Corporate Treasury Management in the Interest Rate Environment

The recent interest rate decision by the European Central Bank (ECB) on 6 March 2025—lowering rates by another 25 basis points—has notably impacted short-term money market rates. Concurrently, geopolitical developments, such as import tariffs imposed by US President Donald Trump, have introduced additional uncertainty into the markets. This increases the likelihood of further rate cuts by central banks in the coming months.

These developments affect not only the capital markets but also directly influence the economic situation of many internationally active companies—particularly their financial and liquidity management. In this context, Corporate Treasury Management is gaining importance, significantly contributing to companies’ competitiveness and resilience.

Long-term interest rates are also showing changes: in the wake of political discussions about a special fund to finance infrastructure projects, yields on German government bonds have already risen noticeably.

In the context of Corporate Treasury Management, two central challenges currently arise: firstly, the reference interest rate for investing surplus liquidity with banks is decreasing. Secondly, the financing costs for long-term investments are simultaneously increasing.

We therefore take a closer look at the impacts on liquidity management and demonstrate how a holistic approach within the company can strategically address these challenges.

Challenges in Liquidity Management

Especially for companies with surplus liquidity, the current interest rate environment has immediate effects on their earnings situation. While generating interest income is not the primary objective for manufacturing companies, a strategic, rule-based approach to managing liquid funds can make a significant contribution to business success—extending beyond merely ensuring liquidity.

A professional Corporate Treasury Management enables the identification and utilisation of market opportunities. Particularly in today’s volatile environment, the role of efficient, forward-looking cash management is becoming increasingly important.

Holistic Approach to Cash Management

In a volatile market environment, professional cash management is more crucial than ever. The goal is not only to ensure liquidity at all times but also to manage it in a targeted and strategic manner. Many companies face the challenge of aligning short-term availability with long-term planning.

Continuous market observation and the definition of appropriate key figures—such as proprietary yield curves—form the basis for making informed decisions in Corporate Treasury Management. This allows for early recognition and utilisation of opportunities in the interest and capital markets.

A central element is precise, forward-looking liquidity planning. Key figures like the so-called minimum cash reserve serve as benchmarks for necessary liquidity reserves. Additionally, incorporating the cash flow statement helps to transparently depict the sources and uses of funds.

Scenario analyses further enable the simulation of potential developments and strengthen the company’s resilience. Clearly defined processes for monitoring and controlling cash flows are just as crucial as internal coordination between treasury, controlling, and management.

Finally, ESG criteria are also gaining importance in cash management—be it concerning investment decisions or in the context of growing regulatory reporting requirements.

The interplay of the four central pillars of cash management is illustrated in the following graphic.

Bank Evaluation and Management of Cooperation and Partner Banks

Beyond liquidity control and market observation, a structured approach to cooperation and partner banks is a central component of Corporate Treasury Management. A clear overview of the respective strengths and weaknesses of banking partners forms the foundation for well-informed investment and financing decisions.

A systematic evaluation approach supports companies in strategically aligning their banking relationships and better utilising potential—both nationally and internationally. Targeted analysis of the banking and capital markets helps identify suitable partners, minimise risks, and enhance the quality of collaboration.

Conclusion: Embracing Challenges – Seizing Opportunities

The current interest rate and market environment presents new challenges for companies—particularly in liquidity and cash management. At the same time, it opens up space for strategic developments in Corporate Treasury Management.

Whether through optimising existing liquidity processes, introducing transparent control instruments, or systematically evaluating banking partners: those who act proactively today can be more resilient and competitive tomorrow.