Corporate treasury is at a critical juncture of its evolution. The pace of change in business means the status quo isn’t good enough anymore. Treasury must evolve and reinvent itself to remain relevant and fulfil its strategic mandate. These were the key messages at last week’s EuroFinance Conference in Copenhagen.
Change is never easy, and it’s especially challenging for treasury right now. Many teams only have the time and resources to keep their heads above water, let alone plan strategically for the future. Yet the steps treasury teams take in the coming year or two will define its position next decade. It’ll either be at the top table or not. There is no in-between.
So what should treasury focus on in the next 12 months to adapt and provide greater value to the enterprise?
Solutions are out; platforms are in
Technology adoption is key to the success of treasury. But not all technology is created equal. For too long, ineffective solutions have prevented teams doing their best work, trapping them in inefficient process flows and limiting opportunities to add real value.
Treasury teams must look beyond these solutions and towards networked platforms if they’re to achieve their goals. Doing so will allow treasury to better connect with key stakeholders and their systems. That’ll promote the free flow of data, creating more opportunity to reinvent processes and drive straight-through processing. And with digitized flows treasury can use AI-enabled tools to analyze its data and make more strategic decisions.
Platforms also give treasury flexibility and adaptability to meet the changing needs of the enterprise. Treasurers can use platforms that provide open APIs to connect with best-in-class tools from an ecosystem of providers and partners at the click of a button. Just think about how the iPhone gives access to an infinite number of apps, allowing us to do whatever we need at home. Platforms will provide treasury with the same level of professional power.
It was encouraging to hear much more talk of networks and platforms at EuroFinance. My concern, however, is that far too much of the conversation remains centered on efficiency and cost savings. These should be the baseline expectation of any platform. Treasury must think bigger to achieve its goals. It should look to use networked platforms as the launchpad into a period of continuous improvement and evolution.
Working Capital 2.0
It’s no secret that the world is becoming more complex. Because of this macroeconomic uncertainty is a top area of concern for business. And while the increasing complexity poses several challenges for treasurers, it also creates an opportunity for them to exercise their strategic muscle.
Treasury’s renewed focus on working capital is just one area where this is apparent. According to a recent study by PwC, 64% of treasury teams are taking a much deeper look at their company’s working capital position. They’re looking to use various techniques, technologies and working capital solutions on both the accounts payable and accounts receivable side of the business to unlock trapped capital in the organization.
At EuroFinance several treasurers spoke of success in this area. However, there is still plenty of room for improvement. Treasurers claimed that banks were still not providing financing deep enough into the supply chain and that onboarding suppliers was an arduous task. Selling the benefits of working capital solutions to stakeholders in accounts receivable, accounts payable and procurement were also highlighted as a barrier to success.
Fintechs focused on this area are helping treasury solve these challenges. Panellists cited how using their user-friendly tools allowed them to onboard more suppliers onto their supplier finance program. While data was cited as an enabler of transparency that would reduce risk and make financiers more comfortable funding deeper into the supply chain.
Treasurers keen on impacting the future of their company should pay close attention to developments in this space. If they can unlock trapped value in the supply chain it can give the company a strategic advantage going forward.
People power will drive change in treasury
Despite all the talk of technology, it’s clear that treasury is, and will remain, a people business. Treasurers alluded to this in multiple sessions. And their focus is primarily on three key areas: upskilling, hiring differently, and building an innovative culture.
Treasurers understand that their roles are changing. And, as a result, they’re finding themselves working on more and more unfamiliar tasks. And according to the panellists, the pace of this change will only continue. To meet this challenge, several treasurers spoke of looking to gain new skills. These varied from data science, project management, and strategic thinking.
Interestingly, some treasurers also spoke about changes to their hiring practices. Some leading teams are breaking from the status quo by hiring people with ‘non-traditional’ skill sets from technology fields. This is something we’ve seen in the banks for some years, and it’s interesting to see this gain more popularity in the corporate world. And I suspect it is a trend that will continue as treasuries adopt more technology and the role shifts from transactional to strategic.
Linked to both trends is a wider transformation of treasury culture. Some at the conference spoke at length about looking to build an inquisitive and innovative culture within their departments. They want their teams to solve problems and not accept the status quo. This can only be a good thing—assuming innovation doesn’t come at the expense of risk management—and should promote a quicker pace of transformation in treasury.
Getting ready for the future
While these are challenging times for treasury, the future is exciting and the opportunities endless. Treasury is transforming. And with focus and direction, there’s a clear path for treasurers to follow to reach their goals. When they do they’ll be more relevant and add more value than ever before in their enterprise.
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