Navigating volatility, trade tariffs and market disruptions
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Ali Curi: Good morning everyone, and welcome to our webinar, "Navigating volatility, trade tariffs, and market disruption." I'm Ali Curi and I'll be moderating today's session. We're joined by a fantastic ION panel of experts across commodities, treasury, and capital markets who will help us make sense of today's fast moving global environment and what it means for your business.

A quick housekeeping item before we dive in. This is an on demand webinar. So if you have any follow-up questions for our panelists, please send them an email that will be listed at the end of the presentation.

Now, let's get started. In recent months, we've seen heightened volatility across asset classes driven by escalating trade tariffs and geopolitical tensions.

Whether you manage supply chains, capital flows, or investment portfolios, the ripple effects are clear, businesses need to actively manage increased volatility in the market. Our panelists, Sourabh Verma from ION Treasury, Sandeep Sabnani from ION Markets, and Andre Jaeger from ION Commodities will help unpack these trends and share insights into how organizations are adapting in real time.

Gentlemen, can you give us a brief overview on what's happened in the last two months on trade tariffs and what is the current state? Sourabh, let's start with you. 

Sourabh Verma: Sure. Thank you. Thank you, Ali, for a great introduction. I think the recent months have been nothing short of turbulent for global markets. The market confidence has taken a significant hit leaving both investors and companies navigating through this fog of uncertainty, as I would call it, at the peak of this chaos, financial indicators signaled extreme stress and panic.

Gold prices surged to record highs, stock markets swung widely. I remember Monday, April 7th when I woke up in the morning and I saw Hong Kong stock index Hang Seng tumbled by 14%, which was honestly a surprise for me. S&P and Nasdaq also fell in excess of 5%. But in the next few days, we saw US corporate bond spreads widen sharply and yield curves steepened dramatically across the key economies.

Once striking anomaly we have witnessed during this entire episode is the unprecedented selloff in the US dollar, even as the treasury yields climbed. So traditionally what happens is rising yields attract demand for the dollar as a safe heaven. But this time the greenback lost that status, which is a very unsettling sign of the evolving financial landscape.

Then if you talk about the current situation, a temporary 90-day pause on escalating trade tariffs, provided a brief reprieve or relief to the countries. Yet the path ahead, I think remains highly unpredictable. Once this pause concludes, I think we face two main uncertainties to consider going forward.

The first is the future of global trade deals is far from clear. So some nations may succeed in negotiating favorable bilateral agreements, while others could remain vulnerable to elevated tariffs, perpetuating, maybe supply chain disruptions and cost pressures.

The second point is the spotlight has shifted from tariffs to the changing dynamics in sovereign debt markets. We're seeing a pronounced steepening of yield curves in the US, Germany, and Japan. If you focus on long-term yields in particular, then I would say they've risen sharply reflecting growing concerns about inflation. And if you focus on Japan, then the CPI index is climbing after years of stagnation there.

So there are doubts about sustainability of US debt. There are doubts regarding the inflation and the bond markets in Japan, and these factors have driven investors towards traditional safe havens like gold and Bitcoin, which have both benefited from this climate of uncertainty. If you look at President Trump's strategy is it's all focused on boosting exports and curbing imports through tariffs on goods.

And regardless of the debate around this approach, whether this is going to be effective or not, the reality is the treasurers and market participants are now tasked with managing the fallout. I really feel we are at crossroads here where geopolitical tensions, trade policies, financial market dynamics, they all converge. Leaving a very complex and volatile environment and navigating through this will require agility, will require data-driven insight, and collaboration across functions and sectors. That's where we're at. 

Andre Jaeger: Absolutely, Sourabh, I agree. In addition, it feels to me like that this is just the latest event in a series of market disruption that has been driving volatility in recent years and seems to me that new normal started, at least in my perception, with the global pandemic.

Since that point, we have been bouncing from disruption to disruption. And couple of example, at least from my commodity world that kind of stuck in my head as it definitely started, as I said, was COVID. First time negative oil prices in history. Then I think the next big thing that happened was the Russian invasion.

We still have a lot of geopolitical risk, especially that event. Significant impact on global commodity supply chains. Another great example in this context is the Suez Canal blockage, or the Red Sea attacks impact to shipping and not just for commodity, for any type of goods. And then I remember also that global server outage and flight disruption is one personal to me, because I tried to fly that particular day to the US and just one simple IT issue was global impact, grounding huge amount of flights. And then various weather events from the Texas freeze, to recently in Europe we had the big power outage on the Iberian Peninsula covering Spain, Portugal, and I think even parts of France. So just environmental disruption with significant impact.

On the other hand, I don't believe that the world has completely changed, but the impact is definitely amplified based on years of lean supply chain and just-in-time delivery. And that resulted in very limited access capacity, due [to] relentless focus on asset utilization. And it's actually something that we have seen across industries. So in any case, seems to me that kind of, those type of disruption like "trade terrorists," which is the latest one, is the new norm. So definitely a key focus of any business to be prepared.

Ali Curi: And Sandeep, what are your thoughts on these events from a markets perspective? 

Sandeep Sabnani: Thanks, Ali. So, as Sourabh and Andre have touched upon, today's trading environment is shaped by a combination of hyperconnectivity, speed of algos and geopolitical complexity as we've just seen. So markets are no longer reacting to fundamentals, but they're responding to signals from policy shifts. From macroeconomic sentiment and even social media, all of that in real time.

So what that means is that volatility is no longer episodic, it is structural. It has become a part of our fabric, when we talk about treasury commodities or capital markets. And while that introduces risk, it also creates a dynamic landscape of opportunity. And the firms that are succeeding in these scenarios are those that can interpret and adapt to this volatility on a continuous basis. We've all seen this in action. For example, I think it was back in 2021 when Elon Musk tweeted about Bitcoin's environmental impact. Within a few minutes, you could see that the price of Bitcoin dropped 10%.

However, we also know there were firms who had sentiment driven algorithms. And they could interpret and act on these signals instantly and position themselves for the rebound and also capture a significant part of the upside as the markets sort of corrected. All in all, I think there is a new normal, as we are all saying here. Full of opportunity, I must say.

Sourabh Verma: Sandeep, I think I completely agree that volatile markets do create opportunities, and not only for trading and investment, but also for quickly adapting your strategies or maybe pivoting to the new normal.

What's really important is for treasurers, it's not really an opportunity. They see this as a problem because it's often a source of stress. Shorted fluctuations are still manageable. But any sudden fundamental shifts like of trade tariffs would've gone ahead in full swing, without any pause and that would disrupt consumption overnight. That would disrupt the FX markets, the functioning of bond markets, and would raise interest rates significantly as well.

That kind of shock force forces treasurers and CFOs to urgently maybe take a re-look at, or rethink about their capital structure. The liquidity, the working capital, which makes their job much more challenging. And from corporate treasury perspective, I think it's never about making profits, it's always about protecting your cash, protecting your positions, your forecast. That is where I think treasury world differs from the investment and trading world. 

Ali Curi: Thank you. All very insightful. Now tell us, what kind of challenges does all this pose for customers? Can you talk about your customers and what challenges they face from all three perspectives from capital markets, treasury and commodities?

Sourabh, let's continue with you. 

Sourabh Verma: Thanks, Ali. I think very interesting question on this. This uncertainty created a very difficult spot for corporate treasurers and finance teams alike. The question was, should we hedge now or should we invest? If we do that, how and when? What is the right timing? The volatility is already very high, is [it] a good time to enter? Such questions became very, very difficult to answer and it forced many companies to reconsider their plans and prepare robust contingency strategies for future, what we call as "Plan B."

Let me put this in context maybe. So entire trade tariff saga severly shook the market confidence. So one, markets are uncertain and unpredictable. Decision paralysis often sets in. This phenomenon occurs when the risk of acting seem greater than those of waiting. So leading many to actually adopt a cautious "wait-and-watch" approach instead of proactive decision making. So let me give you an example, if Trump actually proposed a $1 to $1.5 million US dollar entry fee into US ports for all the vessels, which are either owned by Chinese entities or built in China. Then on top of that, he also proposed additional fees for operators, with significant percentage of Chinese built vessels.

What do you think this is going to have an impact on? Or what do you think this is going to change in the markets? Given that China is already a dominant player in [the] vessel building space, this is just going to cause a decision paralysis and delay any new investments or CapEx decisions, which can have a major impact on shipping capacity in [the] future.

And as I spoke to a few customers, they cited the same problem. That they're unable to make any long-term decisions because by the time, let's say even if they make a decision now they invest in a new factory, in a country where the tariffs are not that high, by the time the factory becomes operational, things would've changed, right?

So when there is uncertainty, people actually delay their decision making. And then the CapEx and investment decisions as well. This can have a huge impact in [the] future. Then I think there were a lot of companies which were caught with unhedged or under-hedged exposures facing significant financial losses as currency fluctuations, interest rates, and commodity prices, they all moved up sharply and unexpectedly. Again, it was a very tough call for them to decide whether to hedge in the middle of the chaos with heightened volatility priced in or not. And I think during this whole period, liquidity management emerged as a paramount priority for treasurers. So treasurers focus intensely on securing credit facilities, optimizing investments and money market funds to take care of excess cash, or maybe in-house banking to make sure that internal needs are taken care of before they go to external institutions. And safeguarding cash flow to ensure operational stability amid the chaos.

So with all this, treasury teams had to reassess impact from multiple time horizons perspective. Whether it is short term, medium term or long term, they were more focused on how exactly this is going to change my short term strategy, medium term strategy, or the long-term strategy. And given these challenges, I think I want to emphasize the critical importance of mitigation strategies.

Treasury teams need to employ sophisticated decision support analytics to identify and quantify risk exposures. This can include your hedging strategies, this can include refinancing options or scenario analysis, stress testing. Some advanced tools like cashflow risk and value at risk also are very helpful to decide what sort of potential financial losses you're looking at and what kind of liquidity buffers or adequate buffers you need to ride through this wave.

Andre Jaeger: From my side, adding some additional commodity perspective. So some of these mitigation strategies Sourabh just talked about, I think are very applicable if you look at the financial perspective that you have also from a financial commodity trading perspective.

What's interesting for a lot of our clients is that additional physical commodity and related supply chain aspect that our clients on the commodity side needs to be managing. And usually that part of the businesses includes a lot of optionality, not just financial, but real option. And with that, you have naturally some room for optimization, and that means the embedded ability to react to whatever is happening on market disruption side. So there's a couple of key questions to be answered or what our clients wanna be able to answer.

So what and where are my positions? I have certain production plans. I have delivery and sales commitments. So it's all about looking at demand supply along with my current inventory. Some of it in storage, some is maybe in transit. And the embedded options like switching suppliers, reroute commodity flows, and just react to the changing conditions.

There's also understanding commitments and where's my risk concentrated, understand certain exposures across different counterparties I'm dealing with. Different commodities, different geographies or countries that I'm exposed to, and then you try to get that physical business and translate it into potential financial impact.

So linking that physical activity to financial impact. And potentially being able to run certain scenarios, understand what's happening, if cost is changing, if I have delays, non-availability, and just look at those different market operational events. The other thing is key, and that's also what Sourabh touched on, is the hatching aspect.

Understand current hatching levels and commodities, quite standard to hatch on a rolling basis for a certain timeframe, different type of strategies. But in any case, it's very key that you have and achieve that kind of supply chain transparency for better decision making. And this is the biggest challenge our clients try to solve. So combining that financial hatching, physical business activity and generate a holistic view of that business embedded optionality. And you need to get that ability to understand, "What are my options?" And then you're able to react whatever the next disruption might be that we run into. 

Sandeep Sabnani: Finally, from my perspective, I think those are very interesting thoughts, Sourabh, Andre. Just to add on to that, from a capital markets perspective, we see several challenges. I'll focus on five sort of interconnected ones that are seen on the street.

So breaking them down. Firstly, rapid sentiment shifts. Market sentiment in light of volatility can change in an instant. And this is often driven by things like headlines, be it tariffs, be it a tweet. And related social media or macroeconomic developments. In many cases, perception moves faster than fundamentals, and this creates an unpredictable and emotionally charged market participant set, which can sway the market in any direction. Now, we saw that all when GameStop happened and the short squeeze during that market, thanks to the retail sentiment was amplified by platforms such as Reddit.

So you see internet, social media, microeconomic, all of these factors coming in together and creating a perfect storm. What this meant is that the traditional valuation models of "What is a GameStop worth today?," was no longer valid, and this caught many firms off guard. The second is volume spikes during such volatility and periods of heightened volatility lead to dramatic surges in trading volumes.

Now, whilst this can increase liquidity, it also places immense strain on the infrastructure exposing weaknesses, for example, in the scalability or the throughput. Again, we saw this when the Brexit vote happened and we saw FX volume spiking sharply. We saw many firms experiencing outages, missed trades, and reputational damage due to this infrastructure overload.

The third one here is lack of realtime visibility. So when you get such a situation of volatility and a fast moving market, the inability to see positions, exposures and limits in real time, can lead to delayed reactions, risk breaches, and also missed hedging opportunities. So the absence of a unified operational view increases the likelihood of blind spots in your, for example, trading operations.

Fourthly, what we also see is in such markets, the regulatory pressure usually escalates. And what we can see is that circuit breakers introduced by the regulators are hit, and this means that there is a heightened sense of scrutiny on the whole market operations, the operation of the participants, the exchanges, the brokers, the banks, everybody essentially. And in light of this, firms face increasing demands for transparency, accuracy of their reports, responsiveness to any compliance requirements and many such things which sort of fall in the same bucket. Again, looking at GameStop, what happens specifically in that scenario was regulators introduced stricter reporting requirements. Now, what this does is this places additional pressure on firms to meet these evolving needs.

And finally, joining all these dots is the demand for auditability. Again, this becomes challenging in high-speed environments because every trade, every decision must be traceable from a compliance POV. And when you are not able to provide clear audit trails, this can undermine your internal governance, it can erode your client's trust, and it can also expose you to regulatory risk. So all in all, I think there's a mix of operational, regulatory, and market-driven challenges that we see in capital markets. 

Andre Jaeger: It's actually [interesting] how much similarity we have across those different markets we operate. What you just talked about, feels very applicable to some of the discussions that we have been having with the commodity client base and seems that we're operating in the area where some of these shift changes, disruptions, have become the new norm as we discussed. Doesn't matter if it's, energy transition is a big topic for us, related regulatory changes you talked about. We talked about trade tariffs. Brexit, big event. Pandemic, big event. And despite these continuing disruptions seems to be that many businesses did not account yet for such an, or a different operating model that can [help] to manage some of these new volatility level. And to navigate this effectively, you need to equip yourself with that real time visibility you just talked about. And that again, it doesn't matter if you're in treasury capital markets or commodities, and you need to manage that to get to that resilience that's required for the today's volatility at the end.

Ali Curi: And Sourabh, from a treasury perspective, what does this mean for today's CFO or treasurer? 

Sourabh Verma: Ali, I think risk management is crucial. Treasurers must stress test their exposures and reconsider the floating fixed interest rate mix that they have currently. Rather than locking in worst case rates, to be used optionality with caps or collars to manage the downside risks in this volatile news driven market. Every day is a new day, every day there is new news, so you want keep your options open.

But where do you start? You start by mapping your risk. You first have to identify your risk exposures. Then, maybe create a heat map to figure out what are the top risk exposures that are going to be needle movers for you when market situations change. And then after that, you think about implementing a structured hedging policy.

So if I have to summarize this from the perspective of treasurer, maybe prioritize liquidity, maintain a cash flow buffer, keep short term investments, and secure your credit lines. Because, I think credit lines are very interesting, credit facilities, because with commitment fee, it works like low cost insurance. When you need to draw, you can draw from the credit line, which is already approved.

You're paying commitment fee till the time you don't need it. But I think it works out very well if you need some sort of an emergency funding from your financial institution. And then you should focus on optimizing in-house banking and working capital. Also, I think it makes sense to consider pre-hedging for upcoming refinancing or M&A needs, especially if you're outside the US where rising trade tensions and uncertainty around capital access can create problems.

I don't think many corporates actually consider pre-hedging as often as they should. But given that liquidity from the market can really be problematic in these scenarios, it's really a very effective tool if you think about pre-hedging all the future upcoming events such as refinancing and M&A. I think inventory financing is key as tariffs increase cost, and extend your payment terms.

So use purchase auto financing or inventory finance or supply chain finance to manage your cashflow. You need to look at the entire ecosystem. Don't just focus on your own company, but if you have some vendors who you think are not in good shape, but they're trustworthy, maybe consider supply chain financing for their favor as well.

Because if you don't invest in the entire ecosystem, then it can come back and, probably haunt you in scenarios where things go for a toss. And monitoring your counterparty risk closely is very important, as economic shifts can weaken a buyer's credit and limit your credit insurance. So just to summarize, what I've just said in a lot of detail is probably refresh your cashflow forecast and shore up your liquidity, reassess your financial covenants and engage with lenders early if needed, and review your financing plans or refinancing plans with enough lead time.

I think that would be a summary of what it means for a CFO and a treasurer today. 

Ali Curi: Great, thank you Sourabh. And Sandeep, from a trading perspective, what is the best practice for capital markets and commodities?

Sandeep Sabnani: What we are seeing is the firms who are thriving in this environment are doing a few things exceptionally well.

First principle, they're not just reacting, they are building systems and strategies that anticipate these scenarios, the volatility, the disruption. So they are best positioned to adapt. So what are these things? The first one is integration. What usually happens is if you have a set of siloed systems, your decision making is slower, and it also increases your operational risk in these types of environments.

So integrated platforms that connect trading, risk, compliance, all these functions and create a single source of truth and also enable faster and confident decisions are the differentiator. Secondly, infrastructure resilience. Resilience here is more than just uptime. It is about performing under that increased stress, under that increased pressure.

What we mean by this is, when you've got cloud native architecture, for example, which have embedded real-time monitoring and stress testing have become essential. So what we saw as an example again, is in '23 when Silicon Valley Bank collapsed, we noticed that there were firms who were using cloud native platforms, which enabled them to be fully operational, and we could see that differentiation very clearly, how they managed that disruption.

The third aspect here is investing in advanced analytics. So firms are using predictive analytics and scenario modeling to simulate such market shocks and being prepared for a range of outcomes. This is important because this shifts the mindset from, being reactive to actually being anticipatory and more proactive for such events.

Fourthly, there's an element of risk management. I think Sourabh has already touched on that, where the risk frameworks need to evolve with the new type of these market[s]. I would call it "additions to the market structure," if you like. Which means incorporating geopolitical signals, microeconomic trends, and stress testing into their daily operations.

So this is where they look at these risks and they proactively understand where they would stand in case such an event happened.

And fourthly, and most importantly, automation. So algorithmic trading and smart order routing are no longer optional. They are foundational in such markets. They enable firms to respond to these conditions in real time and ensure best execution across venues, across geographies that may be fragmented.

So given the example of the tariffs, you might wanna suddenly access liquidity in a completely different part of the world, which means that a platform or a set of infrastructure or a set of systems that provides you with that access becomes super important, is again, built on automation. So I think these approaches are quite useful in today's environment for capital markets firm.

Andre Jaeger: My perspective from a commodity perspective, and again, some of these approaches that Sandeep just described are not just important for somebody that's trading commodities, but would also take into consideration companies that we call "commodity intensive corporations." So that means you have raw material input, so various commodities and those related costs have a significant impact to your bottom line. Or on the other hand, you might not call yourself a commodity trader, but you are somebody that brings commodities to wholesale markets or potentially even to end consumers. Again, you're heavily dependent on commodity prices. And as we discussed, it's all about to manage your commodity exposures and optimize the optionality more like a trader would in this context.

So it's not about becoming a trader, but having that mindset to think about exposures, demand supply optimization, and just handling it as another procurement item is not sufficient to remove earnings volatility from your bottom line.

So what does that mean at the end? It's all about manage that financial risk of commodity and raw material input. The ability to monitor and manage market credit and certain limits around that. It's understanding a little bit different scenarios and doing what/if analysis, what happens if price curves are changing, if counterparties defaulting, just having some visibility, what might happen based on my portfolio. And then similar kind of ability to manage it, supply chain and operational risk of that physical commodity business. Ability to provide not a backward view, where ERPs are usually very good, but also to have that forward-looking perspective on commodity demand and operations reflect that supply chain optionality. We talked earlier about incorporate some of these hedging strategies and have then the ability to react and limit the impact of that market disruption.

And as Sandeep says about integrating is about single solutions. So having procurement, finance, commodity marketing, hatching operations, depending what your business kind of cover, integrated with solution systems that provide the necessary reporting and decision support to react. So it's getting about that end-to-end visibility into your global supply chain, and you need to be supported by a solution, inter-related data strategy that enables that quick reaction and decision making and the ability to optimize the activity that you focus on in your business.

Sourabh Verma: I can add to this Andre and Sandeep. Completely agree. I think what stands out for me as well is real-time visibility and automation. When we are dealing with markets like this where every day there's a new surprise, then maybe it's best to have real-time visibility from end-to-end. Having a dashboard with all the data points that you need, with all the analytics equip you. Making a decision in real time, that's required. Because I don't think we are at a time now when you only review your risk exposures and your hedging policies or your current hedge ratios every month or every quarter.

It probably needs to be reviewed in tandem with the changes in market. And what will enable you to do that is real time visibility and then automation, right? If you don't have the tools in place, then it doesn't equip you well for these challenges.

Ali Curi: Andre, would you like to share any final thoughts?

Andre Jaeger: As I can just repeat some of the key things that at least I heard across the different markets that we serve.

So it's all about gaining that visibility, [build] resilience with the appropriate tools and technology for [your] particular business, and combine that, as I said, with a data strategy to enable reaction and quick decision making because as we said, we probably will see more disruptions in the future.

And from our perspective, there's definitely solutions and technology available that kind of helps you manage this information and related structure. Or structure the data at the end in a way that enables your business to manage these changing conditions more effectively.

Ali Curi: And Sandeep, what are your final thoughts?

Sandeep Sabnani: Here's the final bit of pointer. So disruption may seem unwanted and clearly all of us could do without it. The only way to succeed is to embrace this and look forward to the opportunity it brings, take that to be more proactive and more agile in these environments. So specifically within capital markets, where we see retail participation is increasing rapidly. And we are also inching towards 24/7 trading globally. All I can see is that this is only going to get more disruptive as we see things through. What will set the winners apart in this environment are those who are always on, who are always informed, and who always act essentially by leveraging the systems, the tools, the technology, the automation, the real time views into their risk, whatever that particular thing may be. But people, participants, who are willing to act. They are investing in technology that scales, analytics that anticipate these disruptions. And again, automation which executes with precision. So volatility is not going to go away.

And with the right tools, the right mindset and the strategy, it becomes a catalyst for innovation and growth, not a threat. That's the sort of final view points that I wanted to make. Thank you.

Ali Curi: Sourabh, any final thoughts to close us out? 

Sourabh Verma: I would just echo what Sandeep said. I think if you're equipped with the right tools, it's not a threat. I won't call it an opportunity. If you can manage the volatility, then with the robust risk management process, perfect. 

Ali Curi: Well, gentlemen, you have shared some incredible, very useful insights.

Sourabh Verma: Thank you.

Sandeep Sabnani: Thanks for having us.

Ali Curi: We appreciate your time. Thank you very much.