Episode 1
Trends in Corporate Treasury 2021
In the first of the Journeys to Treasury podcast series, our experts preview the results of two major studies for 2021 undertaken by the EACT and PwC respectively, to understand the trends in corporate treasury as we transition into a post-pandemic environment.
Helen Sanders, Director, Asymmetric Solutions speaks with (below, left to right):
Jan Dirk van Beusekom, Head of Strategic Marketing BNP Paribas Cash Management & Trade Finance;
Christian Mnich, VP, Head of Solution Management, Treasury and Working Capital Management, SAP;
François Masquelier, Vice Chair, European Association of Corporate Treasurers (EACT); and
Sarah Korykora, Senior Associate, PwC.
Corporate treasury priorities 2021
Treasurers have played a critical role throughout the pandemic, supporting the company’s cash, liquidity and risk management needs during an extended period of market and social volatility, compromised working conditions and a rapid shift towards new, digital business models. This article previews the results of two major studies that will be published shortly by the European Association of Corporate Treasurers (EACT) and PwC to explore how treasurers’ priorities have developed over the past year and the likely trends as we move into a post-pandemic environment.
Cash flow forecasting
For the second year in a row, the EACT survey placed cash flow forecasting as treasurers’ most important priority, with 63% highlighting forecasting as one of their top three issues. François Masquelier, EACT notes,
“This finding comes as no surprise. Last year’s survey was conducted at the start of the COVID-19 pandemic, which brought huge change and uncertainty in corporate cash and liquidity dynamics. Now, as we look ahead to a very different consumer and business environment compared with pre-pandemic days, treasurers are once again challenged to understand, model and influence future cash flow and liquidity to maintain the financial health of the business.”
However, while many of the 2021 echo those of 2020, a notable change is the importance of risk management. In 2020, risk management was ranked 9th amongst treasurers’ priorities. In 2021, this jumped to 3rd, reflecting the new perception of risk as well as market and cash flow volatility that has characterised the past year.
Treasury digitisation and technology innovation
The 2nd most commonly cited priority in 2021 (compared with 4th in 2020) was treasury digitisation, at 43%. Twenty eight percent (28%) also noted that review or replacement of their treasury technology was also one of their three major priorities in the coming year. Christian Mnich, SAP comments,
“Digitisation is at the heart of treasury optimisation. Treasurers are exploring opportunities for data analytics (54%), robotic process automation (40%) and the use of application programming interfaces (APIs) (36%) to digitise processes, enhance the quality of data and harness it more effectively, and facilitate the real-time exchange of data and transactions.”
Data and the Value of Treasury
PwC’s research drills down further into how these digital capabilities can be best used in practice. For example, one of the benefits of improved data and analytics is that treasury is better able to demonstrate the value that it brings to the enterprise, creating a virtual circle in which treasury can continue to expand its influence over the components that contribute to liquidity and risk. Whether treasury is undertaking a working capital assessment, liquidity analysis, bank fee evaluation or business case for technology investment, it is impossible to build a compelling narrative without visibility over the relevant data.
Risk and real-time
It is not just the quality and visibility over data that is motivating treasurers. As the EACT survey emphasises, treasurers are highly motivated by opportunities to exchange data and transactions, and manage liquidity in real-time. As digital business models evolve, with the growing expectation of immediate fulfilment of goods and services, the need for real-time or just-in-time treasury processes and decision-making is likely to continue to grow, with new solutions emerging to meet these changing needs.
Treasurers’ role in ESG
As PwC explores, environmental, social and governance (ESG) issues have become an increasingly important element of corporate strategy over recent years. As yet, however, treasurers have not yet fully embraced the ESG agenda in their departments. For example, the EACT survey illustrates that many treasurers have relatively little involvement in their company’s ESG agenda at present, with activities often limited to reducing business travel and working from home (which is likely to be more the result of business continuity plans during the pandemic than part of an ESG strategy). Sustainable bonds and borrowings have grown in importance since last year, but there remains considerable potential to improve treasury’s contribution to the company’s ESG performance.
There are still challenges to overcome, however. For example, the PwC study reveals that most treasurers do not include ESG issues when making investment decisions. One reason for this is the lack of consistent metrics and reporting, with multiple reporting agencies and frameworks, making it difficult to establish a cohesive ESG-driven investment strategy. Sarah Korykora, PwC comments,
“Every part of the business is tasked to play a role in companies’ sustainability agenda, and treasury is no exception. In addition to borrowing and investment, there are a number of ways in which treasurers can embed ESG criteria into their operations, through processes, controls and recruitment practices. One client recently launched a project to evaluate their banking partners based on their ESG performance, including both internal metrics, but also external activities, such as financing of fossil fuels. Although this client has a mature sustainability agenda, we expect to see more companies reviewing their service providers through an ESG lens.”
The wider treasury community
Although treasury has a distinct set of responsibilities, its scope of influence extends across the business, touching on all elements of the financial supply chain. PwC’s survey reveals that building relationships between treasury and the wider business is a major focus of attention, particularly for CFOs, for whom this is the third biggest priority over cash and liquidity management, and funding and capital structure. Jan Dirk van Beusekom, BNP Paribas notes,
“Treasury’s wider relationships across the business, such as accounts payable and receivable, sales and eCommerce, have become increasingly important during the pandemic to forecast and support cash and liquidity requirements. As corporations pursue new, digital business models, and seek to create financial efficiency across ecosystems, treasury’s internal and external relationships will become more important than ever.”
About the surveys
EACT Treasury Survey 2021
Pan-European survey including over 300 senior treasurers
Published annually in conjunction with the EACT Summit
Helps to define the agenda and content of the EACT Summit and Journeys to Treasury
PwC Global Treasury Benchmarking Survey 2021
Global study including over 300 (to date) senior treasurers and CFOs
Published every two years as a flagship thought leadership and research report
The full report will be published in June/ July 2021
In the next episode…
Digitisation became a higher priority during the pandemic, as the risks and limitations of manual processes and interactions between systems and counterparties became apparent. In the next podcast, Journeys to Treasury experts will explore the new and emerging opportunities for end-to-end digitisation, and some of the areas in which corporate treasurers have had the greatest success.