In today's fast-paced and increasingly complex business environment, the corporate treasury function is undergoing a significant transformation. A "Building the Treasury of the Future" roundtable event recently held in Abu Dhabi, brought together senior corporate treasury professionals, and representatives from Abu Dhabi Global Market (ADGM), BNP Paribas and Zanders, to discuss the future of the corporate treasury function. This article explores the outcomes of the roundtable discussion, highlighting five observations on the treasury function of the future. It also provides a framework for building a high-performing treasury function that supports business growth and optimises financial performance.
The treasury function is the financial backbone of any organisation, responsible for managing cash, risk, and funding. However, with the advent of digitalisation, changing market conditions, and evolving business needs, the treasury function is facing unprecedented challenges. The roundtable event aimed to address these challenges and provide a platform for senior treasury professionals to share their experiences, insights, and best practices on building a high-performing treasury function.
The event identified how the treasury function of the future will be shaped by five key themes:
1. Productivity and performance: striking the balance between achieving operational efficiency, lowering treasury total cost of operations (OPEX) and optimising added value of the treasury function by efficient use of capital and liquidity.
This can be achieved through process automation, straight-through processing, and the use of robotic process automation (RPA), as well as artificial intelligence (AI). For instance, treasury teams can leverage RPA to automate manual tasks, such as data entry and reconciliation, freeing up resources to focus on higher-value activities.
2. Financial resilience and glocalisation: rethinking the physical and financial supply chain to limit overreliance on key suppliers and taking a more regional approach.
This includes diversifying the supply chain, implementing risk management strategies, and developing regional treasury centres. For example, organisations can establish regional treasury centres in strategic locations to manage cash, risk, and funding more effectively.
3. Third wave of digitalisation: driving digital treasury transformation journeys using the data obtained in the second wave of digitalisation by means of exponential technology such as AI, ML, and NLP.
This includes the use of cloud-based treasury management systems, blockchain technology, and data analytics. For instance, treasury teams can leverage cloud-based treasury management systems to improve visibility, control, and automation of treasury operations.
4. Fragmentation of the payment landscape: accelerating digital payments in both B2B as well as B2C sectors, development of new payment infrastructures which co-exist beside traditional SWIFT driven infrastructure.
This includes the adoption of real-time payment systems, the use of APIs and open banking, and the development of new payment models. For example, organisations can leverage real-time payment systems to improve cash flow forecasting and reduce the risk of payment fraud.
5. Cash is king, data is queen: cash-flow forecasting still a top priority, and the accuracy of source data is vital.
This includes the use of machine learning algorithms to improve cash-flow forecasting, the implementation of data governance frameworks, and the development of data analytics capabilities. For instance, treasury teams can leverage machine learning algorithms to analyse large datasets and predict cash-flow patterns more accurately.
Treasury teams can leverage cloud-based treasury management systems to improve visibility, control, and automation of treasury operations
Corporate treasury is evolving into a digital function characterised by its ability to think and work in scenarios, a fit-for-purpose centralised organisation, embedded in the financial supply chain and with highly automated processes. Further investments in treasury technology leading to success in the digital age for treasury functions are based on:
In-house bank (IHB) structures can provide several benefits, including improved cash management, reduced external fees and enhanced working capital management. However, it is difficult to give one overall encompassing definition of an IHB. There is a wide variety in terms of scope (number of participants, geographical coverage), supported treasury transactions (intercompany lending, netting, payments, collections, FX trading) and level of automation. Setting up an in-house bank structure can be complex and requires careful planning, such as:
The overall goal of many treasury functions is to centralise most of the treasury activities to a group level and have internal treasury and finance transactions routed via the IHB. As such the IHB also becomes the entity from a regulatory perspective which is a counterparty in most internal and external financial transactions. Therefore the location of an in-house bank structure is critical and depends on several factors, including:
A centralised treasury model with multiple regional treasury centres can provide a scalable and efficient framework for managing treasury operations. Regional treasury centres can provide several benefits, including:
In conclusion, the treasury function of the future will be shaped by technological advancements, changing market conditions, and evolving business needs. By embracing digitalisation, adopting in-house bank structures, and driving productivity and performance gains, treasury teams can build a high-performing function that supports business growth and optimises financial performance.
This article was written by representatives of Abu Dhabi Global Market (ADGM), BNP Paribas and Zanders
