Treasury in 2025: Will You Be at the Cutting Edge?
By Eleanor Hill, Editor
The ‘Journeys to Treasury’ report has become a landmark piece of research among the corporate treasury community – and the 2019/2020 edition is no different. According to the latest study, the treasury of the future will be almost unrecognisable: core treasury skills and requirements will evolve dramatically, driven by the combination of data and technology that is already transforming the profession in ways we never thought possible.
Cast your mind back to 2015 – the year that ushered in the Paris Climate Change Agreement and saw the Chinese stock market crash for the first time since 2007. Back then, treasurers were starting to get to grips with cloud computing and hearing more and more about real-time treasury, blockchain and artificial intelligence.
Just a few years later, the hype around these treasury trends and technologies is turning into reality, as outlined in the fourth edition of the Journeys to Treasury report – authored by BNP Paribas, PwC, the European Association of Corporate Treasurers (EACT), and SAP, featuring input from leading corporate treasurers (see box).
Corporate contributors to Journeys to Treasury
The report also suggests that fast forwarding to 2025 could see treasurers enter the realm of what was once seen as ‘science fiction’, with technology effectively ruling the treasury roost. That is not to say that treasury will become less relevant as technology takes over, however.
Arguably, the opposite applies as the need to manage liquidity and risk internationally becomes more important. Treasurers will also be freed up to spend more time reviewing processes and mindsets, with the aim of making treasury more efficient and ultimately adding value to the business.
Until then, the report suggests that treasurers may wish to focus on four key areas:
1. Payments and collections
New payment methods are proliferating as digital business models come to the fore, and regulators seek to improve the payment experience for consumers and businesses alike. Real-time payments are a global example, together with mobile wallets, which are becoming increasingly common in parts of Asia, Africa and Latin America.
The report suggests that not enough treasurers are playing an active role in the company’s payment and collection strategy. In many instances the choice of payment, and particularly collection method, is a commercial decision made by sales and customer engagement teams. Treasurers should arguably be involved in these decisions, however, to take account of issues such as: payment and collection costs; operational and credit risk; resilience; technology integration; working capital and liquidity, and sustainable growth.
Furthermore, new payment and collection instruments – from SWIFT gpi to Request to Pay functionalities – have the potential to create valuable opportunities for the business, particularly as digital business models evolve. For example, a growing number of companies in markets where real-time payments already exist are carving out competitive advantage, such as to settle insurance claims quickly.
As such, treasurers would do well to keep abreast of evolving payment and collection methods and to share their knowledge with other parts of the business. In this way, treasury can contribute to strategic and commercial decision-making, which will be especially relevant when expanding into new international markets.
2. FX risk management
International growth is also a driver for treasurers to review their FX risk management. With exposure to an ever-expanding range of currencies, and pressure on sales margins, FX volatility can make a major difference to earnings. The report highlights that treasurers are therefore renewing their focus on hedging strategies and optimal execution to manage risk and reduce the impact of volatility.
“We have seen a definite change in treasurers’ attitudes towards payments and collections over the past three years. As companies make a strategic shift from products to services, such as subscriptions and rentals, the cash flow dynamics change, with a higher volume of lower value flows.”