Corporate treasurers are increasingly heading towards alternative-finance solutions amid a flurry of regulatory activity, according to the latest biennial Global Corporate Treasury Survey from Deloitte.
In a press announcement unveiling the survey report, the Big Four auditor said that this year, more than half of respondents (52%) have seen an impact on their treasuries from banking regulatory reforms.
Those impacts include:
Deloitte noted: “These impacts are resulting in treasurers considering alternative solutions – including moving towards the use of credit-support annexes (collateralisation with banks for OTC trades) and seeking out [alternative] funding sources.”
That is not the only change of emphasis under way within the treasury community. Further survey data suggests that broader operating models are being revised, too – certainly among larger corporates.
As Deloitte partner – and report co-author – Hussein Hussein said: “When comparing… operating models between 2017 and 2015, there is an interesting contrast across company revenue groups.”
Hussein pointed out that the largest firms – ie, those in the $30-50bn revenue bracket – are shifting towards a greater use of shared-services models, while their smaller counterparts tend to prefer centralising their corporate and regional treasury centres.
Another shift that respondents flagged up, Hussein said, “was that in two to three years’ time they will move to managing cash and operations through channels other than corporate treasury, towards ones that include both internal and external managed service solutions.”
He added: “More than 70% of respondents indicated they see value in such execution models whether for liquidity, control, standardisation or cost-efficiency either by using regional treasury functions and their expertise and scalability for growth, or shared service centres or third-party providers.”
In terms of key challenges that treasurers have faced this year, Deloitte treasury and capital markets partner Steven Cunico noted that FX volatility remained in “pole position”, with 50% of respondents indicating that it was particularly problematic.
Cunico went on: “Visibility into global operations increased from 40% to 43% to become this year’s second-biggest concern. This was followed by issues of cash repatriation, which fell by 10% over the two-year period to 40%, as did concerns around liquidity, now at 39%.
“Entering restricted markets increased as a challenge from 24% to the current 31%, and 30% of those surveyed cited insufficient systems infrastructure to support their department, which was better than two years’ ago when 40% expressed the concern.”
Deloitte also found that 40% of participating companies indicated that their treasury teams have recently been affected by fraud, requiring more than one remedial method to bring the problem under control.
As such, 88% of firms have reviewed and upgraded their internal controls and governance – with 51% upgrading their internal security protocols.