EuroFinance report 4: The challenge of connectivity

The success of EuroFinance’s international treasury and cash management conference over 25 years has very much been based on a mixture of broad-brush presentations covering big picture topics and workshop sessions drilling down into specific treasury issues.

This year’s presentations have been no exception, although there has been a decided shift in the past couple of years. Tensions in the eurozone, the migration crisis and an anti-globalisation agenda shared by extremist groups on both the left and the right have pushed socioeconomic and political issues onto the big picture presentations.

Day two of the conference was a perfect example, kicking off with a presentation entitled ‘Renaissance 2.0: Ingenuity, innovation and crisis’ from Dr Ian Goldin, director of the Oxford Martin School and professor of globalisation at Oxford University.

His upbeat premise is that we are living in a second Renaissance period, with mankind making extraordinary strides since the beginning over the Eighties. In three and a half decades, average life expectancy has increased by 20 years, illiteracy has been reduced by 70% and extreme poverty has been cut dramatically. In short, this is the best time ever to be alive as our longevity and health steadily improves.

However, the first Renaissance period ended with a series of systemic risks and disasters, with plagues, the rise of the Medicis and anger at the speed of change from those who felt left behind. Similarly the gains of the second Renaissance appear increasingly at risk as walls are re-erected, inequality increases and globalisation is seen as bringing changes that are bad as well as good.

Treasury not aloof

The challenge for treasury is increasingly one of managing a world of rising uncertainty and taking decisions in this environment, said Dr Goldin. It is one in which rising life expectancy is accompanied by a collapse in fertility rates, so population growth is not only slowing but has gone into reverse in Europe and East Asia. The US can thank immigration for the fact that it enjoys somewhat healthier demographics.

The economic future is one in which the emerging markets are set to enjoy much stronger growth than the developed ones. China is likely to maintain its recent annual growth rate of around 6.5%, India will enjoy 7% and even the collapse in commodity prices shouldn’t see Africa fall below 4%. By contrast, the US growth rate is likely to be nearer 2%, Europe 1% and Japan will struggle to manage any growth at all.

The cyber world is becoming the “nervous system” at the heart of everything we do, so trust and integrity are becoming increasingly vital. Automation stands to dispense with up to 40% of jobs in North America and Europe, which poses the question of how we can make technology our slave instead of being ruled by it. In addition to all this, climate change is now clearly the most urgent problem that the world has ever faced.

Yet Dr Goldin suggests that all of these challenges make it a good time to be working in corporate treasury as the demands and responsibilities placed on the treasurer steadily increases. Their priorities in the short term should be to demand a clearer regulatory environment, as the regulatory response currently depends on which region of the world your business operates in.

They also need to fight back against the short-termism that afflicts both accounting and regulation. Their efforts will go towards ensuring that the significant achievements of the second Renaissance are sustained.


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