The Future of Treasury

The EACT Summit featured an expert panel who discussed some of the changes in treasury over recent years, and how issues such as digitisation could impact on the role of treasury in the future.

Panellists Maciej Müldner, Finance Director, Skanska Property Poland Jan-Martin Nufer, Director, Treasury & Funding, Borealis John Colleemallay, Senior Director, Group Treasury & Financing, Dassault Systèmes Pierre Fersztand, Global Head of Cash Management, BNP Paribas Moderator: Helen Sanders, Editor, TMI

 

What do you see as the biggest changes in corporate treasury over the past five years?

Pierre Fersztand

Pierre Fersztand, BNP Paribas
I would note three changes: the increasing role of the treasurer; the importance of compliance, and the opportunities presented by technology. The treasury role has changed since the global financial crisis: the search for liquidity intensified and cash became king. More recently, we have seen considerable uncertainty in interest rates, including negative rates. Treasurers have played a critical role in managing the impact of these developments, and are engaging with the business more actively than ever to help manage the company’s liquidity and risk requirements. The role of the banker has also increased, with greater recognition of the value of long-term partnerships, particularly at a time when some banks are exiting certain products or geographies.

The second change is regulation. While it may seem a long time ago now, the introduction of SEPA (Single Euro Payments Area) was a major initiative, creating a huge migration burden for some corporations. At the same time, it has created significant opportunities for centralisation and rationalisation, and many are still at the start of this journey. Regulatory compliance is also becoming a more important, and more challenging area, and both banks and corporate treasurers are tasked to manage the regulatory burden as consistently and cost-effectively as possible.

While regulation may pose challenges, technology is creating opportunities, such as the growth of eCommerce and mCommerce, which implies major changes in the way that companies interact with their customers. Furthermore, within treasury itself, the past five years has seen a major increase in the potential for increased centralisation, rationalisation and efficiency, improved connectivity and standardisation and better liquidity planning and forecasting. However, with new opportunity comes new risks, particularly with the increase in fraud and cybercrime, which will be a major challenge for the months and years ahead.

John Colleemallay, Dassault Systèmes
I would add just one thing to the excellent points that Pierre has raised, in particular around the role of the treasurer. Treasury is becoming a real business partner to senior management and the wider business, and more closely involved in strategic decision-making. To fulfil this role effectively, treasury needs to be more efficient, with rapid access to complete, accurate information on which to base decisions. As a technology company, this has been an important focus for us: harmonising our systems and processes for example, and securing our payment flows, providing better support overall to our internal and external clients.

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What do you think treasury will look like in five years' time compared with today?

John Colleemallay

John Colleemallay, Dassault Systèmes
The next five years is likely to bring a big change in mindset: in particular, treasury needs to become more adaptable and agile in a changing environment. Emerging fintechs are likely to have a role in this, given that adaptability and agility are their core strengths, but banks’ role will not decline. Rather, banks are likely to partner with emerging, as well as established technology companies, to support their clients in new ways. As a result, we are likely to see changes in the way that we manage exposures, transfers and potentially manage costs. Virtual accounts, for example, offer considerable opportunities in this respect. Other initiatives that are developing now, such as instant or real-time payments, are also likely to have a rapid impact. 

Jan-Martin Nufer, Borealis
While it’s important to take a five-year view, the reality is that we’ll reach this point very quickly, so we also need to look to the next 10 or 20 years. For example, at Borealis, we’re looking at the areas that treasury is in a position to influence, and how to put these ideas into practice. This has a technology angle, but also impacts on treasury organisation and structures, and how we influence and collaborate with diverse global teams.

As the role of treasury changes, so too do the people that it comprises. People development is therefore a key area for us. The role and profile of the treasurer today is not the same as it was 30 or 40 years ago – and indeed, the profession did not exist in many countries at that stage. We are now seeing a new generation of people coming through, who have different expectations and demands in how they work and collaborate, what motivates them, and how they achieve satisfaction from their role. 

These two areas, treasury’s role, and the people who fulfil it, can largely be influenced by treasury, but treasurers have less influence over market and regulatory developments that will undoubtedly continue to shape the environment in which we operate. Regulation is transforming the bank market, and the EACT has an important role to play in challenging regulations that are likely to have a damaging impact both on corporate treasury and also on our banking partners. 

The macroeconomic environment is also out of our control, and it can be difficult to predict how it will change given the diversity of global players. While uncertainty will not go away, treasury needs to be prepared by being agile in responding to change. 

Maciej, given what you’ve heard so far, what do you, as a CFO, need from your treasury?

Maciej Müldner

Maciej Müldner, Skanska Property Poland
Many of the day-to-day treasury activities – cash management, simple FX etc. - will be taken over by technology in due course, making many of these roles redundant. The value that treasury needs to offer, therefore, is advisory, and I think this role will, and should, grow significantly. We can see that the world around us, and therefore the challenges that companies face, are becoming more complex: in this environment, do I train my business controllers, project managers etc. on how to manage liquidity, risk and capital effectively, or do I bring in treasury, and leverage their expertise? While the latter is undoubtedly my preference, treasurers need to move from behind their screens and engage with, understand, and think in terms of the wider business. Go after your internal clients and invite yourself to meetings, because they won't invite you, but if positioned correctly, and with the right skills, treasury is essential for the company’s future. 

 
Pierre Fersztand, BNP Paribas
I agree with Maciej, automation is changing the face of treasury: 80% of payments processing is now automatic, and around 60% of reconciliation, with significant progress still ongoing, such as virtual accounts as John mentioned earlier. Banks and fintechs are also working collaboratively to digitise processes such as account opening and compliance, and we’d expect to see this happen over the next two to three years. Given that many of the familiar treasury processes today will be digitised, treasury’s advisory role will become increasingly important.

 

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Jan Martin Nufer, Borealis
Personally, I don’t see automation as a threat to treasury, as this will mostly affect the transactional business which is not where treasury’s real value lies. What is perhaps more interesting is the combination of digitisation and automation on one side, and the changes in the regulatory environment and banking space on the other. We are seeing banks exiting from some products and geographies as Pierre noted earlier, so there is potentially the opportunity for fintechs to occupy the space that the banks no longer can, or no longer want to occupy. In most cases, however, fintech solutions are designed to meet specific, isolated needs, and do not replace the wider banking partnership. From my perspective, I don’t think – nor would I want to see it – the banking industry will decline, so we need to support it.

Audience Question: The treasurer’s role expanded subsequent to the 2008-9 global financial crisis when liquidity was short, interest rates were high and cash mobility low. Today, with a flood of liquidity and near-zero interest, isn’t this role declining? 

Maciej Müldner, Skanska Property Poland
I disagree: treasurers gained visibility within their organisations during the crisis, and it is up to treasurers to take this opportunity and establish themselves as business partners. In central and eastern Europe, for example, shared service centres and treasury outsourcing are growing, and to some extent replacing the transactional elements of treasury, and this is no bad thing. However, the business will lose out if treasury’s expertise and advisory services are lost. My advice would be to use the position gained during the crisis, use the contacts you have built up and get closer to the business. 

Jan-Martin Nufer

Jan-Martin Nufer, Borealis
Treasury tends to thrive during bad times, and that’s what we saw during the crisis. The impact on treasury’s visibility and profile have been very apparent: we’ve seen a number of treasurers becoming CFOs, for example, which was less common in the past. Treasury’s importance may be less obvious during better times, when liquidity is readily available, but the reality is that many treasurers are busier than ever as they extend their partnership with the business, such as into M&A.

 
How can treasurers prepare for – and indeed influence – some of the changes we’ve discussed?

John Colleemallay, Dassault Systèmes
Adaptability will be key to the future of treasury. Treasurers in 20 years’ time will have a completely new mindset, and be far more technologically-oriented. At the same time, they need the ability to be partners both to internal clients – the business – and the banks.
 

Jan-Martin Nufer. Borealis
I agree that technology will become more important, but at the same time, you need to understand what you’re doing and be able to question and challenge the data where necessary. The value of personal relationships will not change, and the ability for treasurers to collaborate and build trust and consensus will remain paramount, both within and beyond the company.
 

Pierre Fersztand, BNP Paribas
I think these themes: technology and people, are those that also resonate most strongly with us as a bank. Co-operation and co-creation is, and will continue to be very powerful in driving innovation and opportunity, across banks, newer fintechs and established technology companies, clients and regulators.