Recent corporate treasury surveys (e.g. HSBCs Risk Management Survey 2018) confirm a shift in treasury priorities towards a stronger strategic partnership. This shift is driven by a significant change in operating business models (e.g. in the automotive / mobility and energy sectors), more complex geopolitical developments as well as the technology-driven efficiency gains in "classical" treasury aspects like exposure accumulation and repetitive cash management and hedging activities.

    Economic slowdown as catalyst or millstone?

    The recent worsening in key economic indicators across the world can act as a further trigger for treasury to strengthen the partnership with CFOs and operating business segments. In a more volatile trade environment, where future cross-border cash flow planning becomes more difficult, treasury can add significant value in analyzing and mitigating the impact of currency fluctuations on operating margins. But at the same time mounting cost pressures reduce the likelihood of getting additional and frequently required IT and personnel resources into the finance function. Thus for many treasurers the balancing act between aspiration and technological curiosity on one hand and the ability to efficiently transform treasury processes in an adequate time on the other hand is often widening. Such a dilemma is evidenced e.g. by the recent survey "KI, Robotics & Co." conducted by HSBC and DerTreasurer which included views from 166 German corporate treasuries).

    Data analytics and real-time reporting as further treasury competences

    Another observation is that technological change is reflected in many recent job profiles for open treasury positions. The range of skills required and tasks to fulfill has expanded, providing less time (and thus requiring more efficient processes) for classical treasury competencies in areas such as FX risk management. Especially the ability to handle an exponentially growing amount of internal and external data and improving its quality is requiring a frequently new set of skills within treasury teams. The prize earned from such is often a lucrative one as it is treasury's expertise in this area that enables to support CFOs and operating business with a real-time view of the financial risks the enterprise is facing. A critical decision in the process is whether and which parts of the data lake are to be shared with external partners ranging from core banks over fintechs to consultants. In the end like with all commercial projects the expected "lifecycle" value contribution from such partners should be a main factor in the decision.

    Digital processes for market risk management purposes

    Besides general resource constraints and the "buy vs. make"-decision as described above, the magnitude of to-be-digitized work streams on offer far exceeds the capacity and current demand of most corporate treasuries. But which process to start with – electronic platforms for financing instruments or FX hedging, internal risk dashboards or rather a full "Straight through Process" from ERP system into accounting entries? The best choice is as heterogeneous as the status quo of treasury systems across geographies, business sizes and industry sectors - and the tech train will continue to drive with different speeds through treasury departments. A helpful support to the prioritization decision is to cluster the various digitisation projects considered into a matrix plotting "proof of technology" and "expected efficiency gain for the company" – an illustrative example further including "resources / time required" as bubble size is shown below:

    Source: HSBC; for illustrative purposes only. Bubble sizes indicate amount of resources/time required for implementation.

    As a result it might be worthwhile to start digitizing the cash flow planning on a group-wide basis, while retaining or even increasing treasurer‘s flexibility to decide between various hedging instruments, ratios and tenors. Increasing the latter at times where treasury is gaining better visibility of underlying business drivers should enable to better protect profitability against financial market volatility when the geopolitical and economic environment remains challenging. And despite the significant progress in machine learning to improve interest rate and FX predictions, for the time being a transparent and comprehensible (to the human brain) hedging decision with technical execution support remains the preference.

    The balancing act remains

    Rising business uncertainty, more and more complex data gathered – to navigate such challenging conditions, treasurers need to increase collaboration with operating business units and communicate constantly with a larger set of stakeholders. The width of treasury skills between new requirements and continued excellence in "old" virtues (e.g. in trusted partnerships with banks when entering and hedging Emerging Markets exposures as well as established processes for incident management where technology falls short of perfection) is rather extending.

    With respect to budgets and efficiency gains, less is frequently more for treasury digitization: a successful middle ground for many corporates is to focus efforts on core tasks, follow through on implementing key processes digitally and continue to draw on the experience of those (bank) partners who offer value-added services and solutions to safeguard the company against financial risks across its enterprise.

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