Challenges for Treasurers in 2025

Challenges for treasurers include those that are thrown our way to catch and grapple with, and those that are opportunities we positively seek out. Forward-looking treasurers monitor evolving global, regional, sectoral and local issues. Leading treasurers then evaluate interrelated issues in the context of their own organisations - over appropriate time frames - and act decisively to maintain and improve liquidity and flexibility

We'll address selected suggested items for treasurers’ 2025 watch lists, identified in December 2024 by the ACT’s Policy and Technical (P&T) team, review appropriate planning time frames and how to determine them, and follow one seasoned treasurer’s evolving challenges in their recent transition from FTSE 100 group treasurer to start-up founder.

Why fund early?

The Policy & Technical team reported that many treasurers they talked with during 2024 were focused on risk management, specifically liquidity with those who needed to fund doing so early to minimise the risk of market shocks. Why is it good treasury practice to fund early? As treasurers, we need to avoid approaching the market when in need of funds. To do so would weaken our negotiating position over pricing and other terms.  

What is a “shock”?

A future market shock, in this context, would normally be a sharp upward move in interest rates, potentially a reduction in the availability of funding, or both.  

Why fund long?

Funding early substantially protects our organisation over the maturity of our funding. For this reason, a second element of funding good practice is to fund long, extending the period of protection and future flexibility.

Funding early and long is almost always a good practice. The greater the uncertainty about future market conditions, the more protection an early and long funding policy will give our organisation.

ESG labelled borrowings & communicating with investors

The P&T team also note that additional reporting regulations for ESG, sustainable finance and transition finance borrowings will come into effect in 2025.  

Some corporates fund using “labelled” borrowings, expressly linked with ESG. For others, their sustainability strategies are already fully embedded in their general (“non-labelled”) borrowings and credit ratings.  

In either case, all treasurers need excellent and improving skills and relationships to communicate ESG and corporate strategies to lenders. Appropriate training to support your important work in this area includes the ACT’s specialist ESG and sustainability courses (follow the link under other resources below).

Should I be worrying about tax changes?

Tax and accounting rules evolve continuously. Why does this matter for treasurers?  

Starting with tax, organisations must calculate and pay their own tax liabilities, supported with computations and other disclosures, and also stand ready to respond to any questions or investigations by the tax authorities.  

Changes mean more work, potentially more tax payable, though sometimes opportunities for savings, and possible structural changes in response. Increased tax payments can put us in breach of financial covenants in our borrowings documentation, agreed under an earlier tax regime.

The Global Minimum Tax Rate tax anti-avoidance rules are likely to affect many treasuries in 2025.

Should I worry about accounting, when it isn’t a cash flow?

That’s an excellent question. The answer is yes.

It’s true that accounting rules don’t directly affect an organisation’s cash flows. However, accounting rules are still important for several reasons.

(1)     First, accounting affects profits, profits can affect tax charges, and tax charges affect cash flows. So accounting can affect our cash flows indirectly.

(2)     Second, accounting rules include disclosure requirements, potentially adding reporting burdens on treasury staff.

(3)     Third, balance sheets are affected by accounting rules, as well as income statements. Changes in either or both of these can lead to breaching financial covenants, as discussed for tax changes above.

(4)     Finally, markets are very focused on our reported profits, so market perceptions must be understood and managed as well as we can.

What accounting changes are in the pipeline?

A key change in the pipeline affecting many organisations is the further application of International Financial Reporting Standard 9 (IFRS 9) Financial Instruments.  

Another is International Accounting Standard 21 (IAS 21) The Effects of Changes in Foreign Exchange Rates, in its application to currencies that are not exchangeable into another currency.

What’s horizon scanning & why should I be doing it?

It’s very natural and part of good practice to plan for, and risk manage over, periods ending at our external financial reporting dates. However, as part of our total activities, we need to look much further ahead as well.  

Our organisation’s most important issues may only manifest after our next year-end, the one after, or later still. As time passes, uncertainty and the significance of time-lagged interrelationships both increase.

Horizon scanning is part of our overall risk and opportunity management processes that explicitly increases our time horizons for identifying and evaluating issues.  

By looking further ahead and considering interrelationships, we have a better chance of responding in good time.  

How far ahead should I be looking?

That depends on three main factors:

(1)     how fast is the future event likely to evolve?

(2)     how soon will we have reliable actionable information about the evolution of the event (sometimes known as “risk clockspeed”)

(3)     the potential adverse or favourable impact.

Surely it’s impossible to prepare for the unexpected?

The longer the time horizon, the more we need to expect the unexpected. But how can I prepare for the unexpected?  By ensuring:

 (1) organisational liquidity and flexibility

 (2) continuous personal development, being one of the challenges we need to set ourselves and positively seek out.

Treasurers in start-ups

“In the startup space, the ability to raise finance in 2025 is likely to be unpredictable. 2024 saw significant funding available for AI startups but as it is becoming clear that there will be winners and losers, expect funds to be more discerning. 

It’s therefore important that founders raise funding when they can without holding out too long to avoid dilution, especially as the interest rate environment is less welcoming than a few months ago.” James Kelly FCT, Co-founder of Your Treasury, AI in treasury coaching business.

Together with the final quote below, it illustrates the importance of identifying the maturity of our organisation and focussing accordingly.

Treasurers in large corporates

Until December 2024, James Kelly was also group treasurer of FTSE 100 media group Pearson. From this perspective, he advises:

“Treasurers in 2025 face continued potential for volatility driven by geopolitics and trade wars, which may make currency repatriation more challenging. Being able to create natural hedges and proactively exploit opportunities of calm to take action will benefit treasurers or risk stranded cash, which could devalue.”

Self-identified challenges

All treasurers’ organisations, and all treasury careers, benefit when we take the initiative to identify opportunities and challenges for our personal development.