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Treasury Management

Treasury Execs Bullish on Econ, Less So on Job Challenges

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March 25, 2019

Corporate finance execs like what they see in the econ but worry about treasury challenges

Issues on Horizon - BinocsTreasury executives still hold a very positive outlook for the economy but still take a more conservative stance on treasury-specific issues. That’s according to a recent survey of corporate finance executives covering a broad range of issues.

TD Bank teamed up with consultancy Strategic Treasurer to survey 340 mostly treasury and C-Suite executives in companies globally. Conducted in late 2018 and early January 2019, the survey found respondents to be overall less optimistic than they were when polled at the same time a year earlier. In the year ahead, a healthy 57% said they expect the GDP of their headquarter country to grow, although 67% said that in the previous survey. At the same time, 47% said the outlook for their own companies had become positive over the previous 12 months compared to 51% a year earlier.

“The outlook was extremely optimistic last year and still very optimistic this year,” said Craig Jeffery, managing partner at Strategic Treasurer. He noted that the percentage of respondents anticipating GDP decreasing in their HQ countries rose to 8% this time around from 1% last, while those with a negative outlook for their organizations increased to 13% from 10%.

Thomas Gregory, director of treasury management sales at TD Bank, pointed to the impact of tariffs and trade wars, and tax reform’s less-than-anticipated impact on GDP, as possible factors in the decrease.

“These types of things may be causing deterioration in that overall sense of optimism,” Mr. Gregory said.

Although most treasury teams are lean, the survey found they’re still bogged down by too many manual processes and their companies remain hesitant to adopt new technology to increase automation. In fact, “manual processes” was the operational challenge checked by the most respondents (57%), followed by “staff capabilities and/or size” (47%).

Perhaps unsurprisingly, the survey found that 34% of treasury practitioners don’t have time to perform all their duties, with cash forecasting (46%) and risk management (39%) the most common functions left unperformed. Compliance and bank account management were each overlooked by 30% of respondents.

“We’re seeing a lot of concerns about productivity in treasury operations,” Mr. Gregory said. He added that despite often insufficient staff to get the work done, and a preference among 60% of respondents to increase automation, “In aggregate it looks like there’s not a lot of automation being deployed, nor is staff being added,” he said.

Fully 75% of survey respondents said they’re excited about the development of new technologies that should increase productivity. However, just 17% of respondents said their companies are using application programming interfaces (APIs), which aim to automate connectivity with banks. And in terms of more exotic technologies, just 5% said their companies are using blockchain technology and 7% artificial intelligence.

In fact, treasury executives appear to be holding back on the technology front, perhaps in part—as NeuGroup members often complain—because treasury often must wait in line for IT dollars. Consequently, despite the potentially disruptive impact of new technologies, 42% of respondents said they are keeping informed about developments but waiting to see where the industry heads, and 37% said they’re not doing much currently and will start to act “when they feel it’s time.”

Survey respondents said corporate borrowing will be most impacted by their companies seeking to increase the diversity of debt and capital structures (45%), followed by greater leveraging the financial supply chain (31%), and renewing credit facilities earlier (30%).

Excess cash will go to paying down debt (31%) and capital expenditures (29%), followed by holding cash for future financial investments (24%) and acquisitions (22%).

Interestingly, respondents suggest US corporate tax reform has had limited impact on their businesses, with 31% saying no significant impact, and 20% or less saying it caused an increase in income, improved financial performance, or enabled bringing funds back to the U.S. Only 11% said it enabled an increase in spending on new technology and equipment, and 12% increased investments in the U.S.

A majority of respondents at large corporates (68%) said trade conflict, whether stemming from China, the G7 or NAFTA, has had no significant impact on their businesses. Only 17% said such conflict made it more expensive to conduct business, 18% said it increased the price of purchased materials and goods, and 11% said it increased the price of goods and materials they sell.

“Some companies have experienced tariff-related challenges, but that does get reduced by the strong economy we’ve seen,” Mr. Jeffery said, adding that treasurers “are very practical and not fooled by loud noise; rather, they focus on the reality on the ground.”

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