Insight & Analysis

Corporate treasury in 2020

Published: Jan 2020

When it comes to predicting the future, no treasurer has a crystal ball. The ongoing concerns regarding Brexit, the trade war between the US and China, conflict in Hong Kong and drone strikes on oil facilities in the Middle East – 2019 was somewhat of a turbulent year for treasury. But what will 2020 have in store?

Miniature figurines of workers painting the number 2020

According to the Chinese zodiac, 2020 will be the ‘Year of the Rat’. The main characteristics of such a year, and for people born in them, are creativity, intelligence, honesty, generosity, ambition and a quick temper.

With these themes in mind, Treasury Today interviewed Claudia Villasis-Wallraff, Director, Corporate Cash Management Structuring APAC, Deutsche Bank, to ask her about her thoughts on what the year ahead could have in store:

Creativity

For treasury, there is a long-standing issue of either choosing a bank with well-established legacy systems, or a more agile fintech. Creativity for industry in 2020 therefore, is key:

“There is a lot of catching up in some industries, where legacy systems have stopped treasurers from making use of new products,” says Villasis-Wallraff. “Treasurers can decide now whether to follow the typical linear journey to sophistication or choose a different option moving forward.”

Open banking is a given and is not an option anymore. “While open banking is more developed in the retail business, 2020 will likely be the year when open banking will reach corporate clients. This development opens the door to new solutions. The current middleware between banks and corporates will be expanded. Some Treasury Management Systems (TMS) will need to evolve, since more attractive solutions based on API ecosystems are being built by the day.”

She adds: “The combination of TMS, enterprise resource planning (ERP) and other fintechs are enabling a bank agnostic world. Banks need to show their presence in this world by offering innovative banking ‘as a service’ solutions. For this, they will need to find the appropriate partners – which is challenging, given the number of fintechs out there with great ideas.

Intelligence

Our world is one of constant change – and treasury recognises that the adoption of new technology is the way forward:

“Artificial intelligence (AI) has been widely discussed. The potential is clear, but what isn’t clear is where all the data will come from, especially given the large number of systems that corporates and banks have. This weakness hasn’t been acknowledged by many, thus there are few solutions in the market looking after fixing this problem.

“The most promising area for AI is cash forecasting. The theory is that big data can combine internal and external data to identify patterns and trends. The problem again is the availability or even existence of data. Accounts payable data needs to find its way from a physical invoice into an ERP. This requires more human discipline than machine power. Collections forecasting might require some behavioural data and therefore, more data.

“New fintechs and systems have made straight through processing cost-efficient and achievable. This is changing how treasury departments operate. Treasurers are learning which tasks can be better handled by robots. It is not about replacing FTEs with machines, it is about using FTEs better.”

Honesty

Fraudsters and cyber-criminals are getting savvier by the day, but there is still much more work to be done:

“Know your customer (KYC) and anti-money laundering (AML) are complex but necessary processes. Companies and banks are still working on platforms that could speed up the process. There is a huge potential for a blockchain platform to solve this issue but success stories are missing.

“Each bank has its own standard, and there is no bank currently leading in simplifying the process. It seems to customers that banks are always requesting more documents but it is also a fact that few customers remember to update their documentation when there are material changes. Thus banks need to ask for more.”

She continues: “KYC and general data protection regulation (GDPR) have something in common: they require an automated solution but their increasing and combined requirements have made it even more difficult to find one. It is not lack of interest or investment from participants that a solution hasn’t been found but a breakthrough is still pending.”

Generosity and ambition

Given these challenges for treasury, there is also an increasing need to innovate:

“Banks and service providers have recognised the need to speak the client’s language. Corporate treasurers moving into banking has become a trend. Customers can be better understood and can be served better. Deutsche Bank has made good progress in this area, especially through our newly created Cash Structuring team.

“For treasurers today, technology skills are a must. Treasurers shouldn’t be afraid of innovation and should be able to embrace it. Investing in understanding how systems talk to each other and how data is managed is required to face the new challenges.

“Python is a useful skill. 2020 could be the year when Excel sheets can finally be replaced with Python code,” says Villasis-Wallraff.

Quick temper

And finally, with the presidential election in the US in November 2020, treasurers will have to continue to adapt to a quick temper:

“It is necessary to be agile, to comply with new regulations and a volatile landscape. An increased use of renminbi when trading with China has been observed. This is pushing companies to accept renminbi exposures, and treasurers need to learn to work in this environment. Banks and service providers also need to adapt by offering competitive renminbi products,” she concludes.

As we wave goodbye to 2019 and move into a brand new year, it seems that political instability is here to stay, while the shift to leveraging data for real-time decision making will increase for a growing number of business functions. This year will be one of technological innovation – failure to do so could mean your business is left behind.

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