The tariff wake-up call: Why strong cash flow forecasting matters more than ever

Tariffs are back in the global trade spotlight, and they’ve exposed longstanding vulnerabilities in cash forecasting and liquidity management frameworks. 

Amid escalating tariff announcements, many corporates were hit by rising costs, supply chain disruptions, and an urgent need to move cash – often across borders and currencies – at short notice. Even for organisations not directly impacted by the tariffs, the ripple effects led to shortfalls at the cash pool, currency, and even firm-wide levels. 

While heightened market activity boosted revenue and trading volumes for some in financial services, it also brought acute liquidity management challenges. The rapid shifts across asset classes, client segments, and counterparties – particularly due to margin requirements (initial and variation margin) – resulted in daily liquidity swings that were often difficult to trace or explain. 

Several major banks, despite not knowing the full impact of the tariffs on their liquidity positions, needed to trigger contingency funding measures. They also faced urgent questions: where had the cash gone, and why? For some, it would take days or even weeks to surface the answers.  

This lag in visibility didn’t just raise concerns from regulators. It also alarmed internal stakeholders, including executive committees, boards, and risk management teams. The inability to provide a clear, immediate view of cash flows during periods of stress is unacceptable in a modern financial environment. 

Most firms lack the means to delve deeper into cash movements 

Historically, banks have looked at liquidity from a wide angle, focusing on the overall amount of cash that business lines expect to be moving in and out during a given day. Many don’t drill down any deeper to understand what’s driving cash flows.  

As recent events have made all too clear, organisations lacking this visibility are exposing themselves to real risks. During the height of tariff volatility, many banks lacked the agility to manage their own liquidity – let alone that of their clients – leading to mismatches, shortfalls, and friction in releasing or reallocating cash. The ability to track and move cash globally with speed and precision is becoming an increased priority with each passing day – not just for banks but corporates as well.  

The challenge lies in the lack of real-time, granular data – specifically, understanding where, when, and how much cash is expected to move and being able to quickly confirm whether those movements have occurred. Addressing this requires targeted investment in core data infrastructure and operational capabilities.  

Four steps to stronger cash traceability 

Cash needs to be traced across multiple dimensions to understand the impacts on intraday liquidity. This means taking four interlinked actions:  

1. Identify the "why" behind cash movements. It’s vital to move beyond simply knowing the total cash amount to understanding what, where, and why cash is moving. A good starting point is looking at the most material drivers of cash flow volatility. Identify where the big changes in cash positions are occurring and go after them first. 
2. Get to the source. The information needed to identify cash flow drivers will exist somewhere within an organisation's systems. The challenge is getting to that information. Finance needs a quick, reliable way to track down the data it needs and surface it from its system of origin.  
3. Bridge the gap between finance and business. Business lines possess crucial information about the drivers that directly influence cash flow, such as client behaviour, trade impacts, and product cycles. Finance needs to partner more closely and communicate more frequently with their counterparts in the business to gain that knowledge.  
4. Add context. Once data is sourced, firms can go a step further and enrich it with relevant context, allowing them to better understand the drivers of cashflows and even predict future stress events. By analysing relevant market trends alongside cash positions, for example, organisations can understand the relationship between cash movements and external factors such as equity prices, FX movements, etc. 

Building better cash capabilities for our clients 

We’ve partnered with major banks and corporates to apply these principles to shape stronger cash and liquidity foundations. We blend advanced data management and architectural capabilities with extensive product, delivery, and business expertise to deliver cash flow transparency and forecasting sophistication. We also work with clients to embed the necessary operating model and organisational changes to sustain these capabilities far into the future. 

Businesses that put in the effort to shape firmer cash flow foundations benefit on multiple fronts: 

1. Improved compliance. Robust, real-time cash capabilities are critical for identifying and managing stress scenarios. It means organisations can more quickly and easily explain any variances in intraday cash positions, putting themselves in a more defensible position with regulators. 
2. Reduced risk. Improved understanding of the relationship between cash movements and external factors acts as a "canary in the coal mine," providing early warning of potential volatility. Instead of being caught on the back foot – as many have been by recent events – firms can spot warning signs earlier and take decisive action to minimise the impact on their liquidity and operations. 
3. Commercial efficiency. With better transparency on risks and costs of cash, organisations can drive sharper commercial decisions. They can also potentially reduce cash reserves and buffers without driving up risk, putting themselves in a stronger financial position. 

Market disruption isn’t going away – and firms need real-time visibility to navigate volatile conditions with confidence. If you’d like to strengthen your cash forecasting and liquidity management capabilities, get in touch to learn how Baringa can help.