For the past two decades corporate treasurers have been eagerly awaiting a wave of technological change to help cope with their ever-increasing workload. For some time now, treasurers have been told that their industry is on the brink of accessing automated systems that will free them from the drudgery of their day-to-day operational activities like managing cash flow and treasury reporting. Treasury staff and even the chief financial officer (CFO) have long expected mundane processes to become mechanised, only to have them remain manual, excel-based and fragmented.
More than 20 years since these promises were made, many organisations have implemented treasury management systems (TMS) to streamline operations and allow treasurers to think more strategically. The idea being that treasurers could move away from process-oriented and information gathering activities and instead have a seat at the C-suite table, becoming instrumental in formulating the organisation’s overall strategy through careful planning and risk management. But this promise has struggled to be fully realised.
“Part of the reason why this hasn’t happened is that the role of the treasurer keeps changing,” says Naresh Aggarwal, associate director – policy & technical at the Association of Corporate Treasurers. “The world itself keeps changing. Businesses keep changing. The systems the company employs also keep changing as well. Companies grow, they expand to India, Guatemala. They shrink, they sell bits of their business. And so, there is never a consistent ecosystem that treasurers inhabit.”
For that reason, however, TMS providers have upped their game – and the industry has grown in competitiveness over the past few years. With the treasury landscape in a constant state of flux due to volatile financial markets, increased regulation and a myriad of macroeconomic headwinds, firms have become reliant on TMS vendors.
“Treasurers need a vendor that can pivot quite quickly to ensure that their solutions are capable of adapting and adjusting to changes in the landscape,” Aggarwal explains. “Therefore, it’s less about the products vendors offer and more about how they can respond to the ever-changing ecosystem that treasurers operate in.”
The regulation conveyor belt
Over the years regulation has continued to shapeshift. The European Market Infrastructure Regulation (Emir) came into effect back in 2012 and with it brought more stringent reporting requirements for derivative contracts and risk management standards for treasurers to implement. In the years that followed Emir has been tweaked by the European Securities and Markets Authority (Esma) several times, with the most recent review of the regulation, known as the Emir Refit, published in May of this year.
The introduction of new accounting standard IFRS 16 from the beginning of January 2019 significantly altered how businesses govern the treatment of leases. Under the new standard it changed how treasurers look at certain assets, effectively removing opportunities for off balance sheet accounting, which in turn changed the way treasuries implement asset financing strategies, accounting methodologies, gearing and profitability.
Coming down the pipe, corporate treasurers are already busily preparing for London Interbank Offered Rate (Libor) reform in 2021. And regulatory compliance is just one aspect of a treasurer’s workload, with many of them beavering away at a myriad of tasks just to keep the wheels of their organisation turning.
Considering the vast swathes of responsibilities treasurers are required to manage, it would appear prudent for investment dollars to be allocated to treasury teams for implementing technological solutions to help ease the strain. However, investment in technology to streamline treasury functions has traditionally been neglected due to its high cost. Treasurers’ resourcefulness has also hindered investment in technology, with many managing to do their job using simple tools like Excel, leading management to rely too heavily on the adage ‘if it isn’t broke, why fix it’. But this trend has started to reverse in recent years.
“The real game changer for treasurers right now is that the cost of implementing technology solutions is much lower due to things like APIs and the rise of fintechs – meaning that you don’t need to put in a new £50,000 TMS to deliver what you need,” Aggarwal says.
Out with the old
The technologies available to treasurers have also changed significantly, with the broader use of robotic process automation (RPA) and artificial intelligence (AI). These more sophisticated technologies are not only cheaper than ever before, but they also offer treasurers the tools to automate more and more processes, allowing treasurers to do more interesting work.
“The acceleration in technology and innovation within the treasury ecosystem is being driven by lower costs for computing power and data storage, combined with an increase in the availability of data and applications being developed,” Todd Yoder, head of derivatives and hedging strategy and director of global treasury at Fluor Corporation told Bloomberg.
“We wanted more information to ensure we implement the optimal hedging strategies in alignment with our overall objectives.” he added. “The right hedging strategy can mean millions of dollars to the business, so we are looking for any edge we can get.”
Since the financial crisis corporate treasurers’ responsibilities have grown in tandem with the size, scale and complexity of the challenges their organisations face. In turn, treasury departments increasingly look to new technologies to reduce costs, improve efficiency and strengthen their teams. In doing so, not only are more mundane processes finally being automated, but more sophisticated tools are empowering treasurers to think more strategically and helping to push their ideas to the fore, with treasurers increasingly guiding strategy at the highest the level.