Global Treasury Benchmark Survey 2017
by PwC
PwC’s latest global treasury benchmarking report reveals that the success of the treasury profession is dependent on how well it operates in an increasingly virtual environment. It records the views of over 320 treasurers and chief financial officers (CFOs) from around the world.
The forces changing treasury
Financial technology, such as online tools, enterprise resource planning (ERP) and treasury management systems (TMSs), is finally delivering on promises made over the last ten years. Integration, unbroken audit trails, enhanced security and workflow enable workers to collaborate on processes independent of their physical location, and the declining cost of treasury technology makes this more and more available.
Virtualisation is prevalent in treasury and probably has more impact here than on other business functions. It requires a more collaborative and less hierarchical organisation of processes. CFOs are also urging treasurers to take on wider responsibilities.
The treasury agenda
The treasury agenda continues to be dominated by traditional tasks such as liquidity management, risk management and funding, but CFOs are tending to put more emphasis on compliance and IT security. Cash flow forecasting is at the top of the treasury agenda, and cybersecurity, simplification of bank connectivity and establishing centres of excellence are being promoted to exempt the risks of cyber attacks. Other issues on the agenda are bank documentation/Know Your Customer (KYC),
Changing role of treasury
While 83% of respondents have a dedicated central treasury department, on average only 35% of the full-time equivalent (FTE) involved in treasury processes are employed in treasury departments. Treasury is widely seen as value-adding shared services, with 92% run as a cost-saving centre. Sixty-four per cent of the respondents say their treasury operates as the central counterparty or the group’s in-house bank.
The increasing virtual reality of treasury implies that it is no longer only about technical skills and centralised processing: success in treasury is now about integration and collaboration.
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Risk and ownership
Questioned about the operational risks facing treasury today, respondents mention several organisational, process and systems related topics with no single topic really predominant. A variety of technology related themes, including functionality, upgrading systems, integration, cybersecurity and reliability are apparent. Flat budgets may be a constraint for the necessary investment: two-thirds of respondents say that their budget will be flat or increase only marginally.
Virtual treasury can prove a blessing in disguise as it creates efficiency in terms of processing, time, cost and instant visibility and fosters collaboration across the business. The operational risk created by a virtual environment must be properly assessed and addressed.
Operational risk and control
Control framework and governance must be a priority in the increasingly virtual treasury world where processes are executed remotely and reach far beyond the treasury department’s head office. Application management, workflow configuration, static data management, definition of user roles, access and reporting have to be properly addresses, and IT security, process monitoring and key control are essential when preventing data leaks and deptecting fraud or criminal activity.
Adequate reporting must be a high priority and treasury may need to implement a data cube or data warehouse drawing from multiple sources including the TMS, ERP and market data provider.
Bank relationship management
The survey results indicate that organisations maintain an average of 344 accounts with local banks, as well as with an average of 7.7 core banks and 20.7 additional banks – an increase from pre-financial crisis levels. Bank relationship management is one of the traditional responsibilities of treasurers and more treasurers than ever before are fully controlling the bank relationship across the enterprise. Respondents say that credit is the entry ticket for banks to fee earning business from their organisations; pricing, quality of service and relationships are equally important for distribution of business across core and secondary banks.
Respondents are well aware that they require multiple bank relationships and have to share their wallet strategically.
Forecasting: a challenging top priority
Forecasting has been a top priority for nearly two decades. Treasurers recognise that it is vital for making decisions on activities such as liquidity, capital structure, funding and planning, but the survey showed that it was still a source of frustration. Basic concerns include accuracy, collection and analysis of data, and it forecasting remains one of the most manually intensive reports used by treasury.
However, digitisation and sophisticated tooling mean that treasurers are now able to get real value out of the effort put into a robust and accurate cash flow forecast.
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Funding
The survey results confirmed that capital structure and funding continue to be top priorities for CFOs. Many of the respondents could benefit from a more strategic assessment of their options: while organisations clearly assess their needs and the resulting impact on existing funding, less than a third of respondents consider forward-looking and more strategic drivers when considering new funding.
Accounting and financial risk management
Volatile times put the treasurer’s duty of securing the financial assets of the company under the spotlight. Investors and analysts expect multinational corporations to identify risks and manage tem proactively, and new accounting standards require increased transparency about risk management. Seventy percent of respondents indicate that IFRRS 9 is, or will be, relevant to them. One third has not yet considered its impact, and only one out of five organisations is actively working on its implementation or already reporting under it.
Treasury system solutions
European companies rely on an average of six different applications for their treasury functions, typically including their ERP, TMS, spreadsheets and a market data provider; in some cases more specialised solutions are used for deal capture, valuations, confirmation matching, payment processing, regulatory reporting and commodity risk. North American companies deploy an average of five different applications. Overall respondents appear to be fairly satisfied with their applications and vendors, but satisfaction with their TMS rates lower than most other systems.
Treasury is increasingly operating online, and there is also a growing tendency to integrate different applications. Automating interfacing, cybersecurity, data management and application management are all now a core part of treasury strategy.
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Research methodology and demography
The 222 survey respondents were contacted by local treasury consultants across the PwC network. Responses, half completed online and half by interview by PwC consultants, were collected between 1 July and 30 September 2016.
PwC Corporate Treasury Solutions
The survey report concludes with a description of PwC’s Corporate Treasury network and its Treasury Benchmarking Tool. More information is available at www.pwc.com/corporatetreasury
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This is an edited version of PwC’s Global Treasury Benchmark Survey 2017, The virtual reality of treasury. To read the whole report please click here.
