After a relatively benign period, there are several challenges facing corporate treasury departments in 2018. Much of this is regulatory and, since January, we have seen global initiatives from the authorities which have impacted during the past six months.
Add to this a plethora of fast-moving technological developments and major global tensions and it is easy to see that treasurers are in for a busy period in terms of strategy. There is even more pressure as the role of treasury changes within the corporate world, taking on an ever more influential advisory role to boards.
This signifies a change from back office responsibilities to a new era in which treasurers are increasingly advising boards as to how to deal with difficult decisions on investment and cash management, particularly in the case of trapped cash.
With major regulatory procedures being introduced in the EU and key markets in Asia such as India, China and Indonesia, treasury teams are having to think through their traditional models and act proactively to ensure they have a nimble approach to the markets. This is key to ensuring ongoing compliance and that treasurers can manage liquidity in an efficient manner.
The latter region offers many opportunities and treasurers will need to tap into these opportunities in growing markets such as Vietnam. This will involve leveraging new technology and adapting business models to drive firms forward.
The impact of Fintech is being felt across the world and treasury departments are having to take the brunt of the impact. This involves delicate negotiations with management advocating expenditure. This involves not only new technology but also defence mechanisms against potential cyber attacks which continue to hit the headlines – and not only in the financial press.
The need for protection of data has become even more important with the introduction of the General Data Protection Regulation which has had a significant impact worldwide.
The biggest challenge for any corporate is reputational risk. Technology has transformed the treasury function, but as processes become increasingly automated, defence against cyber risks becomes a key element of strategy. This should be a boardroom conversation if it is not already.
The need for data is greater than ever but controlling and analysing that information both internally and externally is more arduous than ever. This will mean that individuals within the same team will need different systems to help them carry out their tasks. From an overall management view, however, these risks must be overseen and there is a need for a platform to link them so that they can be seen together and form the basis of immediate business decisions.
Geopolitical decisions also are having a huge impact on treasury strategy. On one level, treasury departments are looking at interest rate levels and the quantitative easing which many governments and economic blocks such as the EEC have introduced. There is little doubt that this method of re-booting the global economy is coming to an end as Central banks around the world abandon it or begin to slow it down.
This will mean a fall in bond rates and a limit on available liquidity around the global markets. A serious challenge to treasurers is thus at hand.
As if all the above were not enough to make a treasurer reach for a cold drink, there is the issue of global politics to consider, and the potential for them to spark an international trade war. At the beginning of the year, the concerns included a Saudi-Iran stand-off in the middle east and US sanctions against China and North Korea.
Now we view a different economic landscape in which the US has diverted its attention to seeking to satisfy the voters of the Trump presidency with levies on steel and aluminium exports. All the talk is of a global trade war which the US President claims is easy to win. This will send shivers through corporate treasury departments around the world, with yet another challenge added to their to-do lists.
Although we have seen the centralisation of treasury departments over the last few years, all of the above issues suggest that a de-centralised model might be an option for many companies.
Whatever the individual board analysis may be, it looks set to be a challenging six months for most treasurers.
Simon Lynch is the owner of Treasury Talent.
Treasury Talent is a specialist treasury talent, recruitment and search provider solely focussed on the treasury market with offices in Sydney covering Australia, Singapore covering Asia, and San Francisco covering California and the USA. To make contact firstname.lastname@example.org