Treasurers have grown wary on outlook, expect already onerous regulatory demands to increase and are struggling to fulfil all their responsibilities due to legacy manual processes and ever-expanding workloads, according to a survey of the profession.

A wide-ranging survey of treasurers has found that optimism across the profession has waned markedly compared to a year ago, with rising rates, political gridlock and fears of a recession undermining sentiment across the profession.

The 2019 Treasury Perspective Survey by TD Bank and consultant Strategic Treasurer is the latest in the series of annual snapshots of the profession. It involved a poll of 340 corporate treasurers, treasury professionals and corporate bankers primarily from North America and Europe on their views regarding the economy, technology, industry innovation and regulation to better understand top challenges and opportunities in the marketplace.

The 2018 survey revealed that more than half of the firms polled were more positive about the outlook than in 2017, with just 10% less optimistic about their prospects. For 2019, respondents holding a positive outlook has fallen to 44%, while those with a negative perspective jumped to 14% – “a noticeable shift” in just a single year, according the study.

Overall GDP growth expectations have also declined since 2018. One year ago, over two-thirds (67%) of organisations expected the GDP of their HQ country to increase and just 1% expected a decrease. In 2019, 57% of firms anticipate a GDP increase over the next 12 months and 8% expect a decrease

“Viewed in aggregate, these datapoints all point toward a tapering of expectations among corporates as they grow wary of an economic slowdown after several years of low interest rates and high growth,” say the study authors, who include Thomas Gregory, Director of Treasury Management at TD Bank and Craig Jeffery, Founder & Managing Partner at Strategic Treasurer

The survey reminds that US tax reform was heavy on the minds of many treasurers over 2017 and early 2018. Back then they were worried over how the tax law changes would impact them but the overall consensus was that a revamp would largely benefit US businesses.

A year on, under the new US tax structure, the 2019 survey data indicates that the expected benefits of the changes have not been as widespread as originally anticipated. In fact, despite the sweeping changes to the corporate tax structure, the impact on the business environment appears to be relatively subdued. In total, nearly half (44%) of firms indicated US tax reforms has had no significant impact on their business, 15% indicated they led to an increase in total income and 12% said they improved financial performance. Ten percent said they had repatriated funds back to the US as a direct result of the changes.

Trade tantrums

Trade conflict intensified heavily over 2018, especially over the course of the last six months with the US-China dispute the major flashpoint. But, despite significant media coverage of such trade disputes, two out of three organisations surveyed said they remain unimpacted by them. Just one-fifth of firms are finding it more expensive to conduct business overall and only 1 in 7 have seen an increased cost of the goods they purchase.

The study says: “While further escalation of trade conflicts between the US and China would certainly damage the global economy, both sides are pressing for a deal and negotiations between the countries are ongoing. Although the danger posed by an all-out trade war still exists, organisations clearly feel that there are more imminent threats to their operations and to the economy overall.”

Although many treasurers are now less optimistic about economic and business growth compared to a year ago, nearly half of large firms with annual revenues of more than US$1bn plan to undertake a significant financial technology upgrade or complete a major acquisition in the next two years. On a worrying note, however, spending plans among smaller firms are subdued across virtually every category.

The survey also finds treasurers continuing to struggle with workloads, pointing out that in the modern treasury environment, it is not uncommon to find treasury groups operating with just a few employees. In fact, data from the survey indicates that nearly 50% of respondents had treasury teams consisting of three or fewer individuals.

The study authors say: “While staff capabilities and size represent a problem for many firms on its own, the nail in the coffin for many teams comes from an excess number of manual workarounds or checkpoints in their daily processes.

“Although there continues to be heavy emphasis on automation and efficiency within the financial realm, conservative technology adoption practices among corporates have prevented many treasury groups from achieving the level of automation they need to adequately perform all their responsibilities.”

Manual processes top challenge over 2019

Drilling down further on workload, one third of respondents reported that they are actually unable to fulfil all their responsibilities. For these respondents, cash forecasting (46%) and risk management (39%) were the most common functions left unperformed.

Allied to this, treasurers are concerned about their reliance on legacy processes: nearly 60% of respondents selected manual processes as the top operational challenge for 2019, besting the threat of fraud, rising interest rates, and regulatory change. Banks also recognised this reality with regards to their clients, with 70% labelling manual processes as a top corporate challenge.

Against this challenging backdrop, the study authors welcome as a good sign the findings that 30% of firms plan to undertake a significant financial technology overhaul in the next two years. Furthermore, 64% of corporates say they plan to utilise SaaS-based fintech solutions for treasury within the next five years, along with 63% for mobile banking apps, 51% for APIs, and 47% for artificial intelligence.

While each of these technologies, when leveraged properly, can provide a massive boost for beleaguered practitioners, the study authors caution that “given that much of this adoption is expected to occur several years down the road, there may not be much respite for treasury in the immediate future”.

More broadly, the survey found that 75% of corporates are “excited” about the development of new technologies and that eight times more practitioners would rather upgrade their technology than hire more staff. Yet the study also found that the percentage of firms actively leveraging products that include blockchain, artificial intelligence, or digital currency remains quite low: “A large swathe of the corporate landscape is choosing to remain on the sidelines and hold off on adoption until further enhancements and improvements occur.”

No respite on regulatory front

Treasurers have already battled their way through a decade of post crisis regulatory reform and many say compliance restrictions are still intense and, indeed, expect them to increase. Fifty one percent of corporates now see current levels of regulatory oversight as higher than historical norms, compared with just 2% that see current levels as lower. What’s more, 50% also expect continued increases to the scope and reach of regulations, while just 7% expect a decrease.

“Given that compliance is already a top-three area of concern generally for corporates, this outlook is worrisome. Today’s compliance landscape is growing incredibly complex. Organisations are expected to adhere to a myriad of shifting requirements, many of which are vague and difficult to understand. This results in an environment that is both time consuming and expensive.”

Nearly 80% of survey respondents indicated that regulations today are costly and 50% see them causing significant delays or obstructions to their operations. Alternatively, just 24% believe new regulations are adding value and only 10% believe they increase efficiency.

However, the survey data also reveals that 45% of corporates do not have a dedicated team or established process for managing regulations: “If this is indeed the case, then the impetus is on corporates to bring further structure into their compliance management processes, especially given that regulations are expected to continue growing in scope over the next several years.”