![logo_plain_RGB_0-53-142[69].jpeg](https://static.wixstatic.com/media/42e0ed_3d6148714e1a484cb932bc20b8a93bc4~mv2.jpeg/v1/fill/w_50,h_25,al_c,q_80,usm_0.66_1.00_0.01,enc_auto/logo_plain_RGB_0-53-142%5B69%5D.jpeg){kind=logo}
François Masquelier (ATEL) : EACT Treasury Survey 2023
Back to basic treasury management issues!
EACT annually launches its Treasury Survey to determine top priorities for corporates. It also aims to identify challenges corporate treasurers are facing and the technological innovations they intend to implement. This survey attempts to detect treasury trends and priorities for MNC’s over the coming months. Logically this year again, Cash-Flow Forecasting (#1) is in the lead, followed by the Working Capital Optimization (#2) and Treasury Technology Infrastructure review/replacement of existing IT tools (#3) (*), which are quasi equal. They are then followed by a few other priorities, such as Treasury Organization & Structure (e.g., centralization, new required skills, etc.) (#4), Risk Management (e.g., FX, Interest Rate, or commodity risks) (#5), Long Term Funding (capital markets/banks) (#6), Digitization of Treasury (#7), and Bank Relationships (#8).
"43,82% of Treasurers consider Cash-Flow Forecasting as their major priority"
As you can see, this year the results have changed significantly. Fundamental and pure financial issues are back at the forefront of the treasurers’ priorities. How do I secure and guarantee reliability of my cash-flow forecasting? How can I optimize my Working Capital? How should I change or modernize the complicated IT architecture I use, often after years of use without any fundamental changes? The second and third priorities have pushed bank relationships and digitization of treasury further down.
Top priorities for Corporate Treasurers :
We may be surprised (although this can probably be explained by the pre-SBV timing of this survey) not to see Banking Relations in the top three priorities. The same is true for the Digitalization of the Treasury Function, which drops to 7TH position. Finally, it should be noted that New Financial Regulations do not seem to be a priority, nor is partnering with stakeholders. Even market risk has dropped dropping down from fourth to fifth position, despite the continuing sensitivity and volatility of markets. We are facing a return to basics. Trendy topics such as ESG, regulations, digitalization of treasury and robotization, or fraud mitigation are seen as of secondary importance.
Technological innovations
In terms of technological innovations, it appears that in the next 12 months, the priority will be placed on Data Analytics (#1), APIs (#2), the Cloud solution and Treasury as a Service (#3), and finally Robotics Process Automation (RPA) (#4) Artificial Intelligence & Machine Learning (#5), followed by Crypto currencies & CBDC technologies (#6). However, the ranking only slightly changed, we feel a greater appetite for the other “new technologies” in treasury. The low ranking of AI (only #5) comes from a general absence of true data lakes and standardized pieces of information. They may want to first fix current systems around TMS or review current IT architecture before using other new technologies. We all understand that the C-level wants treasury to make use of huge financial data they sit on and develop more reporting and dashboards. APIs have shown the use banks and corporates can make of them, to enrich reporting. Contrary to the recent excitement for Bitcoins and announcements around CBDC, cryptocurrencies do not seem to be a priority for treasurers. Nevertheless, it is higher ranked overtime. All-in these answers show a certain lucidity on the part of treasurers who seem realistic in their use of new technologies.
We see, surprisingly, that Centralization and Standardization are the focus for treasurers in the next months (#1), followed closely by Real-time Reporting and Dashboarding (#2), and then Real-time Liquidity (#3), followed by Real-time Payments & Collections (#4), FX Automation (#5) and finally the use of APIs (Application Programming Interfaces) (#6). This demonstrates, once again, that the priorities may be more basic and simpler than imagined, as many treasurers still need to improve their day-to-day management before jumping into the use of newer technologies. The objective is immediacy - real-time for all types of information. Currency Management Automation for FX Management is also in 5th position, as here again, we seem to be far from complete and perfect automation. Although real-time access becomes key, there are still many areas with highly manual, slow, and inefficient processes (e.g., dashboarding, cash-flow forecasting and FX risk management…). It creates pressure for further automation to achieve greater efficiencies and enhanced internal controls. However, the fragmentation of IT systems in treasury and the complexity of IT treasury architectures in many of MNCs’ explains the importance of the risk of fraud, which has increased in recent years, and of cyber risk. Fragmentation increases these risks by a lack of fluidity, homogeneity, and sometimes consistency of the financial data to be processed. In the same vein, it is detrimental to the quality of future cash flow forecasts. The more IT solutions in use, the more difficult it becomes to consolidate data and allow systems to interact with each other, or to exchange data. The more complex the IT construction of the treasury, the more complicated the change will be/appear to be. Treasurers would like to change the IT organization but sometimes do not dare to tackle the cliff that this represents.
Financial regulations which could have an impact on treasury activities
We can also notice that treasurers can support ESG (Environment, Social & Governance) initiatives by issuing green bonds or other sustainable borrowing (#1); revising processes, further automation, and controls to improve sustainability (#2) and investing in sustainable investment instruments (#3); in reducing business travel and encouraging work from home. Number of financial regulations under consideration is incredibly high. Their impact could be major for treasurers. Among the most important ones identified, it appears that the priority is the ESG report (#1 – 52,2%); the EMIR review (#2 – 41,7%); the new ISO 20022 format (#3 – 32,8%); the MiFID/R review (#4 – 28,3%); the PSD2 review (#5 – 20%), and finally the adoption by the EU of the Basle rules (i.e. Capital Requirement Regulation) (#6 – 18,9%). This demonstrates the essential role that EACT can play in trying to influence and change the measures that are least acceptable to its members. It is important to make the voice of treasurers heard in Brussels to defend their interests.
Takeaways
The quest for further digitization and hope placed in new technologies and innovations are explained by the importance of combating the increasing risk of fraud (ranked higher, as cyber-attacks and frauds significantly increased during the pandemic); the need for strengthening internal controls; by growing economic uncertainties; the need for more efficiency, and by a lack of sufficient (human) resources. The crises have crystallized the need to digitize and accelerate the ongoing transformation. The maturity of technological solutions, more than ever, makes it possible to have greater expectations for improved cash management. The challenge for treasurers comes not so much from the changes themselves, but from managing the continuum of changes, on the economic, financial, and regulatory sides. It is clear from this survey that there is still a long way to go to reach a level of mastery of new technologies, real-time operations management, and reduction of inherent treasury risks. Despite the significant shift noticed during these recent crises to digitize and automate treasury processes wherever possible, the survey demonstrates the need for taking treasury to the next level.
François Masquelier, Chair of EACT (European Association of Corporate Treasurers)
OUR ADDRESS
ATEL
Francois Masquelier
Résidence Soho/NY
1 rue de Chiny,
L-1811 Luxembourg
Phone: 00352 621 27 80 94
secretariat@atel.lu
BGL : LU79 0030 7000 7964 0000
Contact us:
