Treasurers are facing major challenges. In order to meet them, their operating methods will be called into question. They will focus on tasks with high added value, linked to anticipation, and their mission will evolve. In particular, thanks to the availability of connected solutions (e.g. payment solutions, payment related services), with upstream systems (order to cash in particular) for the business. This development will take place more or less rapidly. Depending on the development of new technologies (digitisation of cash), new payment methods and regulations for example.

 

Transforming cash flow: what has worked over the last ten years

The changes that have taken place over the last ten years have enabled companies' treasuries to better manage financial risks (the primary mission of a treasury department):

  • Better visibility on their cash by centralising liquidity: cash pooling, payment "on behalf of"
  • Better transaction security: Automation of front-to-back processes, electronic exchanges with banks (SWIFT messages, etc.), bulk payments, etc.
  • But also, greater efficiency and expertise : Centralisation of treasury activities via regional or even global centres. And the development of shared service centres for tasks with lower added value, process automation, etc.
  • The implementation of new tools to optimise working capital: supplier financing, factoring, etc.

And the use of new financial instruments to optimise the cost of debt and foreign exchange risk hedging.

All this is made possible by the development of standardised processes and the implementation of treasury IS. They are not very "customisable", however, and are less flexible to adapt to the ever-changing needs of the treasuries.

 

Under the constraint of a treasury IS, the emergence of new methods

Some treasuries have taken advantage of this to rethink their cash management structures. By rationalising, for example, the number of banks and accounts. They are setting up "virtual accounts" or foreign exchange/FX management modules, adapted to their geographical footprint.

At the same time, they have also rethought their supplier payments to reduce the frequency of payments, cut costs (especially FX) and optimise their working capital. But the major subject of the last few years has been the reconciliation: how to optimise it? The answer can be found in several solutions: dedicated IS, virtual accounts, Swift Gpi... In this context, future developments may bring new solutions - but also constraints - such as Instant payment.

 

Challenges 2.0 for company treasuries

Corporate treasuries are facing a new revolution: digitalisation (accelerated, 2.0, 4.0). This is sometimes encouraged by regulation (Open banking globally and PSD2 in Europe). The latter provides a framework for offering new services and solutions to consumers while at the same time controlling the risks of fraud and protecting merchants. These changes are based on an accelerated development of technology, particularly in terms of connectivity and APIs.

This in a context of increasingly volatile and uncertain markets and a changing regulatory environment (data protection, BEPS, tax reform in the United States, export controls, abolition of LIBOR...). Cybercrime is growing and waves of acquisitions are emerging, which may have a strong impact on the changes already made. For example, those in liquidity management, which requires a large mobilisation of the treasury teams.

 

Response to the digital revolution: the questioning of known models

This revolution is accelerating with the emergence of new technologies, "real time" payment methods and new players. Together, they are challenging and will challenge, to varying degrees and on different horizons, the models deployed by B-to-B corporations and treasuries:

  • New business model for B2B corporations

The business models of B2B corporations will evolve. With the possibility to reach the consumer directly via marketplaces and new payment methods (instant payment, DPS2, mobile payment).
This will have a very strong impact on the process order to cash (redesign). An eco-system with new players (PSP, Fintech, GAFA) will be inserted between the bank and the corporate to offer services around cash collection directly to the business. They could then question the classic banking model of "collection" under the pressure of business. The corollary would be the emergence of new counterparty risks, payment security risks and uncontrolled collection costs (stacking of players).

It is therefore essential for the treasuries to be proactive and to be involved in a number of developments:

  • Those of the process order to cash,
  • The design of new value chains,
  • The selection of PSPs and other actors.

The banking relationship will therefore evolve. The service expected from banks is no longer collection but services associated with collection: new means of payment, "real time" payment information. In this context, treasuries and banks have no choice but to adapt to remain dominant players. Banks will have to be able to respond to these new service needs with the necessary agility.

Some banks (including Deutsche Bank) have undertaken major changes and investments to meet the needs of their customers and the market. The recent announcements on a new payment solution (Request to Pay) in the airline industry is a good example of this.

  • Digitisation of treasuries

An internal digital revolution is imminent in treasuries:

  • Real time" in liquidity management. With open banking and instant payments: flows will be 24 hours a day, 7 days a week.
    It will be essential for treasuries to analyse the impact on the management of their liquidity and their operating methods,
  • Artificial Intelligence/Robotica/BI: they should make it possible to increase the level of automation, and therefore efficiency, to develop predictive analyses (cash flow forecasts for example) and to set up a dynamic management layer (dashboards),
  • Blockchain/Signature Electronic/EDM for some contracts: documentary credits, KYC, account opening documentation which are real problems for treasurers,
  • API, TPP, eWallets,
  • API : they open up the possibility of exchanging information with banks, Fintech, PSP in "real time" and call into question the scope of functionalities of existing IT systems.
    The prerequisite is to have a stable and functioning "STANDARD" transactional IT system covering all treasury operations.

In fine, with all its (r)evolutions, it is important to know whether treasurers are going to digitise their management processes or digitise their profession/user experience.

 

Different impacts for different business models

Conclusion: the impact on cash flow will be different according to the corporate and cash flow business models. These changes make the Treasurer's activities more complex. These challenges are all the more important as the implementations will go through :

  • The evolution of current Treasury SI, which are partly obsolete and cumbersome to develop (incompatible with the agility required to meet business needs) and which will require substantial budgets,
  • Strong change management in organisations and teams with the need for new profiles:
    • Process engineers in charge of designing solutions with the business and delivering them
    • Mathematicians for the development of predictive analysis, for example.
  • The identification of strong players with a presence beyond the region,
  • In-company training for business contributors, IS/IT, treasurers on the new players, technologies and new means of payment that are still too little known,
  • Awareness at the level of the financial departments on the digital stakes in the treasuries.
  • The mobilisation of budgets to accompany these changes in a context of strong pressure to reduce costs.

 

In any case, the Treasurer's positioning has never been so strategic and digitalisation 2.0 will only reinforce his necessary involvement in the company's management processes.

 

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