Journeys to Treasury 2017 - Resilience, Adaptability and Innovation

 
By Jan Dirk van Beusekom, Executive Director, Advisory, Strategic Marketing & Engagement, Cash Management, BNP Paribas

Now in its second year, industry partners BNP Paribas, SAP, PwC and the EACT are proud to unveil the new edition of the Journeys to Treasury report at this year’s EuroFinance Conference. The 2016 edition was quickly established as an authoritative, thought-provoking and inspiring report in shaping the treasury profession of the future, and the 2017 edition promises a similar response. Now that the Journeys to Treasury concept has been established, we have been able to engage treasurers more directly in the development of the 2017 report compared with 2016. During the EACT Summit held in La Hulpe, Belgium in March 2017, we held an interactive session with event participants which has been instrumental in identifying key themes and treasury priorities. 

Changing priorities

In 2016, the major focus areas of Journeys to Treasury were i) continued innovation (including discussions around blockchain, fintechs and big data), ii) ‘anytime, anywhere’ treasury (including the impact of mobile banking and real-time payments on treasury) and iii) cybercrime and fraud. A year later, cybercrime and fraud continues to be a priority for every treasury globally, and therefore remains a key theme of this year’s Journeys to Treasury report, while the other priorities have evolved to some extent. While innovation continues to be central to the evolving treasury experience, the focus has shifted. For example, blockchain has the potential to transform many activities related to cash and trade, but its impact is likely to be felt in the medium rather than short term. However, there are growing opportunities in big data, artificial intelligence and machine learning and as such, we have identified data analytics as a key theme for 2017. Finally, treasurers indicated that although flexibility and adaptability was crucial to respond to changing market conditions, this is just as important in order to comply with changing regulations, particularly in an international context.

Journeys to Treasury 2017: Key themes

Data analytics: From data to information 

‘Big data’ is not yet high on many treasurers’ agenda, but every organisation acquires a huge volume of data available on a continuous basis, both directly and through third-party partners, such as banks, technology vendors and consultancies.  Artificial intelligence (AI) and machine learning are increasingly being used to process and analyse large volumes of data quickly and objectively, with companies in many industries now employing highly sophisticated consumer analytics.

This trend is now emerging in treasury, so the question for treasurers is how to turn ‘big data’ into actionable information to help inform decision-making and refine processes. This will be manifested in different ways depending on an organisation’s treasury challenges and priorities, but there is particular value in areas such as cash flow forecasting where timeliness, accuracy and completeness of data continue to pose difficulties. Similarly, a growing number of treasurers are automating routine activities such as FX funding and hedging and daily cash investment.

  

Three tips on data analytics What data do you have available today, and where are the gaps? What are your key challenges in treasury, and what are your success criteria in addressing them? How can banks, consultants and technology vendors help to extract, manage, present and leverage data to meet these challenges?

Regulation, compliance and adapting to change

The regulatory environment continues to change, and given their international role, treasurers need to understand and comply with diverse regulations across their footprint. Not only is the regulatory burden increasing, but the financial and reputational consequences of non-compliance continue to grow.

Some of these new regulations are specific to treasury, with reporting, policy or hedging implications, but others, such as Base Erosion and Profit Shifting (BEPS) have important ramifications on organisational structures. Similarly, complying with new rules such as the EU’s General Data Protection Regulation (GDPR) requires considerable collaboration and alignment with other parts of the business. A wide variety of treasury responsibilities will be impacted by GDPR, including: 

• lBank account reconciliation: Customer data used for identifying and reconciling incoming payments;
• lBank account management: Personal data of authorised signatories;
• lPayment factories: Vendor information, including addresses, individual and company data and bank account details;
• lPayroll: Employee information including identity, salary and bank account details.

 

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In these, and other areas, treasurers will need to consider how this data is held, maintained and transmitted both within and outside the organisation. 

New regulations are not always intended to be restrictive, however, and the second payments services directive (PSD2) which takes effect in January 2018 is intended to inspire new methods, and new players, to make payments and access bank services. New technologies, such as open APIs (application programming interfaces) are likely to emerge, but treasurers need to consider the scalability, robustness and security of new processes and technologies.

  

Three tips on cybersecurity and fraud Individual employees are an organisation’s weakest link, so mandatory regular training on changing threats and instilling a security culture is essential. Develop and communicate an incident plan and test it regularly with simulations. This is valuable in highlighting weaknesses in processes and controls and helping employees what to look out for and how to react. Work closely with internal information security teams and external experts to ensure that company directives and industry best practices are implemented in treasury.

 

Cybersecurity and fraud: changing risks in a digital world

Securing company financial and information assets is a responsibility for every business function, but this responsibility is particularly acute in treasury given the size of transactions and sensitivity of data. Furthermore, the financial – as well as reputational – implications of fraud are very real. According to PwC’s The Global State of Information Security® Survey 2017, 79% of respondents suffered direct financial losses as a result of a breach, of which 20%  were between $250,000 - $1m and 16% of more than €1m.

While cybersecurity threats often have the highest profile, internally and externally-initiated fraud often relies on weakness of individuals and processes, rather than hacking into systems. According to PwC’s The Global State of Information Security® survey 2017, the main reasons for fraud were inadvertent human error, lack of staff awareness of security risks, failure to follow processes and external attacks specifically targeting an organisation. 

Treasurers need to engage closely with the company’s information security teams, familiarise themselves with company-wide security strategies and ensure that training, processes and systems used in treasury are consistent with these strategies and reflect the specific risks in treasury. In many cases, the threat is not an IT problem, but a human one, with social engineering or phishing (55%),  malware(49%) and human error (45%) the most common types of breach according to the survey above, so training and awareness of changing security threats is essential. 

As fraudsters become increasingly sophisticated in their approach to infiltrating systems and organisations, through hacking, social engineering and exploiting weaknesses in processes and controls, corporations, technology vendors, banks, consultancies, governments and regulators need to work together to share experiences and best practices on the controls, processes and systems that will allow them to stay ahead of fraudsters and keep their organisations safe. It is also vital to have clear action plans in case of suspected or detected breach in order to minimise the impact. This is often difficult in practice given that individuals are often reluctant to expose mistakes, a reluctance which requires a shift in mind-set and culture to overcome it and act quickly.

  

Three tips on regulations and compliance Engage both individually and collectively to ensure that the corporate treasury voice is heard in shaping regulations; Maintain current knowledge of new and forthcoming regulations, including engaging staff across departments, including information security, tax and legal; Review and refine governance structures and risk policy frameworks regularly to ensure regulatory compliance and flexibility to respond quickly to changing market conditions.

 

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Accompanying you on the treasury journey

Journeys to Treasury is not an isolated report, but an ongoing investigation, analysis and vision of the challenges, opportunities and ambitions of treasurers. While regulatory compliance and protecting the business from fraud is dominating the agenda for many treasurers in 2017, the role of innovative technology and data-driven insights will continue to grow, with the potential to transform treasury processes, create new ways of engaging with internal and external stakeholders and drive better decisions.    

 
To access the full 2017 Journeys to Treasury report and contribute to the 2018 edition, please visit www.journeystotreasury.com. 

   

Jan Dirk van Beusekom Executive Director, Advisory, Strategic Marketing & Engagement,  Cash Management, BNP Paribas Jan Dirk has over 25 years’ experience in cash, treasury and risk management, people management and training. He started his career with Avery Dennison at their European Treasury Centre as European Cash Manager, followed by a position as Assistant Treasurer with Hagemeyer N.V. both in The Netherlands. In 1997, he switched to consultancy and banking as Financial Consultant with MeesPierson, at the time a boutique merchant bank. In 2001, he moved with his family to Belgium to start the first eCommerce department within Fortis Bank. In 2004 Jan Dirk became responsible for the European expansion of cash management and created and led the European Sales organisation. The following step was the creation of the Financial Supply Chain Management team, a combination of trade, trust, factoring, supply chain finance and cash management.  Currently Jan Dirk is executive director Client Advisory, Strategic Marketing and Engagement of the Cash Management Competence Center, BNP Paribas Group. He has an MSc in Financial Economics from the University of Groningen (NL-1991) and an MBA in Treasury Management from the Free University of Amsterdam (NL-2000).