As part of the Summer E-Conference organized by ATEL, Trustpair offers you a detailed feedback of the intervention of Francois Masquelier, Chairman of ATEL (Luxembourg Association of Corporate Treasurers) and Philippe Foerster, Director IFRS and Treasury at PwC, addressing the following question: Is Treasury for all?
The challenges of treasury
It is necessary to remember that cash flow issues and the problems they can cause are not dedicated to major groups and that any company, regardless of its proportions, can be exposed to this type of challenge.
The current health crisis has shown the importance of good liquidity, cash and treasury management. 10 years ago, or even 20 years ago, the press had the same headlines as today. Every time we are in a crisis, we realize how important treasury is. Everyone can face the same situation, regardless of the size of their organization. That’s why everyone should do an exemplary and optimized cash management.
The PwC and EACT studies, which gathered the priorities of several hundred treasurers between the years 2017-2021, are particularly revealing.
In 2021, although Cash Flow remains the number 1 priority for the last 5 years in a row, the digitization of treasury comes next.
This digitization is notably one of the keys to obtain and update its treasury processes in an optimal and efficient way.
More and more, banking organizations propose their own tools and solutions related to this theme (and replacing the typical Excel Spreadsheet, sometimes still effective but often obsolete and especially a source of flaws and risks). All agree that today, affordable, easy-to-use and easy-to-implement solutions are available. Digitizing your processes does not mean falling back on a major tool at an exorbitant cost, but rather having recourse to a digital toolbox (where solutions, resources, systems provided by your bank are concentrated and linked…)
Such an implementation must not only rely on the new technical means employed, but on the human resources involved and using them. This involves training its workforce on the new issues and solutions they are facing and employing qualified personnel dedicated to these new challenges.
Thus, it implies a mix between human and machine.
It is clear that maintaining good relations with your bank is one of the top priorities for treasurers this year. Nevertheless, 3 main trends are emerging: cash flow forecasting, digitalization and risk management. There are also “trend themes” such as cash flow on demand (where the aim is to optimize information flows and thus efficiency). The latter were particularly evident in the recent health crisis, where, for example, there was a great mobilization towards online solutions and organization.
The treasury’s maturity curve
PwC recommends an analysis illustrating four stages that a treasury can “climb”, combining Value/Return and Organisational Reach in an increasing way, according to the different levels reached.
Thus, if we take a fictitious company starting from zero, it is recommended:
- to start with a transactional treasury, i.e., a treasury that executes orders and payments properly and generates cash reports correctly;
- once these basics are mastered, to expand towards a process efficient treasury: to start ensuring a global vision on cash, to better manage liquidity, to lower the cost of treasury…etc;
- Then the value enhancing treasury: bringing quantifiable value to the business (enabling you to negotiate with clients/suppliers, decreasing your cost of fundings, increasing your credit rating…etc);
- finally to become a strategic partner: no longer just executing but assisting in the strategic decision (investing in emerging markets, bringing value to the shareholders…etc).
To conclude
One of the positive aspects of the recent crisis is the fact that we have seen a general awakening to the fundamental value of treasury, and that it creates value for all other departments of the company.
It is often denigrated and not valued as a key organization.
Today there is a real gap between the “heavyweight players”, fully equipped with a payment factory, a dedicated team, a management system…etc and the opposite extreme (with not even a Treasury Management System or a treasurer).
“In the future I wouldn’t be surprised if banks decide not to work if they are not fully digitalized.” – Francois Masquelier, Chairman of ATEL
Watch the complete conference here.
