PwC's Global Treasury Outlook: Strategic Thinking Favored by 53%; IHBs by 73%

How can data analytics, in-house banks, and payment automation help treasury departments mitigate financial risks and enhance operational efficiency amidst high inflation and interest rates, and a fluctuating Dollar.

Today, the role of the treasury function is increasingly becoming that of a "strategic business partner".

PwC’s 2023 Global Treasury Survey^[1] revealed this exciting trend—reflecting views from 375 treasury respondents from over 32 countries, 23 industries, and companies with a median annual revenue of $3.9 billion.

After all, safeguarding a company’s assets against financial risks—like high inflation and rising interest rates—is no easy feat.

This report highlights the leadership’s strategic focus on achieving:

1. Top-quartile shareholder returns, and
2. Delivering consistent cash flows that exceed investor expectations.

The key to achieving this? A treasury function that has “a seat at the table” during crucial moments; that establishes operating procedures that provide greater visibility into cash generation and financial forecasting.

This article talks about cash management strategies, emerging tech trends, and new skills needed to redefine their roles amidst new expectations, a technology boom, a shifted payment landscape, and more.

Let’s start with expectations first!

Evolving Treasury Skills: New Expectations but with Limited Resources

The survey results showed a clear trend: people in treasury see themselves as strategic partners (24%) and in value-enhancing roles (55%). Only 16% of treasury roles are purely transactional in 2023.

This change comes alongside a continued focus on Free Cash Flow forecasting and capital structure optimization.

To make a difference, certain skills and abilities are crucial. The report asked respondents what skills are the most important. Here’s what they have to say:

• Strategic thinking (53%): Seeing the big picture and making smart financial decisions.
• Functional knowledge (53%): A strong understanding of treasury functions and operations.
• Effective business partnering (42%): Working well with other parts of the organization.
• Risk mitigation and management (39%): Finding and handling financial risks before they become problems.

It is interesting to note how the respondents consistently balance “strategic thinking” and “functional knowledge”—both are given equal importance.

Next, let’s discuss the trends in managing cash, capital, and liquidity, and explore the strategies organizations are using to simplify cash flow operations.

Centralized Cash Management: 73% of Organizations have an In-House Bank in 2023

Corporate treasurers are most concerned about “inaccurate cash flow forecasting” and “access to funding and liability”.

A rethink into Cash Management strategy will be most effective, according to the report.

People in Treasury are actively seeking to optimize by centralizing their cash management and operations using strategies like:

1. In-house banking (IHB),
2. Payment hubs, and
3. Payment on Behalf Of (POBO).

The adoption of these strategies has increased by 10 percentage points for each compared to PwC’s 2021 report.

So far, the trends reveal that in-house banking is the most trusted cash management strategy implemented by organizations today. But why is it gaining more traction than payment hubs and POBO?

Why In-House Banking is Gaining Traction over Other Cash Management Strategies?

Treasurers are adopting in-house banking to centralize daily operations and cash flow.

This setup increases cash visibility and control, reduces fraud, centralizes risk management, and improves working capital management^[2].

Additionally, in-house banks reduce intercompany loans, cross-border payment fees, and the number of banking relationships and physical bank accounts, enhancing operational efficiency and financial control.

This leads us to the “bank rationalization exercise”, which, according to PwC, many organizations will be undertaking soon^[3].

40% Plan to Rationalize their Bank Accounts within Two Years

Over 40%, in the survey, plan to launch a bank rationalization exercise within the next two years, aiming to streamline their treasury operations and optimize their banking relationships.

The key selection criteria for choosing banks include their capabilities, such as their technological infrastructure and expertise, as well as their participation in long-term funding projects, according to the report.

As a result, large global banks are likely to gain a larger share of the market.

Technology Trends: Most Relevant Tech for the Next 2-3 Years

Data analytics and visualization, according to PwC, will be the most relevant tech for the treasury department in the coming years.

The top 4 technologies based on their relevance for the treasury department are as follows:

1. Data Visualization (83%),
2. Data Analytics (80%),
3. External APIs (70%),
4. Internal APIs (66%).

Introducing these technologies directly impacts cash, liquidity, and financial risk management and reporting, which further helps with strategic analysis, pushing treasuries into the strategic partner spectrum.

Will the Treasury Department have Dedicated Data Teams?

A further step in the maturity level of data and analytics is having dedicated data teams to set up data infrastructure to obtain data faster, almost in real-time.

This requires deep technological expertise to pull/push account balance data to treasury management systems (TMS) or enterprise resource planning (ERP) systems in real-time.

The main obstacles to implementing this are budget constraints and a lack of technological skills, especially in larger corporations. 50% of the respondents in the PwC report believe these two are the main challenges today.

Payment Landscape: 83% say Payment Automation enhances Efficiency & Control

The role of treasurers in the payment automation space is growing, with 71% of respondents in PwC’s survey indicating that the treasury is responsible for “either initiation, payment release, or both”.

83% of respondents note that payment automation and fraud sanction screening tools are key considerations while selecting a payment solution.

Another part of the puzzle is Treasury Management Systems (TMSs). 

There is a trend towards routing payments through TMS for better control over cash. TMS functionalities like sanction screening, fraud protection, and payment flow control provide greater visibility and control over payment cash flows and are being used more frequently, according to the report.

Opportunities for Treasurers in these areas:

• Payment Automation: Initiatives to increase payment automation and reduce manual controls which can be implemented through ERP and TMS upgrades.
• Cyber Fraud Mitigation: Mitigating frauds and reducing the impact of cyber attacks on payment flows, is important. Payment automation tools, whether standalone or integrated within TMS systems, provide better means to counter these threats.
• Migration to New Tech: For treasurers in B2C industries, migrating to new-age payment systems (card, digital, or real-time) can become a competitive advantage.

FX (85%) & Interest Rate (78%) Risks are the Most Impactful Economic Risks

Markets in 2024 are volatile due to recent world events. So, what are the most impactful economic risks today? The report highlights 3 major risks:

• Foreign Exchange Risk (85%),
• Interest Rate Risk (78%), and
• Commodity Price Risk (47%).

Managing financial risk remains a top priority for treasurers. They must balance between protecting against market, credit, and liquidity risks. This involves making tough choices about foreign exchange, interest rates, commodity prices, liquidity needs, and credit risks.

Investors and company leaders are very aware of these risks, so clear communication is essential. Treasurers need to be strategic thinkers with skills in risk management as we also mentioned earlier in the article.

Final Thoughts: Treasury's Strategic Transition

PwC’s Global Treasury report underscores the evolving role of the treasury function as a strategic business partner amidst a landscape of economic uncertainties and technological advancements.

Despite the challenges, the integration of innovative technologies such as data analytics and visualization, coupled with strategic initiatives like in-house banking and payment automation, positions treasury departments to effectively mitigate risks and enhance operational efficiency.

As treasurers continue to adapt and optimize their strategies, there is a promising outlook for achieving greater financial control, improved cash flow management, and ultimately, delivering shareholder value. The proactive adoption of these trends and technologies will likely propel treasury functions to new heights, ensuring they remain pivotal in driving organizational success in the years to come.

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