Insight & Analysis

It’s the end of the world as we know it: but the start of a brave new one

Published: Oct 2018

Last week’s EuroFinance event in Geneva played host to a thought-provoking academic. Uncertainties will continue but all is not lost.

“Life would be a lot easier if the world stopped interfering with our strategy.” Quite so. The world’s economies may be headed for “synchronised recovery” (with a few exceptions) but in the opening plenary at the 27th EuroFinance, held this year in Geneva, Professor Emeritus of World Competitiveness at IMD and Professor at the University of Lausanne, Stéphane Garelli, headed straight for that most persistent root of all issues: the unplanned intervention.

With the likes of currency volatility, inflation that is “all over the place”, too much corporate debt in the emerging markets, and rampant protectionism creating tension in the world’s markets, Garelli acknowledges that treasurers have a difficult task ahead. But all is not lost.

Despite the fractious nature of trade in some quarters, Garelli is convinced that globalisation will remain the dominant economic force. There is “room for improvement” obviously, but in keeping tabs on far flung operations, treasurers must now be more careful than ever of the explanatory numbers being quoted by the world’s economic experts (all of whom have been “just as wrong as the others”).

Paraphrasing Keynes, Garelli suggested that a successful corporate response to turmoil, especially when investing for the future, requires “anticipating what others anticipate, versus believing what others believe”. In business – and of course in treasury – being one step ahead is not easy, especially if the numbers, as he suggests, are far from reliable.

Technology to the rescue

What can be of assistance, and what this conference was solidly focused on, is technology and innovation. But whilst it can most certainly be the source of improved strategy, Garelli asserts that it must only ever be seen as “an enabler not an objective”. The skill of the treasurer remains foremost.

Of course, the technology revolution that seems to be going on right now is generating a lot of heat, especially around the business potential of artificial intelligence, machine learning and blockchain. Treasurers understand the theory but, as many conference conversations revealed, also know that ‘potential’ is about as far as it has got with most ideas of this nature; they are works in progress not solid offerings.

However, technological revolution is going on all the time, noted Garelli. Throughout the process of creation and development, there will always be different response phases. These range from denial, to curiosity, to interest, to hype, and finally to realistic implementation. What we are seeing in treasury now, he says, is a volume of chatter around machine learning, blockchain et al, that very much accords with the ‘hype’ phase.

Eventually, the last step will be taken. This will be driven by the need for corporate reinvention (read: new business models) in a globalised economy that is now straddling the “two powerful economies” of “home and office,” both of which are encompassing rapid change and the aforementioned increasing uncertainty.

In terms of the business response, it is a case of do or die. But progress first demands that all these cutting-edge innovations have a head-on collision with “excellence in implementation”. Movement from hype will be difficult without such an amalgamation of the clever and the practical; failure leads to technology for the sake of it, or at best a solution looking for a problem (which as one delegate suggested is what blockchain’s role is currently).

Even then, success for a solution is never guaranteed: technology can never be the great panacea its marketers would have us believe. Garelli therefore encourages the realist idea that technology will “not make life better or easier, just different”. Its adoption, he added, is only ever likely to be an “exchange of one set of problems for another”.

Ultimately, he noted, it is not what happens that matters so much as how the stakeholders – individuals, businesses, governments – respond. Uncertainties will always intervene but it is important for treasurers to be able to move quickly and decisively, and preferably proactively.

Spirit of co-operation

The general feeling on the floor at EuroFinance 2018 – amongst treasurers, bankers and vendors – was that technology will soon be at a stage where it can start bringing the industry closer together, facilitating a spirit of co-operation. In doing so, it will enable all stakeholders to “anticipate the anticipated”.

With the various streams and the exhibition floor largely devoted to talking up innovation in treasury, the hype may have hit a crescendo at times. But, as Garelli noted, this is just a phase; the next will be excellence in implementation. And herein lies a huge opportunity for all.

Talk of machines taking over jobs is nothing new. Every technology revolution, right back to the days of steam power, comes with the same fear. Every time that fear has proven unfounded. Jobs change but humans have not been replaced. The Institute for the Future suggested last year (in a paper published by Dell Technologies) that 85% of jobs that will exist in 2030 haven’t been invented yet.

Technology will be able to automate so many more tasks in the banking space but the big change will come when the banks decide to co-operate fully and create a truly connected infrastructure that allows all participants access (perhaps a kind of SWIFT plus plus). This will commoditise great swathes of what the banks offer but make doing business, in a world that insists on interfering, so much easier and cheaper for all, including the banks.

Of course, if that happens, banks will have to learn to differentiate in new ways. Far from alienating people from their work, as its application in isolation tends to do, technology used wisely to create a new holistic infrastructure has the power to forge stronger relationships between bank and client.

This conference demonstrated that the way we do business is changing rapidly. Globalisation is here to stay but there is room for improvement, as Garelli said. Companies intent on surviving will still do what they do, but they will have to think in terms of new technologies and new business models, and learn to be more communicative, both internally and externally.

The same can be said for treasury: the core skills will be retained long into the future but change is coming. The role now is also becoming that of part data scientist, part great communicator. The adoption of technology may prove to be the exchange of one set of problems for another, but the treasurer who takes the time to prepare will be ready whenever the world interferes with their strategy.

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