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 prevent 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 toofar 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 overthe 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 “non-specificanxiety.”
KEY TAKEAWAYS
1. There is a “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 operationsside).
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 betimely and accurate.
3. Controlling the data you own. At a recent meeting, one member stressed the need to get “control of the data that youown” and to “change the dialogue with ourselves” in terms of using data to better model and plan within a modern treasurydepartment. Relying on a solution like FiREapps or AtlasFX maybe too much of a black box for some treasurers, so there is adrive toward DIY data extraction and analysis tools. To getthere, treasury staff and talent development need to be goodat data analysis/data visualization, creating systems and applications,and performing coding. Knowledge of programminglanguages such as R and Python may become premium skillsets as do-it-yourself technology projects become more common,eliminating the reliance on IT or external solutions sotreasury can get to where it needs to go.
4. Data visualization another proxy. While growing comfort with the cloud is one indicator of a readiness to embrace digitalization, experimentation with data visualization tools is another. As one meeting presenter said half jokingly, “Excel is really hard to kill,” suggesting this transformation will take time as treasury moves outside its comfort zone and embraces new tools. Only 28% of members have been using new data visualization tools for treasury reporting, dashboards and workflows. For those who are, the four new data visualization tools cited most frequently in our surveys were Tableau, Microsoft Power BI, Qlik and think-cell.
5. 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 toevaluate on the micro level, with some important implications for staff skill sets. Treasury will play a key role in helping organizationsplan and adapt as digital disruption forces changes tocapital structure, cash flow and investment in all industries.
6. It’s a balancing act. Experience and judgment need to be part of the mix to prevent imprudent action driven by challenges that stump models and inexperienced machines. Despite the rapid shift to quantitative analysis, models, machine learning and predictive analytics on road to AI, the importance of human judgment should not be underestimated. Transition risks exist in pushing treasury operations to shared service centers, and automating operations and shared service centers is a double-edged sword when it comes to fraud and cyber risk. Furthermore, one member warned that the “treasury of the future” needs to guard against “younger people relying too much on the data.” As digitalization pushes more basic treasury work to service centers, one member worries “that everyone thinks the answers are in the data,” asking, “How do we build managers who have judgment?” That’s a question we hope to discuss more at peer group meetings during the second half of 2017.
7. 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 largerstrategic initiatives.
OUTLOOK
Rapid advances in automation and digitalization present both immense opportunities and challenges for treasurers. Many members recognize the need to keep abreast of new technology, with goals ranging from “making sure our systems stay up front” to what one treasurer described as an “immense change” that his company is undergoing to get into the 21st century, which includes rolling out an ERP system and “a 10-year journey to get SAP across all businesses.” The ultimate challenge was contemplated in a shock scenario calling for the elimination or transformation of 90% of current treasury jobs—though few members regarded this as a likely scenario. The need to free trapped data was more widely agreed upon. ERP and other enterprise systems hold data that treasury needs for advanced forecasting and exposure management. Getting at and “visualizing” all the data flowing through enterprise systems, and deploying it to analyze issues and support better actions, would make treasury’s job easier and create more value at the same time. Freeing trapped data and ending the data struggle is something the digitalization of treasury must solve. However, while members see the opportunity in treasury digitalization, they also foundcommon ground in warning that overreliance on data will leave departments ill-equipped to deal with real-life scenariosrequiring hands-on experience. “I get a little worried aboutjudgment versus data. We’ve seen this movie before,” onemember said. This same concern was shared by NeuGroupbank treasurers, who have seen data from validated modelsreplace judgment to comply with regulator-supervised bankstress testing. Members also mentioned overreliance on datain the context of pushing too much responsibility to sharedservice centers, where digitalization trends will arguably havean earlier, broader impact. That said, there is widespreadrecognition that treasury needs to do more to avoid beingswept asunder in the digital tsunami. This starts with makingmore use of cloud-based tools and developing staff that iswell-versed in tools and programming languages that willallow more senior treasury members to focus on supportingbroader business goals.
SURVEY SAMPLE
The NeuGroup Peer Research surveyed treasurer groups in The NeuGroup Network about employee head counts and compensation. The results help members identify common challenges for discussions at their meetings that generate solutions. The survey included members from the following groups: tMega, T30 LC, T30, Tech20, AT30 and ATLG.
ABOUT NEUGROUP PEER RESEARCH
NeuGroup Peer Research is the research division of The Neu- Group, with reports, data and analysis provided to members of The NeuGroup Network of knowledge exchange peer groups and to the subscribers of our flagship publication iTreasurer. NeuGroup Peer Research conducts research, surveys and other benchmarking across the NeuGroup Network, which includes more than 400 members across 18 active, invitation-only peer groups. Each report highlights what we have learned from this unique and exclusive access to survey data, trends and insights of world-leading treasury and finance professionals. This indepth interaction has made NeuGroup, iTreasurer, and now NeuGroup Peer Research, trusted thought leaders and independent advocates for finance and treasury professionals for more than 20 years.