The Future of Corporate Treasury

5 The Future of Corporate Treasury The shift to full automation of operational treasury will not happen overnight and progress will differ across industries. As already noted, many corporate treasuries will still need to focus much of their scarce resources on the basics of risk management. However, treasury can no longer be seen as an after-the-fact support function to pick up the pieces. Instead, it must become a real-time business partner offering the insights required at the planning stage to help mitigate the financial risks associated with business expansion into new markets. Digital transformation of treasury is well underway The recent 2018 Digital Treasury Transformation survey shows that many corporates are becoming curious about digital: Two-thirds of respondents currently have a digital strategy in place at the enterprise level. A similar number indicate that digital transformation is a priority for their organization and are now looking at emerging opportunities across both the core business and treasury as a result of new technologies. These results suggest that many innovations are now at a point where they could have a meaningful impact on treasury processes. The key drivers of these changes identified in the survey are increased operational efficiencies from the automation of processes, and improved cash visibility. However, any digital treasury transformation will require investment and this remains a key hurdle to implementing change. Twenty-five percent of respondents noted that while they are keeping up to date with the latest developments, digital themes and emerging technologies are not a priority. Another 12% of them are waiting for further developments before becoming further engaged on the topic as illustrated in Figure 1. Are Corporates Embracing Digital Treasury? Figure 1: Current focus on digital themes Priority now, looking at transformative opportunities Keeping abreast of topics but not in active planning Wanting to see further developments in this space 12% 25% 63% Business Transformation Treasury Transformation Business and Treasury Transformation 13% 39% 48% For those organizations where a digital strategy is in place at the corporate level, the top area of focus is the automation of manual tasks, with over 22% of respondents identifying this as a priority. Enhancing customer experience and cyber security are the next priorities, followed closely by KPI monitoring and managing financial risk. Figure 2: Current areas of opportunity to utilize emerging technologies Automating Processes 22% Cyber Security 16% Enhancing Customer Experience 16% Managing Financial Risk 14% Enabling KPI Monitoring 14% Product Development 10% New Sales Channels 9% The greatest barrier to adopting these new technologies is legacy technology and the integration of new technologies with those already in place. The survey highlights cash management as a key transformational opportunity created by digital. Respondents identify cash forecasting and payments and receivables processing as the top two processes likely to be positively impacted by new solutions. Accurate cash flow forecasting, as a component of FX and liquidity risk management processes, can be the key in the preservation of corporate earnings and the realization of greater economic value generated off shore. The cost of inaccuracy in such a case is the loss of offshore earnings realized, as they get translated to functional currency. Many forecasting models are still dependent on intuitive “guestimate” inputs such as forecasting error standard deviations. However, it is not inconceivable that a digital real-time treasury of the future may mitigate many of these concerns. The forecasting process itself will benefit from the use of machine learning techniques, which could, for example, result in more accurate receivables forecasting through