The chief financial officer (CFO) is often touted as the individual who deals with the day-to-day monetary processes and operations of the business. Yet, as technology has grown in prominence, so too has the role of the corporate treasurer. Menial tasks, such as financial planning and record-keeping, no longer confine them. Treasurers must now traverse the globalised business world and find the correct areas of growth, while avoiding the associated reputational and financial risks.
The purchasing of goods and services, or more commonly ‘trade credit’, is a normal transaction in the world of business. As such, the importance of the corporate treasurer has gradually risen to be integral to a firm’s fiscal success. The pressures of depreciating currencies around the world, divisive political narratives and faltering economies are providing extremely complex challenges; but they can call on data to be the instigator to unlocking the smart growth necessary.
The heartbeat of the business
It’s paramount that financial decision makers understand the importance of data. Data means information, information leads to knowledge and knowledge can unleash unknown areas of growth. Importantly, the treasurer must now be the heartbeat of a business, assessing the potential problems posed before them and making the necessary bold decisions. The latter role is vital: businesses that fail to evolve due to a fear of uncertainty will fall behind competitors and fail to organically grow.
As their role continues to change, harnessing data can provide companies with the tools and insight needed to progress their business during tough economic times. Data analytics has increasingly become core to everything that a treasurer must be able to do, from discovering the financial background of a potential customer to evaluating the credit rating of a business.
Data has the power to uncover huge potential, enabling financial decision makers to be agile and balance potential risk against opportunity. Data is the missing component that can supply the insights needed to identify risks associated when on-boarding new customers; it can also spot areas of growth and risk amongst existing customers. Crucially, data can be the deciding factor that enables a business to thrive above its competitors and ensure that it can adjust to the global impacts around.
Data isn’t only vital to dealing with the emergence of technology but it’s the crux of any smart business looking to overcome turbulent global economies that are throwing up complex challenges. Following on from Brexit, the appointment of Donald Trump as the next president in the US has confirmed the shift some western countries are taking, best associated with uncertainty for some and a new beginning for others.
Research compiled by the International Monetary Fund (IMF) and released in early October found that the estimated global debt load had reached an incredible US$152 trillion, or about 225% of annual global output. The warning that worldwide debt is extremely high and rising serves as a clear reminder that all risk must be managed before a business considers on-boarding new customers or partners. The globalised world means that the treasurer must consider working with a host of different partners, suppliers and customers, and naturally risk becomes part of the everyday operations. Not only can data be the difference but it can provide the treasurer with factual information to safely navigate any global, economic change.
Deloitte’s most recent quarterly CFO survey for Q3 2016 confirmed the heavy impact that Brexit was having on business confidence. In the UK, Brexit has put CFOs on high alert – less than one in five (18%) believe that now is a good time to take on risk. Indeed, bad risk must be avoided at all costs but shying away from growth is not the answer. Financial decision makers are now central to every business operation, and with digital disruption now more common than ever, data is the only tool that can help navigate a business forward.
Digital services aren’t simply transforming everyday processes, but completely evolving daily tasks and changing the financial services industry entirely. Back in September, Barclays Bank conducted its first blockchain trade finance deal, in association with an Israeli based start-up, Wave. The world’s first trade transaction of its kind cut to just four hours a process that would usually take between seven to 10 days
By using the latest analytics, a treasurer can accumulate vast data points, analyse them and decide how much credit to extend to their customers. Pairing this approach with non-traditional data points accessible via Twitter and Facebook, for example, offers companies real-time financial updates based on societal, political and cultural events.
The volume of data now available is huge; 90% of the data across the world has only appeared since 2013. Whether it is deep dive data analytics or real-time internet sources, businesses need the correct tools and support in place to protect the business, inform the treasurer and maximise growth and profit. A data-led approach can locate hidden streams of revenue and help a business mitigate the uncertainty being thrown up by across the world.
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Transactions that encounter different currencies naturally bring the added risk of currency fluctuations – one of the many risks a firm operating in international markets must acknowledge and actively deal with. Indeed, for companies stretching across national boundaries, either through regional subsidiaries or with a client base in different geographies, the pitfalls of foreign exchange (FX) risk can – if not dealt with efficiently – put significant strain on a company’s financial health.
Liquidity management is a cornerstone of every treasury and finance department. Those who overlook a firm’s access to cash do so at their peril, as has been witnessed so many times in the past