Three ways to revolutionize your treasury operations

Forward-thinking treasury teams can improve their operations in various ways, as ultimately their function becomes multi-faceted and new roles change mindsets

Gone are the days when the treasury function simply comprised managing the company’s financial risks and ensuring that payments are made on time. Over and above ensuring there is some sense of stability within a company, and following internal and external pressures to better optimize units within a business, the treasury team is being asked how they can make a greater contribution to the overall business.

Under the current business environment, three ways present themselves in which treasurers can play a greater role within their respective organizations.

One area could be redefining the departmental image, so not to be viewed merely as a cost centre handling daily transactions, but as a profit-generating centre where the treasury team seeks out short-duration investment opportunities. Rather than cash-rich companies making do with low returns on funds sitting in various bank accounts, searching for opportunities to secure additional yield could generate much-needed additional income for the company.

Asset Benchmark Research Treasury Survey discovered last year that a decent number of treasury professionals are moving in this direction, with the majority of survey participants aiming to become an added-value centre or profit centre in three years’ time, despite around 60% of respondents saying that currently they were viewed as a cost centre.

One treasury professional who spoke to The Asset explained that generating alpha for their company has been an important part of their responsibility. However, despite these requirements, preservation of capital remains the most fundamental part of the treasury management philosophy. With this in mind, his team only considers liquidity assets that are triple A credit rated.

Technology usage, which has been an ongoing conversation in the treasury management community, is another way treasurers can make a difference. Whether it is using application programming interfaces (APIs) to obtain real-time information from various accounts across multiple banks, to using robotics process automation to match invoices and release pending payments, these various technology tools should be investigated and piloted by treasury professionals to see where efficiencies can be gleaned within their company.

For example, companies such as IRPC, a Thai-based petroleum company, have utilized blockchain technology to their advantage. For IRPC the company is now able to complete payments with its overseas trading partners in seconds using blockchain as opposed to waiting one to three days under the prior arrangement.

Embracing sustainability and good practices may be another area in which treasurers could consider altering their mode of thinking within their operations. This does not necessarily entail tapping the capital markets for green bonds or sustainability loans, but rather establishing financial incentives via supplier financing to influence their company’s counterparties to be more responsible. As discussed last week, companies such as Walmart have started to consider introducing financing rates that are tied to the sustainability performance of suppliers.

But a question emerges for these types of arrangements: what is the appropriate sustainability yardstick or standard companies such as Walmart should impose on their counterparties?

Moving forward, expect more treasurers and treasury teams to evaluate how they can contribute to their businesses, whether it be via yield enhancement or contributing to the overall sustainability push.

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Date

24 May 2019

Channel

Treasury

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