By Julie Zawacki-Lucci
Rapid advances in automation and digitalization present both immense opportunities and challenges for treasurers.
The timing for treasury transformation projects being discussed in NeuGroup member groups couldn’t be better as the digital landscape continues to improve, offering increased automation and advanced reporting. Bolder transformational thinking about treasury organization and talent management (including business support, data analysis, predictive analytics, automation, visualization and reporting, and quant coding and application development skills) is needed to ride the digitalization wave and being overwhelmed by a “tsunami effect.” However, uncertainty about what changes to make, when and with how much urgency often results in questioning whether what is being done or planned is actually what is needed to bring forth a true state-of-art treasury team that drives high value-adds for the organization. Treasurers are also uncertain whether their staffs and platforms are ready for the “digitalization storm.” And finally, treasury transformation projects that can take years to complete may need to become bolder to prevent their end-states from falling too far behind the digitalization curve.
In the first half of 2017, NeuGroup Peer Research asked our treasurer and assistant treasurer groups—the Treasurers’ Group of Mega-Caps (tMega), the Treasurers’ Group of Thirty Large-Cap Edition (T30 LC), the Treasurers’ Group of Thirty (T30), the Tech20 Treasurers’ Peer Group (Tech20), the Assistant Treasurers’ Group of Thirty (AT30), and the Assistant Treasurers’ Leadership Group (ATLG)—where they stood with treasury technology solutions. The following results are aggregated from approximately 100 company responses we received over the course of the first half of 2017.
Just as Software as a Service (SaaS) solutions in the treasury space are becoming more mainstream, the cloud is becoming more mystifying, with buzzwords like Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) and, of course, fintech solutions that often build off infrastructure and platforms. Both PaaS and IaaS ideas are empowering new applications and increasing the pace of innovation for scalable financial technology solutions that impact treasury and its access to banks, financial markets, other parts of the enterprise and stakeholders outside it. However, only 5% of survey respondents feel they have a strong understanding of fintech trends and technology, and only 26% say they understand the basics, leaving the door open for a lot of homework and “nonspecific anxiety.”
Key Takeaways
1. The “nonspecific anxiety” among treasurers related to the need to be doing more, amid uncertainty about what to do. With only a third (collectively) of survey responders saying they understand fintech trends and technology, anxiety over the unknown isn’t surprising. At first pass, we question whether cloud-based functionality for TMSs is needed to be best in class and stress that an understanding of the risk and opportunity presented by the cloud is a first step toward readiness. Treasury’s comfort with cloud-based software bypasses that of IT groups, with 30% of members saying they are fully comfortable with pure cloud solutions versus 22% of IT groups, and 32% fully comfortable with a hybrid-based solution versus 29% of IT. If treasury has the technical talent, members are willing to work independently of IT groups toward better integration through open or accessible APIs in the cloud, which streamline straight-through processing, opening up time savings and innovative solutions (especially on the treasury operations side).
2. Freeing trapped data. Treasurers in our groups noted identifying the means to extract data from enterprise systems as a top priority since a large portion of the data needed for better cash-flow forecasting and exposure management is still sitting idle, or trapped in ERP systems, with treasury desperate to get it out and get it out faster, in real time, without the manual intervention that is currently taking days from analysts. They would also like to make the data more useful by having it populate well-thought-out reports and dashboards, eliminating time lags and the increased potential for human error. At one of our recent FX peer group meetings, many FX managers noted that among their priority projects was evaluating the implementation of FiREapps or AtlasFX to aid in identifying exposures from enterprise system data—or, for those who have already implemented one or the other, looking to expand the functionality. Strategic execution starts with a good understanding of forecasts and exposures, so reporting must be timely and accurate.
3. Feeling the follower impulse. Members agreed that some promising new fintech technologies like Blockchain are not ready for prime time, with one member saying, “it feels like you don’t want to be the leader, [it] feels like you want to be down the road.” Until then, treasury technology infrastructures should at least be evaluated for readiness. When asked whether their treasuries’ technology infrastructures are flexible enough to respond to changes in technology necessary for operations, 29% of survey respondents said no and 30% of survey respondents weren’t sure, suggesting that well over 50% are behind the curve when it comes to their readiness to adapt to the possibilities of the changing treasury landscape.
A total of 48% anticipate changes to treasury organizational structures as a result of increases in technological efficiencies, 9% in the short term and 39% in the long term. Of almost equal importance are ongoing advancements in digital technology that are affecting corporate capital allocation decisions on the macro level and creating new modeling and automation tools for treasury to evaluate on the micro level, with some important implications for staff skill sets. Treasury will play a key role in helping organizations plan and adapt as digital disruption forces changes to capital structure, cash flow and investment in all industries.
4. Calling all techies. The digital treasury future requires digital-savvy talent on the team. As corporates take the plunge with Blockchain and other new fintech initiatives, the benefits of solutions that are built on a common standard—but customizable to processes as required—will start to become obvious, and adoption will spread. When discussing the digitalization trends impacting treasury, one clear theme was that treasurers need to tap millennials to help build better data analysis, reporting and visualization tools. However, this is easier said than done since even banks report having trouble attracting millennial tech stars. A bank presenter at a recent meeting said that banks share group members’ difficulty in finding young talent whose data and analytics skill set goes beyond Excel, in part because many are not interested in banking and finance and have their sights set on Silicon Valley. Regardless, although tech superstars may be hard to find, most millennials aren’t afraid of learning new tools and even the code to make them work, and they should be strongly encouraged to do so.
Currently, only 41% of surveyed members think that their treasury teams understand technology trends adequately to prepare for any potential digital changes necessary for successful treasury operations. One member pointed out that the “current workforce dynamic was problematic; that people not [already] trained in data analytics and are not as trainable as younger workforce,” highlighting that treasury teams should be a balance between data scientists and client solutions/ consultants. Treasury will need more of both the more sophisticated quants/data scientists/coders and those big thinkers who are better communicators and advisors and can turn data into larger strategic initiatives.