The success of the treasury profession is dependent on how well it operates in an increasingly virtual environment, according to the latest global treasury benchmarking report published by PwC.
The report, entitled ‘The virtual reality of treasury’, is the first published by the group since 2014 and canvasses the views of more than 220 treasurers and chief financial officers (CFOs) from around the world.
The authors note that this year’s findings validate a number of trends detected in the previous report three years ago. Among them is that only one third of people involved in treasury processes today report directly to the treasurer. Increased outsourcing of back office and payment factory processes and more involvement with local finance teams for exposure reporting create new complexities in implementing regulations, safeguarding liquidity and managing risks.
Commenting on the findings, Sebastian di Paola, global corporate treasury leader at PwC, said: “Treasury’s scope continues to expand and should be seen very much as a process rather than a department.
Treasury is becoming increasingly virtual and treasurers need to be jacks of all trades by collaborating more with the business, shared services and banks and raising their game in IT security, valuation and financial risk management. As a result, traditional management models may not be as effective as in the past. Instead, a consultative approach, better integration with other business processes and automation will generally be the best strategy.”
Among the key findings of the 2017 edition:
The agendas of the treasurer and the CFO should be better aligned:
Although the agendas of the CFO and the treasurer are aligned at a high level, CFOs are urging treasurers to take on responsibilities beyond the textbook definition of treasury, opening up opportunities for treasurers. However, treasurers do not appear to have the same sense of urgency as CFOs on topics like cybersecurity, compliance, working capital and financial risk management, as CFOs mention these two to three times more often as top priorities than treasurers do.
True focus on cash flow forecasting is needed:
Cash flow forecasting is at the top of the treasury agenda for both CFOs and treasurers. More than 40% of the respondents mention this as a priority and 80% of these people rank it as high or of critical importance. However, there are a number of basic issues that need resolution, including accuracy of data, data mapping and proper tooling, before treasurers can truly benefit from the features that enable proper predictive and scenario analysis.
Treasurers need to take action to safeguard assets with rising cybersecurity threats:
Treasury typically ‘owns’ payment infrastructures and bank communication. Both are key business functions and cannot be compromised. With cyberattacks and payment fraud regularly making headlines, treasurers must be vigilant in safeguarding financial assets. It is worrying, therefore, that only 19% of treasurers list cybersecurity as a critical concern. By contrast, 45% of CFOs name cybersecurity as a priority, pointing to a significant misalignment in CFO and treasury agendas in this regard.
Base Erosion and Profit Shifting (BEPS) will bring tax and treasury closer together:
New fiscal legislation means substance and transfer pricing will take centre stage. This may have a material impact on the location of treasury activities, distribution of decision power and configuration of systems. As a result, treasury will need to work more closely with tax to assess the impact and properly prepare their organisations.
Treasurers need the means to make their activities truly resilient and effective:
The treasurer’s agenda is dominated by a wide range of high-effort compliance topics such as know your customer (KYC) and accounting changes. In recent years, budgets have been flat and budget outlooks remain stagnant. Many treasurers find it challenging to balance budgets with the effort required to meet compliance requirements and make treasury more effective and resilient. Attractive business cases from increasingly innovative digital solutions may provide at least a partial solution to this conundrum.
The architecture of financial markets has changed and we will soon see the end of the last eight years of prosperity, said Stefan Bielmeier, chief economist and head of research at DZ Bank.
Jill Harrison, group treasury manager of Whitbread Plc, spoke to GTNews at the Treasury Leaders Summit about how Whitbread's subsidiary Costa Coffee hedges risks, the major challenges she faces in her treasury department this year and what career advice she would give to young treasurers.
Cash-flow based metrics now feature prominently alongside traditional revenue measures of business performance in the key figures or financial summary pages of any public company.
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.