Liquidity Planning is Top Strategic Challenge for European Treasurers

Liquidity planning, cash optimisation and risk management top the list of strategic challenges for treasurers across Europe, according to a survey conducted by Reval in partnership with the European Association of Corporate Treasurers (EACT).

The online survey, rolled out over the summer and unveiled recently at the EuroFinance international cash and treasury management conference in Budapest, Hungary, saw the EACT issue a questionnaire to its 21 national associations, which attracted responses from more than 300 European treasury professionals across a range of industries.

The majority of responses came from smaller or medium-sized enterprises (SMEs), with 30% of respondents in companies with annual revenues of less than €1bn and 42% in companies with revenues of €1bn to €10bn.

Asked to name their top three strategic challenges, 22% of respondents cited liquidity planning and forecasting, with cash visibility and optimisation next at 19% and risk management at 15%. The results demonstrated that ‘cash is still king’, commented Reval.

The top three risk challenges were also cash-related, with 27% naming cash and liquidity risk, 22% foreign exchange (FX) risk and 17% counterparty risk. The group commented that all three reflected the needs of growing companies, with cash visibility and liquidity forecasting both ‘must haves’ in any proactive approach to liquidity risk management.

Regulatory issues

Turning to the top three regulatory challenges faced by European treasurers, the European Market Infrastructure Regulation (EMIR) and Dodd-Frank came top, cited by 26% of respondents, followed by the single euro payments area (SEPA) at 16% and the Basel III capital adequacy regime (15%).

“Basel III is impacting corporate directly – for example the pricing of interest rate swaps – and indirectly – for example availability of credit lines,” said Reval.

The survey questionnaire also asked treasurers how they were addressing current challenges, which received the following responses:

•  Reviewing policies, processes and structures – 37%.
•  Implementing new treasury technology – 21%.
•  Reviewing existing treasury technology – 19%.
•  Improving qualification of staff – 19%.
•  Increasing headcount – 4%.

The majority of respondents were optimistic on treasury’s contribution to business success, with 62% expecting it to increase over the next three years, while 35% thought that it would stay much the same and only 2% anticipating a decrease. However, just under one in four thought that treasury staff would also increase in number over the same period, with 63% anticipating no change and 13% a decrease.

Asked how treasury was organised in Europe’s top companies, the breakdown of responses was as follows:

•  Central group treasury with regional treasury centres (RTCs) – 39%.
•  Central group treasury with regional treasury activities – 30%.
•  Central group treasury – 23%.
•  Decentralised treasury – 9%.

Technology issues

The survey found that no less than 94% of treasurers placed either a high or medium value on treasury technology to help master current challenges, with technology adoption highest in the Nordic countries and in the UK/Ireland.

Asked what technology was used in their treasury department, respondents replied as follows:

•  Treasury management systems (TMSs) – 57%.
•  Spreadsheets – 18%.
•  Combination of specialised solutions – 13%.
•  Enterprise resource planning (ERP) system – 11%.

Lack of budget was cited as the main ‘roadblock’ in treasury technology projects, cited by 35% of respondents. This was followed by lack of support from management (19%); insufficient headcount (15%); lack of support from departments (11%); no qualified staff (10%); lack of support from subsidiaries (6%); and other reasons (4%).

“As staff and budget are limited, technology is considered the most effective enabler to transform treasury,” Reval commented.

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