From 2020 to 2030: Future-Proofing Treasury for the Decade Ahead
By Eleanor Hill, Editor
Companies worldwide face an environment of change – ranging from new trade dynamics to evolving business models on the back of digitisation. Ron Chakravarti, Global Head of the Treasury Advisory Group, Citi, explains how corporate treasurers can stay ahead of the curve by reviewing treasury structures, technology and talent.
A century ago, the world was on the brink of dramatic social and political change. The 1920s also ushered in a period of significant innovation in technology and science, with machines replacing unskilled workers on production lines.
One hundred years on, similar trends are reshaping today’s global economy. International supply chains are being reconfigured in response to a surge in protectionism and trade interventions. And digital disruption is transforming industry ecosystems, as well as business models.
Meanwhile, treasurers are busy managing the impact of low and sub-zero interest rates, not to mention changes to Interbank Offered Rates. Major tax overhauls, such as US tax reform and the Organisation for Economic Co-operation and Development’s (OECD’s) Base Erosion and Profit Shifting (BEPS) initiative, are also leading to changes in corporate trading models, with consequences for the distribution of cash, and funding needs, across enterprises.
At the same time, companies are increasingly searching for growth in new geographies, often emerging markets. This adds extra complexity for the treasurer, who is already tasked with taking a greater strategic role and ‘doing more with less’ by embracing advances in technology – even when some of these digital developments are yet to be fully proven.
And, not to forget, unexpected events – and crises – open our eyes to more radical change. Best practice evolves as the world changes, so treasury models must also move on.
Against this backdrop of uncertainty, Chakravarti believes treasurers would benefit from future-proofing their operations for the 2020s in order to support enterprise growth – while navigating the heightened risks and leveraging the opportunities. But with so many priorities, and no small amount of hype surrounding treasury innovation, where should treasurers focus their future-proofing efforts?
Cutting through the noise
According to Chakravarti, there are five key steps that can help treasurers to build their future-proofing blueprint. The first is focusing on collaboration in order to reap the full benefits of digitisation. “Treasurers need to be looking ahead at how they can digitise all of the department’s processes and use data and analytics to help them make better decisions, more quickly,” he notes.
To achieve this level of digital sophistication, treasurers will need to collaborate internally and externally. “Collaboration is vital for treasurers to stay informed of emerging technologies, identify digitisation opportunities, and secure the financial and human capital to realise the potential benefits,” he says. “There will need to be close co-operation with the rest of the finance function and IT in order to ensure treasury’s digitisation efforts dovetail with those of the wider organisation. In addition, treasurers would do well to work closely with their banking partners and technology vendors.”
Fig 1: Prescriptive analytics appetite
Source: Citi Treasury Leadership Client Forum, November 2019
In this spirit, several Citi clients are participating in collaborative experiments to “leverage emerging digital tools that aggregate fractured data sets more effectively”. The hope, Chakravarti explains, is to be able to use technologies like artificial intelligence (AI) to recognise patterns and adjust liquidity predictions accordingly (see fig. 1). “The technology will also help to simulate next-best actions based on policies and risk appetite,” he continues. “We believe there are similar opportunities with FX exposures, where technology can potentially be more efficient than people in determining the optimal hedging approach.”