The Treasurer of Tomorrow: 83% Seek Visibility, 86% Embrace APIs

Welcome to an exploration of the future of treasury operations. This journey will guide us through the past, present, and probable future landscape of the treasury function. Ready to take off?

Deloitte's Global Corporate Treasury Surveys provide insight into current practices and upcoming challenges within the finance’s treasury function. The 2022 survey included 245 interviews, marking a slight increase from the 208 conducted in 2019. Participants in both surveys predominantly represented the Consumer & Industrial Products, Energy Resources, and Technology sectors.

When comparing the two reports to identify emerging trends, the data painted a compelling picture: the integration of technology and treasury is not anymore a thing of the past. Core treasury functions—like liquidity, cash flow, and foreign exchange risk management—are now being upgraded by cutting-edge technologies like AI/ML, RPAs, and Cloud Computing.

However, this technological revolution does not imply a diminishing importance of domain and technical expertise. On the contrary, the “treasurer of tomorrow” will be expected to be well-versed with technical know-how while also possessing leadership skills.

This article explores the complex role of technology in treasury, examining its challenges, trends, and the skills needed for future hires.

It's a challenging but thrilling path, with treasurers adapting to evolving changes. How have 2019's challenges transformed in 2022? And what that means for us in 2024? We’ll find answers to these questions today! today!

Technology Takes Center Stage: A Shift in Treasury Challenges

In 2019, treasurers faced numerous challenges, which have since evolved due to the fast-paced integration of technology into traditional procedures. The data from the two reports shows a change in top challenges treasurers are dealing with in 2022.

1. With 64% acknowledging it, the most critical challenge in 2022 was the increased need for visibility into global operations, cash, and financial risks. This was also considered a challenge in 2019 by 62% of respondents..
2. Complying with digital capabilities has become increasingly challenging. In 2022, 59% identified this as a challenge, up from just 34% in 2019. 
3. The number of people acknowledging “inadequate treasury system infrastructure” as a challenge has increased by 6 percentage points—moving from 47% in 2019 to 53% in 2022.
4. Concerns over managing liquidity have decreased from 57% in 2019 to 48% in 2022. On the other hand, navigating FX volatility has also seen a decrease from 50% to 45%.
5. Interestingly, the challenge of cash repatriation, which was significant in 2019 (42%), does not appear in the 2022 challenges.

It appears that technology has taken a central role in enhancing the treasury function of finance. But, is this change being widely accepted into the everyday functioning of the treasurers?

In 2022, 64% Think “Treasury Continuum” needs a Digital Transformation

The aim of prioritizing technology is to revolutionize the “Treasury continuum”. This includes cash inflow, liquidity management, and cash outflow.

Top Trends: 86% Say API Tech Has the Most Use Cases!

The Treasury Department’s plans to adopt technologies like APIs (44%), RPA (37%), and Visual Analytics (40%) demonstrate their potential to transform treasury operations. But, of these all, API technology is currently the most commonly adopted. As a matter of fact, 86% of treasurers are either already using it or planning to implement it shortly. According to the treasurers:

1. API tech offers treasury departments additional ways to connect with their banks and convert a “prior day” cash view into real-time or on-demand.
2. It also enables the finance team to process instant payments end-to-end. The applications of API extend beyond mere bank connectivity to an “Open Treasury” concept.

The Tech Transformation: Key Benefits

Since 2019, significant innovation has occurred in FinTech—with both direct treasury applications and broader finance implications. According to treasurers, some of the benefits offered by technology implementation are as follows:

1. It lessens financial risk (69%),
2. It automates manual tasks (61%), and
3. It enhances speed, quality, and efficiency (43%).

But which area of the treasury department will be most impacted by the integration of technology?

Top 3 Areas of Treasury to Get Transformed Soon!

The data points towards a proactive, tech-driven approach in the treasury function that is open to technological changes. The following areas are projected to be automated:

1. Cash flow forecasting (78%),
2. Liquidity management (74%), and
3. FX and interest rate risk management (64%).

Certain treasury areas hold significant potential for technological transformation, though the implementation process is not without challenges. The survey identifies several obstacles that underscore why adopting technology can be particularly difficult in these areas. Here are some of the key challenges highlighted:

50% of Long-Term Cash Flow Forecasting Predictions are Wrong

Cash forecasting is among the top three priorities that respondents aim to transform.

According to Deloitte’s survey, Treasurers generally find their cash forecasts more accurate in the short or near term (less than one month), with 86% rating them as such. However, for periods exceeding six months, over 50% consider their cash forecasts inaccurate.

What challenges limit cash flow forecast accuracy?

1. Short term forecasting uses balance sheet information, while long term forecasting requires modeling and relies on budgeting or financial planning.
2. The primary barrier to enhancing cash flow forecasts is data quality (60%) followed by lack of effective tools (50%).

Thankfully, recent advancements in AI/ML have improved cash forecast accuracy. But problems stem from the data source and development of the forecast model. A similar case can be witnessed in the lack of visibility and reliability in FX forecasts.

83% Perceive a Lack of Visibility & Reliability in FX Forecasts

Rising inflation in the US has prompted the federal reserve to adjust monetary policies, causing global FX market volatility. Key challenges include timely identification of exposures, especially for cash flow hedging predictions.

Many worry about inaccuracies in Lack of visibility and Identifying FX exposures, identifying them as the top two challenges (83% and 71% respectively).

As we delve into the challenges of managing FX risks, it becomes clear that treasurers are in search of effective strategies to tackle these issues. The following section highlights the preferred methods of hedging that many treasurers leverage to mitigate the risks associated with foreign exchange rates and interest rates.

What is the Preferred Hedging Method for Treasurers?

1. Hedging with Derivative Instruments: This strategy is popular among 76% of respondents. It is often used to mitigate risks associated with foreign exchange rates and interest rates.
2. Natural Hedging: Strategies such as matching currency footprints and reducing risk of exposures are also used by 55% and 51% of respondents respectively.

25% Team Attrition Reported in Treasury Departments

The active job market has impacted the Treasury department, resulting in a 25% team attrition in 2021. Consequently, many treasurers are reevaluating their team’s structure, size, and skill sets for rebuilding.

According to the report, smaller organizations (treasury team size <=10) are considering expanding their teams, while larger ones aim to streamline.

In addition, there’s also consideration of how people can contribute to business continuity. People are vital in the treasury function and the key treasury skills have evolved to include leadership and technological abilities.

According to survey respondents, the “treasury of tomorrow” will require a treasury domain expertise, as well as leadership, risk management, and technology skills to effectively navigate the strategic treasury priorities.

Embracing Technology and Fostering New Skills

The future of treasury operations is set to be increasingly shaped by technology, including AI, machine learning, APIs, and big data. As this technological integration becomes more crucial, treasurers are expected to face new challenges and will need to develop both tech and leadership skills to adapt effectively.

The treasury function itself is likely to become more proactive and tech-centric, with areas such as cash flow forecasting, cash management, and risk management potentially becoming automated. Nevertheless, the human element remains integral to the treasury function and the continuity of business operations.

Looking forward, treasury professionals of the future will require a mix of domain expertise, leadership skills, risk management knowledge, and tech skills. Therefore, it becomes imperative for treasury departments to stay abreast with evolving tech changes and foster these essential skills within their teams, thus ensuring a successful transition into the future of treasury operations.

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