Eight out of 10 CFOs routinely consult corporate treasurers on strategic matters, according to a new white paper from the Economist Intelligence Unit (EIU) – business research wing of The Economist magazine.
Published on 12 October, the report – entitled Managing Risk in Challenging Economic Times – reveals that macroeconomic, regulatory and technological challenges are not just shaping treasury’s outlook, but changing the way it interacts with the rest of the business.
Compiled from a global poll of 150 senior treasurers and 150 CFOs, the paper confirms that treasury’s partnership with the rest of the business has increased, particularly in areas such as M&A and working capital management.
Uncertainty about economic growth is by far the top concern that treasurers around the world are dealing with at present, while low – or even negative – interest rates are triggering significant policy changes in the area of cash management.
Meanwhile, compliance and other regulatory matters are taking their toll on treasury resources. Respondents indicated that they already spend huge amounts of time on compliance.
However, they fear that there is more to come, with almost 80% expecting their compliance workloads to remain as high as they are, or even to increase, as time goes on.
“This avalanche of new regulatory requirements has spawned a palpable sense of frustration among many treasurers,” the report says, “especially with regulation that is seen as creating high burdens without delivering any tangible benefits.”
Moreover, “treasurers say that tighter KYC requirements have slowed down some treasury processes, notably opening up bank accounts. Several also worry that the higher compliance costs, along with higher capital ratios for financial institutions, could cause banks to become more selective.
“Regulation is thus not just seen as a nuisance, but also as a potential threat to bank relationships.”
Amid the jitters of that heightened regulatory climate, the EIU points out, treasurers are having a stronger influence on risk management and capital allocation decisions – particularly in the fields of M&A and working capital management.
Turning to treasurers’ uptake of new digital tools, the report says that most are happy to drive technological change within their functions, but also tend to be risk-averse – preferring to wait for innovations to mature before adopting them.
That reluctance to pioneer technological change partly accounts for a “low level of fintech penetration” in many treasury functions.
“Still,” the report says, “treasury functions are making progress in upgrading their technological capabilities, with many saying that an increased focus on user experience and data accessibility has become a force of transformational change.
“Data dashboards are perhaps the most important manifestation of that development, and many treasurers express the hope that better data visualisation could be a launch pad for higher awareness of treasury topics throughout the organisation.”
The EIU concludes: “The survey results and interviews show that the movement towards an expanding role [for] treasury has not abated. Even though the pace may be gradual at times, it is continuous.”
It adds: “Naturally, there is still plenty of room for treasurers to improve the visibility and influence of their function within the overall organisation, with many citing a lack of awareness of treasury issues among the top leadership as well as a general communication deficit as hurdles to expanding their roles.”