The black swan has landed. The global pandemic and lockdowns have created economic disruption and accelerated digitisation, radically reshaping our personal and professional relationships with each other and technology.
“The way we work and the processes we work with are all changing,” says Matthew Hurn, CFO, alternative investments and infrastructure at Mubadala Investment Company, and a member of the Association of Corporate Treasurers (ACT) Middle East Advisory Panel.
“This is all part of the digital age we are living in,” he says, acknowledging the extent to which recent events have forced us to embrace digital technologies.
“We are all trying to be more efficient. We are all trying to utilise systems and technology, connectivity, to do our jobs better, to provide more timely information, to provide information on which we can actually make better-informed decisions,” observes Hurn.
COVID-19 has highlighted the value of corporate treasury, in efficiently managing cash, liquidity and risk, and providing timely answers to tricky questions from the board:
In response to the challenges, treasurers have needed to be adaptable, and they have also needed technology that can adapt with them.
“Some treasurers have found that their systems are not agile enough to flex and meet rapidly changing needs from the board on liquidity and cash-flow forecasting,” says Naresh Aggarwal, associate policy and technical director at the ACT.
Boards want more data more frequently, and some tech tools have struggled to deliver.
There is nothing new about barriers to access and extraction of data from enterprise resource planning (ERP) systems in the format needed for other systems and processes, such as budgeting and various types of forecasting and reporting.
But the associated difficulties (and delays) have gained prominence and significance during the pandemic. Witness the experiences of James Adams, group treasurer at Chalhoub.
“We have three cash-flow forecasting scenarios: baseline, best case and worst case that we keep updating and reviewing on an ongoing basis,” says Adams, but the associated systems have not been particularly good at supporting the financial forecasting COVID-19 requires.
“If we have to change quickly for a new scenario,” Adams notes, “that can be quite a manual exercise. It involves a lot of teams, a lot of reworking and time. That can be limiting.”
Time frames for cash-flow forecasting have also needed to change. “Before COVID-19, we were quite happy to look at monthly forecasts or longer,” Adams points out. “Now liquidity is at a premium, we need to look at more granular forecasts and a shorter range, so we shifted from monthly to weekly. It was a challenge getting there and getting the relevant data from the right sources.”
As such, forecasting is becoming less indirect and top-down and more direct, and bottom-up.
Adams explains: “The data is in lots of different systems and it’s not always easy to extract in the way you’d like from the ERP. We’ve had some challenges cleansing that data, doing it better and communicating with those involved.”
The shift that is under way will deliver benefits long after the pandemic, he says: “COVID-19 has helped us to accelerate what was already going on, so from that side at least there is a silver lining to this crisis.”
Demand for tight connectivity or integration across multiple systems and data sources has risen during the pandemic.
“With everyone working from home, we have seen more people requiring a central place they can go to and access everything they need, safely and securely,” says Ben Beach, vice president and global head of corporate sales at TreasuryXpress.
This was a driver for Coastal Ridge Real Estate, when it opted for a treasury management system (TMS), just as COVID-19 went global.
Treasurers have needed to be adaptable, and they have also needed technology that can adapt with them
“Implementing the TreasuryXpress technology will allow us to view, access and manage our cash positions in a single repository,” says Paul Colgan, vice president of accounting and finance at Coastal Ridge.
The company expects to eliminate some manual workflow with the TMS, which will facilitate financial data cooperation and communication, by integrating the company’s multiple ERP and property management systems.
“For those with cloud-based treasury systems,” says Aggarwal, “it’s been relatively easy to continue working in an uninterrupted way from home.”
This has been the experience of Elina Todorova, assistant treasurer at Tideway London, thanks to cloud-based accounting and trading systems, which integrate with an FIS Integrity TMS. “The flexibility of the technology has been really important for us,” she explained to The Treasurer mid-lockdown.
Although cloud-based access and other types of remote connectivity to systems have come into their own during the pandemic, they can raise challenges.
For home working to be sustainable, organisations must address matters such as: relative insecurity of home wi-fi networks; lack of on-site access to formal and informal product expertise and problem resolution; and slow or unreliable internet access.
“I think there are real issues around access to broadband because of local internet capabilities,” says Aggarwal.
Broadband performance that was acceptable before the pandemic may struggle to support home working.
“There is a debate about whether localised hubs with access to high-speed broadband offer a way forward,” Aggarwal notes. Plus, the human element looms large: “It’s not as easy at home to get help from office colleagues with more system expertise, so individuals are having to become more capable themselves, more resilient.”
There are other key tech issues on the horizon, too, such as the coming transition from the LIBOR benchmark. “Contracts in treasury systems that are currently denominated with LIBOR will need some changes,” Aggarwal states.
Standards have not yet been comprehensively defined and vendors have not yet provided the necessary system upgrades – so, as he notes: “Companies will need some time next year to upgrade their systems.” The Treasurer offers some preparation pointers.
Support from TMS providers may be key, as it has been for many during the pandemic. Aggarwal has spoken recently to some companies that have accelerated their TMS implementations plans.
“For them, the pandemic has reinforced the impact of not having a TMS in place.” In other organisations, TMS investment has been put off because there is no money to invest in anything. “Some businesses are just trying to stay alive.” Meanwhile, software providers are offering more flexible finance options.
Redbridge Debt & Treasury Advisory researched TMS vendors’ approaches to this during April. It found various offerings, including:
“Some vendors are looking at a range of innovative investment plans, which do not necessarily require any money upfront,” says Aggarwal.
If you do not have a TMS or your system is quite old and you don’t think you have the money for a new one or an upgrade, it may still be worth speaking to vendors.
“Don’t assume that you can’t have a conversation with vendors,” Aggarwal adds. “This year, there may be a way you can have your cake and eat it, too.”
Lesley Meall is a writer and editor specialising in finance and treasury technology
This article was taken from the December 2020/January 2021 issue of The Treasurer magazine.