cash and payment data with the counterparties involved in a transaction, agreed escalation processes across Treasury, Legal, Compliance, Procurement and the bank, and credible contingency options to preserve liquidity if payments or receivables are delayed.
Treasury as a connecting function
The objective is not for Treasury to replicate Compliance. Rather, Treasury data and insights should be able to reveal the complete economic and payment chain. They should identify the financially material dependencies within a transaction and support the wider organisation in making well-governed decisions quickly when circumstances change.
In a fragmented financial system, cash mobility, forecasting accuracy, resilience and preparedness must become strategic capabilities within Treasury in their own right.
This article is based on our recent Trade Trends webinar with Richard Hayes, Chief Strategist in Transaction Banking. Questions on this topic can be directed to richard.hayes [at] nordea.com (Richard) or your Nordea Cash Management or Trade Solutions contact.
Watch the on-demand webinar.
