TMI | THE SOUTHAFRICANTREASURER 17 NEXT GENERATIONTREASURY a world power and other regional powers flex their muscles. At the same time, the previous paradigmof globalisation is coming under threat, as nations look to protect their own interests, driven in turn by the populist agendas of their leaders. Meanwhile central banks across the developed and emerging world are acting to bring inflation under control, but the big unknown is the extent to which they are prepared to act and what this means for longer-term inflation. Overlay this with the ongoing threat posed by climate change and the efforts by governments and businesses to address this threat. Climate change is already leading to extreme weather events that in turn threaten regional and global stability. This increasingly complex world will have many knock-on effects, some of which we are already seeing played out in our daily lives. Supply chain disruptions and rising inflation are just two of the effects that spring tomind. Whereas in the past a corporate treasurer could focus on a few macroeconomic and cyclical variables inmanaging currency, interest rate or commodity price risk, a more nuanced and agile approach will be required in the years ahead. It’s not enough to simply secure a rate or price, corporate treasurers now have to think more holistically, understanding the different moving parts that contribute to the risks that make up their universe. What then will the corporate treasurers of the future need in their toolbox to stay on top of this ever-changing world? To answer this question, let’s have a closer look at where these complexities are likely to manifest themselves in the coming years: Volatility. As alluded to above, from equity markets to bonds and foreign exchange, we’ve seen volatility on the rise in the first half of this year. Given the uncertainties around inflation, supply shortages and tensions between leading global economies, it’s a reasonable assumption tomake that bursts of volatility will become the norm. Figure 1 shows an average band of volatility of the Cboe Volatility Index (VIX) pre-Covid-19 and a higher band postCovid, which reflects the increased levels of uncertainty and the general change in Climate change is already leading to extremeweather events that in turn threaten regional and global stability. Fig 1 Pre- and post- Covid volatility of the CboeVolatility Index Source: Bloomberg, ICIB, July 2022
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