What in your view are the biggest challenges currently for treasurers?
Firstly, macro risks are very much on treasurers’ minds. The US Federal Reserve is pushing through with one its fastest hiking cycles. In July, it implemented its second consecutive 0.75-point rate rise to 2.25% to combat inflation, which is running at 9.1% – the highest since 1981. This has an impact on capital structure from a financing and cost of borrowing standpoint, as well as cash management as it relates to investments.
Geopolitical events and supply chain challenges, which impact some companies and industries more than others, are adding another layer of complexity.
On the operational side, I see that crypto and the fintech space generally is becoming increasingly relevant for a lot of companies as they become more familiar with these spaces and the kinds of solutions they can offer in an increasingly uncertain operating environment. These spaces, however, are very dynamic and yet still a relatively new consideration for treasurers. With crypto, treasurers really need to stay on top of changes and related risk management including custody, counterparty credit risk, crypto currency movement and policy on crypto holdings.
More specifically, inflation, rising rates and quantitative tightening are making cash more and more expensive, so effective, efficient cash management is now crucial. Cash pooling, for example, can bring much-needed focus to inconsistent, and potentially unwieldy, cash management arrangements by concentrating global cash balances in a tax efficient manner and optimising net interest expense.
Treasury technology has been transformative for treasury teams over the last five to 10 years and there is no doubt it will play equally transformative role over the next five to 10 years. It is important for treasury to champion greater investment in and use of technology within organisations, leveraging data and automation, not least as it can enable greater visibility and control.
What kind of skills will be especially important for treasurers to have over the next few years?
Financial stewardship has always been a major responsibility for treasurers. In the age of ESG, protecting the long-term assets of your organisation through a commitment to moral, ethical and prudent financial decision-making has only become more vital.
Financial stewardship though is not the sole responsibility of the treasurer and as such it can also be a valuable means of encouraging a cooperative environment focused on the organisation’s success.
With so many headwinds to contend to with treasurers also really need to be on top of their game with risk management across the board whether its business, financial or operational risks. Difficult times can put strains on treasury teams, especially younger members, so providing strong, meaningful leadership is increasingly vital.
What impact has technology had on you as treasurer over the years, and what current advances do feel are especially exciting for the medium- to long-term for treasurers generally?
The number of providers in the treasury management systems space is increasing with newer players, including from within the fintech space, entering the market particularly in the cash management space offering more focused modules/solutions rather than comprehensive multi-module legacy solutions. This is introducing more competition and innovation in the treasury management space.
In addition to treasury management systems, treasurers are now also focused on crypto and digital assets as well as receivables and payables marketplaces like C2FO to optimise working capital management.
Aside from your day-to-day responsibilities as a treasurer, what external factors are most impacting your work?
ESG has become top of mind for treasurers. As ESG is a dynamic and still a relatively new space for us, we are still on the learning path with its integration into policies and procedures.
Many companies don’t yet have formal ESG policies and are working towards formulating them as they are needed to satisfy debt capital markets, rating agencies, lenders, investors, vendors and other key parties.
At the same time, regulatory pressure on ESG is also increasing. In the US, the [Securities and Exchange Commission] SEC will soon require public companies to make climate disclosures that are more transparent and provide investors with consistent, comparable, and decision-useful information. For many firms that may mean a pretty significant change to their climate disclosure practices. There is no doubt the level of interrogation by investors and regulators is rising and that it will only become more forensic over the coming years.
Central bank policy is another major external focus for treasurers, especially as it relates to interest rates from a debt capital market and cash management standpoint as well as inflation.
With hindsight what is the single, most important advice you would give to younger self starting out on a journey in treasury?
Knowledge is power. Focus on learning and gaining experience in multiple areas within treasury and finance.
As an established treasurer, if you could share one piece of advice with your peers, what would it be?
Be flexible and dynamic as leaders in the current environment to successfully attract and retain talent as well as engage the team in a hybrid structure.
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