EuroFinance 2019: De-Stressing Treasury

Back in Copenhagen again, this year’s EuroFinance International saw a record 2,200 delegates come together to discuss some of the hottest treasury themes of the moment – from digital treasury transformation to real-time payments and sustainability. Industry experts share their highlights from the event, together with tips on how to de-stress treasury and build resilient practices for the future.

Learning how to draw a cartoon of Donald Trump might not have been top of every treasurer’s agenda when signing up for EuroFinance’s 28th International Treasury Management conference. But the final session of this year’s three-day event, a keynote from Kevin Kallaugher (KAL), the editorial cartoonist for The Economist magazine, provided a little light relief from some of the intellectually challenging sessions held over the previous 48 hours.

Under an overarching theme of ‘resilient treasury’, the conference looked to provide insight into enabling treasury to achieve operational excellence, answer the call for innovation, and help the business respond to disruption. One ‘disruptive’ theme which echoed throughout numerous sessions – including each day’s opening keynote – was geopolitical unrest. On the first day, Karthik Ramanna, Professor of Business and Public Policy at the University of Oxford’s Blavatnik School of Government, shared some interesting perspectives on globalisation and worldwide politics.

He cautioned that while it was important for corporates not to bury their heads in the sand over political battles, it may be wise to steer clear from too much activism or meddling in politics away from home – believing that little could be achieved through such action. This point proved to be contentious among some audience members and was a topic of discussion at coffee breaks across the following days, with corporates questioning their role in making the world a better place.

Meanwhile, the second morning’s keynote saw Joan Hoey, Regional Director and Europe Editor of The Democracy Index at the Economist Intelligence Unit (EIU) who was tasked with providing a view on Brexit – just ahead of the 19 October emergency session called by the UK Parliament. While Hoey was unable to predict anything with great certainty, given the unfortunate timing of her speech, she believed the possibility of a second referendum was slim.

And on day three, Charles Hecker, Senior Partner at Control Risks UK, spoke about the tensions between the US and China. He made an interesting suggestion that to develop resilience, companies working in both markets might wish to consider splitting their operations in two: one entity to work in US-dominated markets and another entity for China-dominated markets.

Let’s get digital

Away from the geopolitical discussions, digital disruption was another core theme at this year’s event. Alongside sessions on different aspects of digital treasury, including an informative presentation on Microsoft’s digital transformation, TMI also interviewed the great and the good of the treasury world on the topic (check out our EuroFinance podcasts for the full low-down). As Steve Elms, EMEA Regional Sales Head, Corporate and Public Sector, Treasury and Trade Solutions, Citi, notes: “Digitisation was, again, on everyone’s minds with treasurers now keen to establish roadmaps for their digitisation journeys, taking more of a keen interest in open banking and APIs and looking for their providers to provide support and guidance.”

Shahrokh Moinian, Head of Wholesale Payments for EMEA, J.P. Morgan, agrees: “My takeaway from the conference this year is that treasurers are expecting automation and digitisation from their banking partners – whether that’s API solutions, real-time payments or virtual account management. It’s a must-have, not a nice-to-have. We’ve been talking about ‘real-time treasury’ as an aspirational concept for years now, but I think we’re finally here – this is what they are implementing and they won’t look back. Tomorrow’s treasury has arrived.”

Similarly, Victor Penna, Head of Cash Management, Europe and Americas and Global Head of Cash Structured Solutions Development, Standard Chartered Bank, adds: “The biggest shift this year is that many leading treasuries are now implementing their digital strategies rather than just talking about their roadmap.” Robotic process automation (RPA) and data analytics are two areas where there has been a fair amount of work over the past 12 to 18 months, he explains. “For example, many treasuries have automated processes such as bank account signatory management and/or compiling of cash flow forecasts. Treasurers are also trying to deepen insights into areas such as risk, liquidity, and working capital by capturing and analysing data using data analytics tools.”

RPA was also a key theme for Xavier Szebrat, VP Risk Management Solutions, Deutsche Bank, who participated in a session outlining how RPA is being applied to reduce foreign exchange (FX) risk and enhance liquidity management by integrating balance sheet hedging with cash management. Over the past 18 months, Yusen Logistics’ German business has worked with Deutsche Bank as its leading banking partner in developing an automated solution for the company’s foreign currency hedging, using the bank’s Maestro platform. “Having worked at three global banks, this solution is the most advanced combined risk reduction and cash management automation system I’ve been exposed to. It is helping the corporate treasurer in ways I did not think possible,” says Szebrat.

Others agreed that technology truly is changing the role of the treasurer. Says Penna: “Treasurers are really thinking about how they can support and drive business transformation going forward. For example, a number of treasurers talked about helping their businesses grow their online presence through the use of alternative payment methods and real-time FX to enable these transactions.”

Not everyone was focused purely on the technology side of digital disruption, however. Jan Dirk van Beusekom, Head of Strategic Engagement, BNP Paribas Cash Management and Trade Solutions, comments: “The most interesting trend from the conference for me is the focus on the human aspect in the digital transformation journey. Many discussed the impact digitalisation has on employees. In my opinion, it will have a great effect on the accuracy and efficacy of treasury operations, as long as machines focus on the ordinary and humans on the extraordinary.”

Van Beusekom also homed in on the role of collaboration in enhancing digital innovation: “Corporates with banks in co-creation; banks with banks on standardisation; and banks and corporates with fintechs and other providers to enhance the customer experience.” While some corporates are working directly with fintechs, many are not quite at that stage yet, as Matthew Davies, Head of GTS EMEA and Global Co-head of Corporate Sales for GTS, Bank of America, explains: “Many of our clients would rather have the banks be their intermediary, and for the bank to partner with a fintech on a white-label solution.”

 And the significant presence of fintechs at this year’s EuroFinance represents the fruit of the kinds of partnerships Davies is referring to. A number of the fintechs were no longer confined to Innovation Alley (although there were many there too) and some fintechs had bigger and busier stands than the banks – a very different state of affairs since EuroFinance was last held in Copenhagen in 2015.

Two sides of the same coin

With all the talk of digital innovation, ‘data’ was an additional theme on delegates’ lips. Referencing the results of the recently published EIU report A Quantum Leap: Building a Data-Driven Treasury (which was supported by Deutsche Bank), Ole Matthiessen, Deutsche Bank’s Head of Cash Management, comments: “Unless you have data and use it to learn from past behaviour, you [the treasurer] won’t come to the decision makers’ table fully educated.”

Indeed, the notion of ‘data as the new oil’ rippled throughout many of this year’s sessions, together with the clear need for treasurers to focus on cybersecurity. Not all digital trends discussed at the conference captured treasurers’ imaginations quite so firmly, however.

Despite an interesting session run by Simon Taylor, Co-founder and Director of Blockchain at 11:FS, looking at the potential of Facebook’s own cryptocurrency, Libra, many treasurers were yet to be convinced. Similarly, some delegates had had enough of hearing about technology for technology’s sake; they wanted real life solutions.

Davies comments: “While new technologies are dominating the news headlines, for many CFOs and treasurers, generating efficiencies from their capital remains the prevailing concern and was the topic of many of our conversations.” As such, treasurers want technology that directly addresses this concern – like Bank of America’s new Accounts Payable Optimisation tool. This new solution analyses a company’s suppliers and determines the most efficient payment method for each specific entity across the bank’s Card, Payments, Supply Chain Finance, and FX Payments teams. This can help companies enhance their cash flow, improve days’ payable outstanding, more effectively control financing costs and strengthen supplier relationships.

Another real-life challenge treasurers are still searching for a solution to is the know your customer (KYC) burden. “Our clients want to see more collaboration amongst banks on alleviating the pain points created by the KYC requirements. The due diligence is only getting more thorough, creating more burden on clients. We agree with our clients that there must be ways to make the process better and we are in fact working on solutions both within the industry and directly through our technology that our clients use,” says Davies.

Broader horizons

Although technology was arguably one of the most talked-about topics on the conference floor, it was not necessarily the star of the show. The theme most remarked upon by banks, vendors and corporates when speaking to TMI was corporate social responsibility.

Citi’s Elms comments: “The topic of environmental, social and corporate governance [ESG] was noticeable, in particular what can treasurers do to support their company goals and sustainably manage supply chains, plus the rising expectations on providers to display their ESG credentials.”

Alongside sustainability, diversity and inclusion (D&I) was also a clear focus at this year’s event – featuring regularly in discussions about treasury teams of the future. Several banks also held Women in Treasury events during the conference, with J.P. Morgan running an all-female breakfast briefing on recruiting and retaining millennial talent (TMI will report on this online), for example.

And rather than these softer topics being seen as a little ‘left field’, they were now more widely viewed as an essential part of building a resilient treasury team. That’s not to say that all treasurers are putting ESG and D&I at the top of their agendas. Realistically, managing funding, liquidity and risk will remain key treasury priorities for years to come. But treasurers realise that the tide is turning, business models are changing, and employee and stakeholder expectations are also shifting.

Be prepared

There are some areas where treasurers aren’t necessarily keeping up to speed, however. Davies notes: “Overall, I’d say there was a lack of urgency amongst corporates in relation to real-time payments. Certainly, they understand the benefit to be paid [in] real time, but generally they don’t have a huge need to make payments real time. There are of course exceptions, such as ride-sharing companies for instance. But on the whole, there’s a disconnect and it will be interesting to see that play out.”

Similarly, there was a lack of awareness among some treasurers as to how to implement proper cybersecurity protocols – with some treasurers still looking to their IT teams and banks to shoulder all of the responsibility. Van Beusekom believes that treasurers will therefore be more focused in 2020 on finding the answer to questions such as: ‘Who do I call after being compromised by cybercriminals?’

He also sees treasurers paying greater attention to areas such as FX market volatility and the selection of banking partners. Penna, meanwhile, believes that leveraging real-time data to better manage exposures will be a key theme, together with evaluating how new services such as instant payments can facilitate faster service delivery to customers – in order to benefit the business.

While it is tricky to sum up all of the diverse conversations that took place at this year’s EuroFinance International, what’s clear is that treasurers are now thinking more like business strategists than ever before. Treasury is no longer an island – it is firmly connected to the business in its thinking, its culture, and its actions. And it is precisely these types of bonds that form the glue of a truly resilient treasury.