The topics explored in this edition reflect some important developments in treasurers’ priorities and concerns since the last report. In 2017, the focus was on data analytics, regulation & compliance and cybercrime and fraud. One year later, enhancing the use of data for better analysis and insights remains key for treasurers, but as part of a broader view of the digital treasury, in which robotics, artificial intelligence and the use of application programming interfaces (APIs) are starting to play a role.
New Dynamics in Liquidity Management
Cash and liquidity management is a core activity for treasury functions globally, but the combination of regulatory and market developments, and the emergence of innovative banking and technology solutions, is challenging treasurers to rethink their cash operations and liquidity decision-making.
Techniques such as payments-on-behalf-of (POBO) and collections-on-behalf-of (COBO) have become popular among corporate treasurers. These techniques help to simplify bank account structures, making it easier to centralise and manage liquidity thereby reducing the administrative burden. Virtual accounts further enhance the value proposition by improving the customer experience and enabling automated reconciliation.
As rapid technological evolution ushers in faster, more flexible and transparent payments, taking advantage of the increasingly real, open banking environment remains the most relevant challenge for banks and corporations. The benefits to consumers of an accelerating PSD2 regulation in Europe is clear as new, secure means of payments and multi-bank services become available. For corporations, the benefits will come from collaborating with fintechs, IT vendors and banking partners. The best solutions are likely to be those integrated by one key partner in the relationship. Technologies such as cloud computing and API connectivity are clearly enabling this trend, however these are only enablers to the phenomenon of new configurations combining the strengths of banks, fintechs and IT vendors.
Talking Tax: Ready for Reform?
The international tax landscape is at a critical point. Long-planned base erosion and profit shifting (BEPS) regulations are now being implemented. At the same time, major US tax reforms have arrived quite suddenly.
New tax regulations mark a change in attitude among tax authorities, rather than simply a change in the rules. Corporations are obliged to comply with the spirit, as well as the letter, of the law, and there are inevitably questions and differences in interpretation.
Most large corporations should be prepared to make some degree of change to their treasury organisation to ensure compliance and avoid potential reputational risk. Crucially, tax structures need to reflect reality, and while the final outcome may not necessarily be ‘best’ in tax terms, it may be right for the business.
Inspiring the Digital Treasury
Automating processes and streamlining decision-making has always been a key treasury objective. Today’s new and emerging solutions can enhance process efficiency and controls, make rule-based decisions and act on these decisions to an unprecedented degree. To take advantage of these opportunities, treasurers need to adopt a new, digital mindset. This is easier than it might appear as banks and technology vendors focus on simplicity, ease of adoption and a high-quality user experience.
A digital roadmap in treasury should take an end-to-end view of treasury’s activities; from integrating data from internal and external counterparties, managing day-to-day liquidity and risk, making key strategic decisions and acting on them. This can involve solutions based on existing technologies, or newer capabilities such as distributed ledger technologies (or blockchain), artificial intelligence (AI) and robotics.
Cyber-risk and Fraud: Treasury at the Front Line
The risks posed by cyberattacks and the damage incurred have never been higher. Even so, the cyber threat continues to grow. Treasury has a particular role to play given the large financial value of transactions it processes and the sensitivity of the data it holds.
While defending data and financial assets involves specialist technology – which could include new controls on system access such as dual-factor authentication – processes, operational controls and business culture are equally important and often under-addressed.
The use of cloud-based treasury management solutions has also emerged strongly, in part as a response to the cybersecurity threat. While there are issues to consider, working with an expert partner can prove to be another defence against cyber risks.
The 2018-19 edition of Journeys to Treasury was released at EuroFinance Geneva on 26 September 2018 and can be downloaded at www.journeystotreasury.com
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