This presents both problems and opportunities for the finance function, which historically has been used to a high degree of stability and control. In a digital world, intellectual curiosity, flexibility and self-motivation are the new core skills.
In 2019, considering the ongoing impacts of globalization, rapid technology evolution and the rise of disruptive business models, pressure on the treasury function to adapt and evolve continues to increase.
To help you stay ahead, we have identified eight overarching trends that are driving opportunity, making business easier and enabling a more intelligent treasury.
Managing and embracing innovation is the biggest driver of change in business today. Digitization and eCommerce have empowered consumers and created new methods of transacting. These consumer pressures on businesses also create opportunities for treasury: potential new partnerships, extended networks or the provision of new services and the use of new methods, such as distributed ledger technologies. Innovation is forcing companies to evaluate how they provide services and explore new business models and opportunities.
Dynamic business models
Dynamic business models are a reflection of the process of restructuring, covering everything from core business operations to acquisitions, spin offs and divestitures. They also force companies to reassess other aspects of treasury. In the digital world, new business models are continually emerging, often disrupting the traditional systems – treasury has to adapt and continuously integrate, build and redefine its core services.
Best of breed
Building a solution in a dynamic environment requires a broad skillset and considerable experience. A treasury’s technology team will typically have experience with change and treasurers have developed skills in system integration. The focus has moved from one ‘perfect’ solution to a hybrid model where treasury can now choose best-of-breed solutions for specific areas, such as FX trading platforms, risk management and cash flow forecasting.
The finance function already generates huge quantities of technical data, and there is now a need to also capture behavioural data and other more complicated information sources, in response to fraud and cyber-risk concerns. For treasury, the opportunity isn’t just in having the right information, it’s in the insight gained from using these multiple sources. A maturing reference data landscape and best-of-breed solutions can enable treasury to evolve from operational management to strategic insights.
Use of automations and machine learning can generate insights faster and augment capabilities for business intelligence, helping create a dynamic decision framework.
Payments, for example, can be intelligently routed based on a combination of cost, speed of delivery, need for advance notification and client working capital specifications. Implementing advanced intelligence is an evolutionary process moving from lean process optimization to intelligent automation.
Increasingly, businesses are demanding real-time transactional capabilities across all aspects of their supply and delivery value chains. Regulators have recognized the need for value now, and real-time payment systems are emerging on a global basis. For treasury, this means a move from batch processing to real-time processing. Continuously clearing and settling, every day, everywhere.
Against a backdrop of continuous change, constant drivers in a treasury function remain: control, compliance, risk management, cost efficiency and capital optimization. The challenge is correlating these with the need to operate 24/7/365, globally. With a strong governance framework and use of centralized structures that concentrate knowledge, processes and operations, the treasury function can move from process execution to oversight and control.
Technology is clearly an enabler for much of the transformation identified within these trends, but the benefits are tempered by emerging risks with cyber security, fraud, continuity, capacity and applicability. It’s possible to over-automate. Using technology means understanding its limitations, risks and control mechanisms. Fundamentally, treasurers must realign their risk perspectives and discipline to the digital world.
The path to a more intelligent treasury
For today’s treasurer and their team, embracing these trends and understanding their causes, impacts and potential solutions will be critical to the next evolution in the treasury function. Not all of these trends will be relevant to every organization, nor will they replace the intellectual capital of people, but in advocating and explaining them, we stand with you on the path to a more intelligent treasury.