In the current macroeconomic environment, Treasury Functions have a very important role to play in supporting business growth to maximise profitability while minimizing risks and safeguarding cash. Treasury Functions have been playing a more strategic role in their organizations since the financial crisis of 2008-09. Closer focus on monitoring financial metrics and even more focus from external parties like the regulators and ratings agencies have meant that the Treasury Function has increasingly become the backbone of an organization. Senior Management and Board members pay very close attention to Capital, Liquidity and Risk Exposure metrics.
There is still some way to go beore Treasury Functions can become the Strategy House of an organization. There is plenty that 'Strategic Treasurers' can do to bring greater efficiency, automation and integration across the range of Treasury activities which will help push a Treasury Function to become the Strategy House. Here are some suggestions:
People in Treasury: Promoting diversity and inclusion can bring considerable business benefits. There is plenty of scope for adopting dynamic working practices in Treasury. Treasury managers tend to recruit people who have very similar backgrounds to theirs. Accountants with Financial Reporting or some Risk experience - this is a typical person in a Treasury function. Recruiting more engineers, strategists, MBA graduates, matemeticians and structurers alongside Risk and Finance Managers will benefit a Treasury function. 'Diversity in Thought' is often excluded from the diversity/inclusion conversation. Diversity in Thought will promote diversity in skill sets and will offer all Treasury employees a key ingredient to cross collaborate and learn.
Path to greater integration: Seamless integration between systems and developments in Robotics / AI / Machine Learning can enable Treasurers to minimize manual processes, reduce the risk of manual errors and bring greater visibility into forecasting processes and in turn, set better strategy setting practices within the organization.
Developments in Financing: Banks are tapping into some direct lending funds or partnering with new age fintech start ups to provide joint financing solutions. There is an ever growing demand for green financing through issue of green bonds and green loans. Managing an optimal funding structure and being able to articulate a funding strategy to external investors, ratings agencies and regulators is becoming a key part of a Strategic Treasurer's book of work.
Working Capital Management: To drive efficiency, Strategic Treasurers need to promote cross-functional cooperation across an organization. Given the current market environment, many customers maybe struggling to meet their payment schedules. Monitoring the organaziation's Cash Conversion Cycle and reducing the time for Debtor Realization are extremely important to avoid a liquidity event. Having best practices in place to manage working capital requirements should be at the forefront of a 'Strategic Treasurer' policy objectives. It is also important to be ethical and empathetic towards customers while doing business. How Treasurer's do business today will determine how they are perceived in the future. Treasurer's should look to work with their customers to manage accounts payables and receivables, not against them.
Payment Trends: There are many notable recent developments in the payments space. FinTechs are taking smaller margins in the FX space and therefore, banks will increasingly need to focus on innovating in order to develop value add products which may bring further benefits to customers than those offered by FinTechs. In the long run, banks may become a backend processing machine while the FinTech platforms become more customer facing. This will not be a desired outcome for many banks. To avoid this, 'Strategic Treasurer' of the banks really needs to be involved in the payment innovation space to shape the business strategy. Revolut is offering current accounts, savings accounts, FX payments, trading accounts and so on. Trade 212 is providing commission free trading on a number of stocks and ETFs traded in the US and UK markets. Tide is offering very attractive business banking services to Small Medium Enterprises (SMEs). These FinTech firms are slowly starting to lure business activy away from traditional banks.
To learn more about Corporate Treasury, click here.
Comments