Corporate treasury strategy around the world will have the most impact from the risk of the global pandemic by as much as 43 per cent in the short term, and 27 per cent in the medium term, a new report by the London-based Economist Intelligence Unit (EIU) has projected.
The report titled: “The resilient treasury: Optimising strategy in the face of covid-19”, examined the forces that will shape and define the corporate treasury function and the priorities of the future.
The work, supported Deutsche Bank and based on a global survey of 300 corporate treasury executives drawn from the regions of Africa, North America, Asia-Pacific, Europe and the Middle East, identified the macro and financial risks that impact tactics as drivers of strategic change, the regulatory initiatives that are currently top of mind and the technologies and skills that the function requires.
In response, however, the report stated that treasurers plan to increase investments in long-term instruments (55%), bank deposits (48%) and local investment products (48%) over the next 12-24 months.
The study further revealed how increasingly dependent treasurers have become on new technologies and statistics for their day-to-day activities. However, with eleven per cent increase from last year’s survey (69%), close to eighty per cent of respondents are either very or somewhat concerned about the quality of data available within the treasury business, noted the report.
With almost thirty per cent of respondents possessing the necessary skills to meet new challenges posed by the change in technology, the survey by EIU explained that having the correct skills within the treasury function to take advantage of new technologies is critical, adding that treasury executives’ efforts to upgrade their tech and data skills are starting to bear fruit.
Other regulatory challenges as pointed out by the report remain very much top of mind for the treasurers; and the respondents indicated that the replacement of the LIBOR, and other Interbank Offered Rates (IBORs), is the most challenging regulatory initiative for treasury (38%), this was followed by GDPR (32%), the OECD’s initiative against BEPs (31%) and MiFID II (30%).
Meanwhile, the regulatory burden will continue to affect different parts of the treasury function and could lead to structural adjustments, as the most affected functions by regulatory actions and initiatives in 2020 are funding strategies (25%), overall operating model (25%) and cash/liquidity investment policies (24%).
On the outlook, top of the agenda for the treasury in 2020 points to managing relations with financial institutions and suppliers and collaborating with other business functions. However, looking ahead, treasury’s data-driven methodology will enhance the functions of becoming more supportive and proactive partners to other parts of the business.