BankingCorporate to Bank RelationshipsVisibility and control paramount for treasurers as headwinds gather force

Visibility and control paramount for treasurers as headwinds gather force

Traditional challenges remain very much at the forefront for treasurers as economic and geopolitical uncertainties intensify, Martin Runow, global head of payments, FX and digital at Barclays Corporate Banking, tells The Global Treasurer

An uncertain economic outlook and across-the-board intensification of risk for corporates means securing visibility and control is now of paramount importance for treasurers, according to Martin Runow, global head of payments, FX and digital at Barclays Corporate Banking.

Runow says that during the pandemic, treasurers were rightly worried about continuity of business and while there were promising signs of an economic revival as the pandemic abated, a number of shocks then took hold and have created considerable economic uncertainty. They include, at the global level, supply chain disruption caused by shipping container shortages; chip shortages impacting production across sectors ranging from cars to power grid componentry; the Ukraine crisis, currency volatility, rising interest rates; inflation and the energy crisis. On the domestic front, labour shortages following the UK’s departure from the EU and subsequent hardening of its border with Europe have also been a drag.

“What this all means for treasurers is that no matter what industry they work in, they are managing at least a handful of these risks,” says Runow. “The implication for them is that they need visibility and control over all their cash positions now, more than ever, and need partners who will help them manage counterparty risk, geopolitical risk, currency risk, supply chain risk and liquidity risk.”

Treasurers have clearly had their work cut out over the past two to three years but Runow stresses that despite the severe intensification of risks and multiple shocks over this period, the traditional challenges for treasurers have not changed. This is reflected in Barclays’ treasury clients continuing to demand solutions that can provide better visibility of cash balances, improve working capital management and generate gains in operational efficiencies so that they can do more with less.

Drilling down further Runow says that with respect to the invoice to cash cycle, Barclays is seeing increasing demand from clients for help in getting access to account information reporting in a faster and richer way, especially from those who have invested in their own treasury technology.

“Efficiency gains in payment reconciliation are key to allocating cash as quickly as possible to aid cash flow and reduce reliance on working capital,” he says. “Key to achieving those efficiencies is seamless integration between the treasurer’s workflow tools – TMS, ERP, CRM, and so on – and the bank. That integration can be achieved through a combination of dedicated APIs and Host-to-Host connections. Open Banking itself offers some potential advantages on this front.”

Solutions to pain points  

With an eye on the biggest pain points for treasurers over the next couple of years, Runow advises them to consider solutions to de-risk the supply chain and free up working capital in global trade. He also believes they will need to focus more on efficient reconciliation and scalable processes.

“Both of these can no longer be dealt with simply by hiring more people,” he says. “They require either investment in automation, or a solution from a bank or partner.”

With corporate treasury departments battling to keep on top of multiple critical priorities like managing liquidity, optimising cash, financing, controlling risk and managing bank relationships, simplifying operations and processes with the help of technology has never been more important.  Beyond the core integration capabilities that banks can now offer via APIs, Host-to-Host, SWIFT and Open Banking, other key solutions to support a simplification of the treasurer’s experience include virtual account management (VAM) platforms and liquidity investment solutions.

“There are lots of tools and technologies through which banks are effectively enabling and integrating a unified client experience to be able to provide an answer to these challenges,” he says. “Aside from the implementation of new technologies, treasurers, as a first step, should seek to rationalise their bank accounts in order to drive simplicity and operational efficiency.”

The continuing increase in demand for virtual accounts that Barclays is seeing is encouraging, says Runow, as VAMs can provide treasurers with a multitude of benefits including account rationalisation, potentially down to a single physical account per currency.

“That not only lowers operational costs and improves cash visibility but also provides treasurers with an opportunity to gain insights from the payments and receivables data, both at the macro level in the physical account but also at the granular level of each virtual account.”

Banking on the future

As for Barclays own investment priorities with respect to its corporate treasury services, they include a fully enabled online portal that offers functionality beyond core cash management to include trade, liquidity and self-service tools. Another major focus is enhanced reporting for complex liquidity management and account structures and receivables reconciliation. The bank also wants to further develop its mobile offering to make treasurers’ business experience similar to their experience as a consumer.

Much is always expected of new treasury technologies and processes, but according to Runow much of what is now being deployed to improve functionality and efficiencies for treasurers is not truly “new” technology. What is new, he says, is realising the key use cases for applying technology in value-adding ways and it is that challenge that will drive treasury technology over the next few years.

APIs are a prime example of established technology already finding application in new and powerful ways with much more to come from their widespread use. A similar argument can be made for payments: many markets are moving to real-time payments but it could be argued that Faster Payments, in the UK, has offered that since 2008; while SEPA Instant is rolling out across Europe right now.

“The advent of new payment types, therefore, is only part of the answer,” says Runow. “The real answer comes from how the treasurer can access the functionality efficiently, effectively, simply and cheaply, the key here again being integration with treasury workflow tools.”

Emerging themes

While impossible to predict with certainty, Runow sees that there are certain themes emerging that treasurers will need to respond to over the next five to 10 years.

On the economic front “it is clear we are entering a period of interest rate rises and inflation volatility […] this will present new challenges for treasury teams that have lived through a period of relative stability from these factors. A fresh look at risk management and the associated policies and procedures in place would be a useful exercise.”

Treasury functions have already moved to become a strategic partner in the organisation and Runow anticipates that over the medium to long term ongoing acceleration of technology adoption will only reinforce this development, and in the process reduce time spent on repetitive and low-value processes and allowing even more time for strategic thinking and decision making.

Runow also foresees the strong momentum behind ESG and sustainability continuing over the long term. “Corporate debt finance will encapsulate a growing proportion of ESG and sustainability-led features.  In turn, there will be an increasing treasury demand on the reporting against targets set by their own business or through sustainability regulations.”

TreasuryTech to come

While the adoption of technology over the long term will be largely dependent on the traction it gets in the marketplace, Runow believes there are clear technologies that will develop across all industries and be especially applicable to corporate treasury. They include data and analytics, which he says will be “the lifeblood of future real-time treasury not only in accounts payable/accounts receivable automation, but as the source for cashflow forecasting, scenario modelling or any movement to digitising the treasury function”.

Ever-increasing levels of automation that leverage AI and machine learning to eliminate manual processes will be another strong feature of the future treasury. Greater use of algorithms will support more effective decision-making while standardised messaging between corporates and banks should enable the exchange of richer data flows.

While the future is bright for API technology Runow says it will need more industry standardisation before it can support mass adoption.

“The benefits of APIs are certainly well worth pushing for, notably seamless integration of a wide range of bank services that our clients can use to create their own customer experiences, tight integration of treasury systems with banking partners, and fulfilling the promise of Open Banking,” he says.



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