As guardians of a company’s financial health, corporate treasurers are inherently risk averse.
They spend their working lives trying to avoid or mitigate risk, looking ahead and planning for the ‘worst-case scenario’ – a concept that has been given new meaning and urgency by the COVID-19 pandemic.
Likewise, the treasurer’s perpetual need to forecast cash flow and have visibility into liquidity, which are being assessed and analysed in more detail and over shorter periods than usual, and informing scenario planning and stress testing that seems more serious than usual.
This existential crisis has reshaped our perspectives on many things – not least, the role and importance of technology. During lockdown, attitudes and approaches towards all sorts of technologies have been refined or transformed – in some cases, seemingly overnight.
The list of today’s potentially mission-critical tech ranges across tools to automate and streamline treasury functions such as:
All of which seems likely to be reflected in our eventual ‘new normal’.
“In an era of home working, for the treasury team, their banking and technology partners and their customers, effective use of technology is key to ensure that treasury is able to carry out key risk management and operational activities effectively and in a controlled manner,” says David Stebbings, head of treasury advisory at PwC.
Among the various technologies he cites with potential to assist are cloud-based systems (as the onus is on vendor rather than in-house support) and online trading portals (as they can better mitigate unauthorised or unapproved trading, rather than insecure phones that cannot record calls).
Treasury technology has certainly flexed its muscles during the pandemic and lockdowns.
“Working with our clients, we have seen how technology can help treasury in uncertain times,” says Elvadas Balkys, who leads corporate treasury advisory services for Zanders, Switzerland.
For example, by improving short- and mid-term cash visibility and enabling treasury departments to think and act more strategically.
“Especially during a crisis situation, prompt decisions based on rapidly changing forecasts are needed. Only with dedicated technology can such ongoing visibility and control be obtained,” Balkys says, and use such data to manage liquidity, borrowing and hedging to minimise cost – among other things.
Technology has certainly flexed its muscles during the pandemic and lockdowns
Responses to the Association of Corporate Treasurers’ (ACT’s) Business of Treasury 2020 survey indicate that many corporate treasury departments and treasurers were planning to increase their focus on automation and strategic technology projects even before the pandemic.
The lockdowns shone a bright light on the benefits of doing so.
There was a sense among survey respondents that the profession’s evolution towards greater strategic involvement is linked to automation, particularly where it can improve connectivity between systems, eliminate operational and repetitive tasks, and enable treasurers to glean greater strategic insights from data they have access to.
These possibilities were reflected in responses to Business of Treasury survey questions on how treasurers expect their role to be impacted by fintech developments over the next two years.
“Within our treasury department, we automate quite a lot and we are looking at efficiency. As a result, I think we can have a more value-adding and strategic role, rather than focussing on treasury operations,” said one treasurer.
“We will be relying more on data,” another said.
“Advances in technology will make more manual processes automated. It will create more time for strategic thinking,” said a third respondent.
Justifying investment can be difficult even without a global public health emergency and its dire consequences in the background.
On the upside, opportunity cost is regarded as lower in recession than at other times. This may help the more than 50% of treasurers who told the ACT that they expected to spend more time on technological advances during 2020.
The areas in which treasurers’ organisations are investing a great deal are: cybersecurity (43%), automation (28%) and (for 25%) new treasury management systems (TMS). These objectives seem likely to remain on ‘to-do’ lists going forward, even if priorities change, timescales shift and strategies evolve.
Levels of automation do seem to have influenced the relative ease, speed and effectiveness with which some treasury teams have been able to respond to the changing demands and working patterns of the pandemic – especially where remote access to the software and systems that treasury relies on was already in place.
Mid-lockdown, Rob Scriven, group treasurer and planning manager at Cairn Energy, told The Treasurer: “All our technology works remotely and we are all used to working on the move, so I have not seen any impact.
“The only problem is when somebody insists on physical signatures and documents. We do need a development in digital signatures.”
At Tideway, which is constructing and delivering a sewage tunnel, the Super Sewer, under the River Thames, a treasury technology strategy to maximise treasury efficiency and flexibility, for example, by using tools based on software as a service (SaaS) clearly demonstrated its value.
“Our TMS used to be hosted on-premise, and we have recently moved to a SaaS version, so it’s now in the cloud and that has been really useful,” says Elina Todorova, assistant treasurer, Tideway.
Prior to this shift, the team couldn’t have accessed the TMS from non-work laptops, and it is now easier to switch modules on and off.
The cybersecurity threat to treasury departments has not diminished during the pandemic
The level of automation and connectivity between the systems used by the treasury team also proved invaluable.
“Our strategy takes account of the fact that Tideway is delivering a project. The company and potentially the treasury team will shrink as the tunnel construction nears completion, so for every technology decision we’ve made, there’s been a cost-benefit analysis for the expected time frame,” explains Todorova.
She notes: “We have automated as much as possible and created seamless operational flows as much as we could within our overall strategy. We are not a big treasury team – there are just four of us – and operational efficiency has always been a priority.”
Tideway's TMS, FIS Integrity, integrates with its NetSuite accounting system.
“Our TMS receives payment files from NetSuite and exports accounting journals into it,” says Todorova. “The TMS also integrates with the trading platforms that we use for cash investments in money market funds and it talks to Bloomberg, so that it can import market rates into the TMS.”
Payments are not as sophisticated as they could be, but after considering SWIFT a while ago, a business case could not be made for a costly time-consuming installation, because Tideway will only have a high volume of payments for three to four years.
Some costly and time-consuming technology spend is unavoidable. The cybersecurity threat to treasury departments has not diminished during the pandemic and it seems unlikely to do so.
Even if the future is not characterised by more social distancing and intermittent lockdowns, now that some of the practical and psychological challenges have been overcome around remote home working, more of this seems likely, although cybersecurity aspects may demand more attention.
For example, says Stebbings: “There may potentially be increased cyber risk from less inherent security in home wi-fi networks.”
Treasury is having to deal with more and increasingly sophisticated external attacks, but the weakest links in the security chain remain people.
ACT associate policy and technical director Naresh Aggarwal says: “Many of the risks stem not frTime it rightom technology, but simply from human behaviour. Whether it’s opening an unusual attachment or providing the IP address for a market news server to a stranger, it is often our human curiosity or desire to be helpful that lets us down.”
So all treasury departments need a formal strategy to mitigate the risks (see the ‘Further reading’ link below for more on that).
Even with the best-laid plans, objectives, principles and tactics for a treasury technology strategy can be scuppered by bad timing.
“How I wish that I had been able to introduce a number of treasury systems before the COVID-19 crisis,” says Christof Nelischer, who recently became group treasurer at International Personal Finance.
As he told The Treasurer in April 2020, he had been planning to launch a TMS project, introduce electronic trading and an intercompany netting system.
However, the challenges of the coronavirus and the lockdown meant that these plans needed to be put on hold, given the immediate focus on responding to the situation in hand.
Nelischer has extensive experience of formulating and implementing cutting-edge treasury technology strategy in his previous treasury role at Willis Towers Watson, so he is rueful about the missed opportunity at International Personal Finance.
“Sadly, the current crisis highlighted how beneficial it would have been, had we been able to implement earlier,” he says, before putting an optimistic spin on the situation.
“On a positive note, the crisis has shown the benefits of operating from a systems-based set-up, with automated operations and much improved visibility of our financial position,” he says.
Something good can come out of even the worst-case scenario.
Why treasurers must wake up to the spectre of cyber risk (article by Naresh Aggarwal)
Lesley Meall is a writer and editor specialising in finance and treasury technology
This article was taken from the June/July 2020 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership