With this in mind, The Treasurer spoke to Naresh Aggarwal, policy and technical associate director at the ACT and chair of the ACT’s Cash Management Conference, to identify the likely areas that treasurers will need to keep an eye on when considering the resilience of their approach to cash management in the coming months.
Financial crime is a centuries-old blight on the business world. But what has recently shifted the scales in favour of the fraudster is generative artificial intelligence (GenAI). In fact, Aggarwal believes there may have been a paradigm shift in risk with “cyber-criminals able to access a level of sophistication that was previously only available to state actors”.
But conversely, GenAI can be used to identify such fraud – if it can be used in areas such as cash forecasting and ‘what is normal’, then it can be used to identify unusual payment activity.
While the world is waiting for the first central bank to blink and start cutting interest rates, treasurers are still looking out for the most advantageous rates for investment returns or financing options. Timing could be an important factor – treasurers will be studying three- to five-year yield curves and the market data that can affect these figures, while analysing the markets’ capacity for fund raising. So, treasurers and lenders will be guided not so much by the immediate effect of central bank interest rate decisions, but more by market information and economic data.
However, Aggarwal notes that there are many treasurers who may simply not have experienced current market condition before now, and so will be going up their own learning curve.
For any business moving to this new ISO 20022 standard there is a greater ecosystem for them to connect to than there was this time last year
Treasurers will have heard much about trends in payments – from new faster or instant payment schemes and reductions in settlement times (T2 to T1 or even T0) through to central bank digital currencies and the ever-present cryptocurrencies. ISO 20022, the universal financial industry message scheme, has been adopted by a number of institutions over the last year, while options for safe, cheap and quick cross-border settlements are coming increasingly under the spotlight.
However, many of these initiatives can be considered as ‘works in progress’ – as Aggarwal says: “With the Bank of England and the ECB switching to ISO 20022 last year, we now have more institutions that have switched, so for any business moving to this new standard there is a greater ecosystem for them to connect to than there was this time last year.”
Sustainability will continue to play an important role in cash management. Again, another ‘work in progress’, treasurers will be looking at where they can place their excess cash, and will turn to ratings agencies for guidance on the sustainability credentials of particular funds. Many funds in the EU dropped from their Article ‘9’ ESG classification to ‘6’ as concerns by regulators across the world of greenwashing have intensified.
While money market funds have been moving to improve their resilience following the stress experienced during the COVID-19 pandemic, the Financial Conduct Authority is consulting on changes to regulation to increase the usable liquidity of MMFs. The proposals include a significant increase in the minimum proportion of highly liquid assets that all MMF types have to hold, with a possible impact on yields.
As Mike Rigby, managing director, head of UK specialist sales at Barclays, says: “We are currently facing heightened geopolitical risk, together with some challenging economic outlooks, both of which mean treasurers are operating in a ‘choppy’ or ‘turbulent’ environment.
“This will mean treasurers will focus first and foremost on risk management. Risk management of available cash, interest rates, foreign exchange rates and of course supply chains. Cash flow forecasting is at the forefront of their minds, while liquidity management is increasingly important in a decreasing interest rate environment. Foreign exchange management will be equally important.
“On top of that, security and fraud awareness remains a daily challenge with heightened risk seen. All of this is normal treasury policy, day-to-day activity, but it comes at a time when treasury teams are suffering resource constraints, so this will certainly lead them to consider how technology can help them manage these risks.”
Philip Smith is editor of The Treasurer.
This article was based on one from Issue 1, 2024 of The Treasurer magazine. For more great insights, members can log in to view the full issue.