Multinational companies are facing challenging times. “The top topics on the agenda for multinational clients include tariffs, alternate supply chain management, export markets or partnerships, and notably, capital injections and capex activities being paused,” reflects Abed Islam, head of MNC coverage APAC at BNP Paribas.

While these clients have had some preparation from Trump 1.0, the current phase of Trump 2.0 “Liberation Day” tariff has been more complex and had triggered global trade shock. Gauging the level of worry among his clients regarding Trump 2.0 on a scale of 1 to 10, Islam placed it at seven-and-a-half to eight. “The key question emerging from corporates is, how do we de-risk?”

Islam adds that in the current environment, corporates are prioritizing efficiency and cost optimization. From a banking perspective, corporates are reassessing their banking relationships and increasingly looking to partner with large global European banks. Banks with strong balance sheet, wide network and robust supply chain finance capabilities are well positioned to support corporates’ liquidity needs.

Kim Mui Tan, senior treasury and financing manager, Asia-Pacific and Middle East, at Danone, a multinational company in the food and beverage sector, observes that the headquarters is holding more and frequent meetings to assess the global impact of the elevated tariffs. But she also points out that Danone’s regional strategy hasn’t changed significantly.

Tan shares that Danone is comparatively insulated in the current environment. “Drinking water, milk powder, etc., all these products people will still have to consume on a daily basis.” Danone’s financial performance underscored this resilience, with free cash flow up 14% in the difficult year.

Another key factor in their products’ resilience, particularly in Asia, is that they are locally produced and therefore are not much impacted by the tariff row. However, she acknowledges that the trickle-down effect could lead to competition from local brands as consumers might pivot to a local brand instead.

Companies are rethinking their organizational exposure beyond financial volatility

Tan says Danone’s treasury team in Singapore is lean but larger in Kuala Lumpur, which acts as a shared service centre. To drive greater efficiency, the Kuala Lumpur team is leading the harmonization of the processes across the countries where it has a presence. An example of harmonization is centralizing foreign exchange deals in Kuala Lumpur, rather than at the local level where they were previously executed.

The treasury team is also enhancing the level of usage of their treasury management system across the different markets through knowledge transfer and training. Tan shares a specific experience with BNP Paribas regarding a digitization project in Indonesia: the Espay solution for collections and auto-reconciliation.

She explains that this solution, utilizing the fintech partner introduced by BNP Paribas, allows buyers the convenience while BNP acts as the ultimate collector, supporting Danone’s account receivables and invoicing. While acknowledging implementation challenges, she states that BNP Paribas helped to roll out the project.

Islam points out: “Corporates are paying greater attention to driving efficiency and minimizing costs in this environment. Banks with balance sheet advantage and supply chain finance capabilities will be able to help corporates with their liquidity needs.”

Thomas Wang, treasury manager at Mercedes-Benz, offers a contrasting perspective from the high-end luxury automotive industry. Unlike Danone, Mercedes-Benz faced significant market challenges, with margins down from double to single digits.

Wang also underscores the critical importance of the China market for Mercedes-Benz, noting that three out of four Mercedes-Benz vehicles sold in Asia are sold in China and that a day sale in China will be equivalent to a year sale in Singapore.

Apart from the challenges the company is facing from the evolving EV sector, Wang also shares a strategic shift in their sales model from B2B to B2C. This shift, partly driven by a desire to boost margins and better control the price across different dealers, has introduced complexity for treasury.

With the B2C model, collections are directly from consumers, leading to increased volatility and lower accuracy/stability in forecasting, and making managing working capital more important than ever. Furthermore, the burden of holding inventory has moved from the dealers to the sales company, significantly increasing working capital requirements, especially in the current high-interest-rate environment.

To address these challenges, Mercedes-Benz is focused on driving down the transaction cost as well as the process cost. Wang highlights that the work with BNP Paribas on a supply chain financing solution where through BNP Paribas’ Connexis platform, Mercedes-Benz is able to fund payments and, if there’s an FX requirement, the platform can also take care of that. This integrated solution allows the company to face only one bank for multiple functions at a competitive cost and greatly reduces the processing cost.

A partner from a Big 4 consultancy firm shared at the event that liquidity was always a top priority for treasurers. In the current context, there is “really a deep pressure on liquidity” focusing on accumulating cash and stress testing the model.

Establishing a “resilient cash forecasting model” is also crucial. The partner notes that while lessons were learned during Covid regarding liquidity and checking counter-party risk, the current environment forces a deeper look into how corporates are exposed to different counterparties and potentially seeking “more diversification of those counterparty risks”.

The partner outlines two main strategic approaches in these challenging times: playing safe, which involves waiting and seeing, leveraging cash, and ensuring sufficient liquidity, or playing smart, which means using the moment to “critically think about the business model when it comes to the supply chains, looking at the model when it comes to the treasury organization, but also being closer to the business to see if treasury can find solutions that can be more innovating”.

He also elaborates on dealing with uncertainty, distinguishing it from volatility like FX rates that treasurers are typically familiar with. He describes Covid as a live application of a business continuity procedure, which revealed limitations, particularly “frictions when it comes to the overall ecosystem”, meaning “dealing with partners that were external to the organization”.

This experience, combined with geopolitical shifts, has prompted companies to rethink their organizational exposure beyond just financial volatility. The partner gives examples of the unthinkable scenarios companies are considering: “What if tomorrow, similar to Russia, we don’t have access to the Swift network? What if we cannot use US dollar anymore? What if our main bank is a US bank and is going to become more complex to deal with? What if we need to have two treasury centres in Asia instead of one?” Ultimately, this involves “really looking into the organization and saying what the company is exposed to beyond just the volatility and rethinking the model”.

The insights from Danone and Mercedes-Benz illustrate how different business models are impacted and the varied treasury responses needed, from harmonization and leveraging shared services to fundamental shifts in working capital management and seeking integrated financial solutions. Deloitte’s perspective highlights the strategic imperative to stress-test models against unthinkable scenarios and rethink organizational structures.

BNP Paribas’ Islam concludes that in this environment, “banks need to step in and step up”. He points out that BNP Paribas doesn’t shy away from extending its balance sheet to key clients. “We are there to listen and work through these challenging times.”