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Pandemic Risks to Shape Treasury Strategy in the Short and Medium-term, a New EIU Survey Reveals

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Shape Treasury Strategy to be Affected by Pandemic Risk in Medium Term

  • Top drivers of strategic change in 2020 are changes to internal company strategy (27%) and new regulatory requirements (26%)
  • The replacement of LIBOR[1] is the most challenging regulatory initiative for treasurers
  • There is a growing reliance on technology to address treasury challenges, with 74% of treasurers having identified the use of new technologies in order to improve KYC processes 78% of respondents are very or somewhat concerned about the quality of the data they are working with

A new report was written by The Economist Intelligence Unit (EIU) “The resilient treasury: Optimising strategy in the face of COVID-19” explores the forces that will shape and define the corporate treasury function and the priorities of the future.

It identifies the macro and financial risks that impact strategy as drivers of strategic change, the regulatory initiatives that are currently top of mind and the technologies and the skills that the function requires. The research, supported by Deutsche Bank, is based on a global survey of 300 corporate treasury executives (conducted between April and May 2020).

The pandemic risk will have the most impact on corporate treasury in the short term (43%) and medium-term (27%). Other risks, notably concerns over global economic growth (31%) and geopolitical risks (25%) are also high on the list over the medium-term. In response, treasurers plan to increase investments in long-term instruments (55%), bank deposits (48%) and local investment products (48%) over the next 12-24 months.

But the pandemic has eclipsed other risks that were previously high on the corporate agenda: environmental, weather and climate risks were only treasurers’ sixth most pressing risk for 2020.

Regulatory challenges remain very much top of mind. Respondents indicate that the replacement of the LIBOR, and other Interbank Offered Rates (IBORs), is the most challenging regulatory initiative for treasury (38%), followed by GDPR (32%), the OECD’s initiative against BEPs[2] ( 31%) and MiFID II[3] (30%). The regulatory burden will continue to affect different parts of the treasury function and could lead to structural adjustments. The functions most affected by regulatory actions and initiatives in 2020 are funding strategies (25%), overall operating model (25%) and cash/liquidity investment policies (24%).

Treasurers have become increasingly reliant upon new technologies and data for their day-to-day activities. However, close to 80% of respondents are either very or somewhat concerned about the quality of data available within the business (a noticeable increase from last year’s survey, at 69%).

Having the correct skills within the treasury function to take advantage of new technologies is critical, and their efforts to upgrade their tech and data skills are starting to bear fruit: almost 30% of respondents say they have all the skills necessary to meet new challenges posed by technological change (compared to 22% in 2018).

Looking ahead, the utmost priorities on the treasury agenda in 2020 are managing relationships with banks and suppliers (32%) and collaborating with other functions in the business (32%). Looking ahead, the data-driven approach of treasury will allow the function to become an even more supportive and proactive partner to the rest of the business.

Melanie Noronha, the editor of the report, said: “The covid-19 pandemic has drastically altered business plans in 2020. It has placed a certain level of strain on treasury processes, but the challenge it presents has been managed by traditional treasury skills. It is clear that pandemic risk will be on the treasury checklist for years to come, but it is one of many risks the department faces and will continue to manage.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil Rises Despite Demand Concerns as Hurricane Sally Disrupts Further Production

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Oil Prices Surge as Hurricane Sally Disrupts Oil Production

Oil prices rose on Wednesday despite weak demand after strong hurricane sally threatens to disrupted operations of US oil producers amid a big drop in oil inventories.

Brent crude oil, against which Nigerian crude oil is measured, rose from $39.34 barrel on Tuesday to $41.58 per barrel on Wednesday.

Accordingly, the US West Texas Intermediate crude oil gained 1.8 percent to $38.96 per barrel.

American Petroleum Institute (API), a weekly oil projection report, on Tuesday reported that US crude oil inventories declined by 9.5 million barrels in the week ended September 11, 2020. This, experts at ING Research said if close to the real number due later today, could provide support for global oil prices.

The experts said, “If we see a number similar to the drawdown the API reported overnight, it would likely provide some immediate support to the market.”

This coupled with the fact that with reports that 25 percent of US offshore oil and gas output was halted and export ports were shut as the storm crawled offshore along the US Gulf Coast bolstered oil prices on Wednesday.

Oil prices gained despite OPEC lowering demand for the year, saying weak global recovery amid rising cases of COVID-19 will impact demand for the commodity through the first half of 2021.

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Brent Crude Oil Dips to $39 as OPEC Lowers Oil Demand for the Year

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Brent Oil Declines to $39 Amid Rising COVID-19 Cases

Brent crude oil declined further on Monday after the Organisation of the Petroleum Exporting Countries (OPEC) revised down global oil demand for the year.

The Organisation of the Petroleum Exporting Countries said growing economic uncertainties amid slow global recovery will continue to hurt demand for crude oil in 2020.

This, it attributed to the weaker than expected recovery in India and other Asian nations.

The Brent crude oil, against which oil Nigeria oil is priced, declined from $42.18 per barrel it traded Tuesday, September 8, 2020 to $39.26 per barrel on Monday during the New York trading session.

The commodity is now trading at its lowest since June 18, 2020.

On Monday, OPEC said global oil demand will average 90.2 million barrels per day in 2020, representing 400,000 bpd below the 9.5 million barrel per day projected a month ago.

In a report made available to the media, the cartel said the negative impact of COVID-19 on the global economy would persist through the first half of 2021.

The report said, “Additionally, risks remain elevated and skewed to the downside, particularly in relation to the development of Covid-19 infection cases and potential vaccines.”

“Furthermore, the speed of recovery in economic activities and oil demand growth potential in Other Asian countries, including India, remain uncertain,” it added.

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Chancellor Merkel’s Africa Envoy, H.E. Günter Nooke, Leads Discussion on German investments in Africa

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The discussion will be centred on the topic: Investment and Trade for Africa’s Economic Development

The webinar will be moderated by Sebastian Wagner, Executive Chair of the Germany Africa Business Forum and Gugu Mfuphi, Presenter of Kaya FM’s prime time business show, Kaya Bizz; the discussion will be centred on the topic: Investment and Trade for Africa’s Economic Development; panelists include NJ Ayuk, Chairman of the African Energy Chamber (EnergyChamber.org) and Rene Awambeng of the African Export-Import Bank; the webinar will be held on 23 September at 3PM CET. To attend, please register here.

With German visibility and participation on the rise in Africa’s energy industry, the Germany-Africa Business Forum (GABF) will host its second instalment of its Germany-Africa cooperation focused webinar series.

The webinar will facilitate the discussion on how FDI can sustainably strengthen the development of the African continent on September 23rd at 15:00 CET. Anchored by the topic Investment and Trade for Africa’s Economic Development, the webinar will highlight key efforts to mobilise German funding for African energy markets as a means to advance the German-African cooperation which can already be seen in Equatorial Guinea, Angola, South Africa, Nigeria, Egypt, Congo DRC, Senegal and recently, through the expression of interest by German investors in the DRC’s Inga III Dam.

The webinar, moderated by Sebastian Wagner, Executive Chair of the GABF and Gugu Mfuphi, Presenter of Kaya FM’s prime time business show, Kaya Bizz, will be opened by H.E. Günter Nooke, personal Africa representative of the German Chancellor Angela Merkel.

“We are honoured to announce that H.E. Günter Nooke will spearhead our webinar. With his vast and unmatched knowledge in both the German and African markets, he will be able to bring many interesting aspects of the discussion,” said Sebastian Wagner.

Joining the panel discussion will be NJ Ayuk, Chairman of the African Energy Chamber and Rene Awambeng, Vice President at the African Export-Import Bank. “With their expertise in the African finance and energy sector, we look forward to a high-ranking and diverse panel. Especially the energy sector is an important cornerstone of any African economy, and we are looking forward to the outcome of the discussion,” said Mr. Wagner.

German interest in Africa as an investment destination has continued to grow and we hope to see a more diversified investment beyond energy and sales of German products to Africa. Africa is and will continue to be an investment market with the potential for significant growth post-Covid and superior returns.

While South Africa and Egypt have seen a huge part of German investment, Ghana, Nigeria, Tanzania, Congo DRC and Zambia are considered hotspots for potential investors from Germany. Projects in the financial services, climate change, energy poverty, health care, energy transition, manufacturing, retail and consumer goods have seen a huge increase.

This event is in collaboration with the Africa Energy Chamber and Africa Oil and Power.

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