Treasury of the future and future of treasury…
Why does treasury continue to evolve, after so many successive changes over several decades? It's worth asking whether and why cash management will continue to evolve in the future. There's no doubt that it will continue to evolve significantly, for a variety of reasons that we intend to outline below. In the face of so many challenges, what will the treasurer 5.0 become? Without pretending to be either predictive or science-fictional, we can nevertheless attempt to determine what will characterize the profession by 2030.
Why does treasury keep evolving?
Even after so many successive changes over several decades, treasury function keeps significantly evolving. It can be explained by technology, as with many other functions. It's worth asking whether and why treasury management will continue to evolve in the future. There's no doubt that it will continue to evolve significantly, for a variety of reasons that we intend to outline below. In the face of so many challenges, what will the treasurer 5.0 become? Without pretending to be either predictive or science-fictional, we can nevertheless attempt to determine what will characterize the profession by 2030.?
What are treasury evolution drivers?
Treasury evolution is driven by both challenges and opportunities arising from external forces such as the following trilogy: (1) economic and geopolitical context and crises, (2) technological evolution and (3) evolving skillsets,
1.??? Economic and Geopolitical Crises:
o?? Crises as Catalysts: Economic instability (e.g., inflation, recession, high interest rates, volatility, de-globalization, …) and geopolitical disruptions (e.g., wars, trade sanctions, terrorism, disruption in supply chain, …) force treasurers and CFOs to adopt more resilient strategies to manage credit lines, cash and liquidity, currency risks, and cash flow volatility.
o?? Regulatory Ripple Effect: Crises often lead to stricter financial regulations and tougher rules. For instance, the post-2008 financial crisis (GFC), Basel III imposed stricter capital and liquidity requirements, directly impacting treasury operations. EMIR was a direct consequence of the GFC, as well as Transfer Pricing principles regenerated (e.g. OCDE 15 actions).
2.??? Technological Evolution:
o?? Scope Broadening: Technology enables treasury to go beyond traditional functions (cash management, financial risks mitigation, hedging…) and take on (more) strategic roles like data analytics, dynamic forecasting, dynamic hedging, and ESG compliance. Treasury has been empowered by financial data.
o?? Efficiency Gains: Hyper-automation, Gen AI, and blockchain streamline operations, reduce costs, and improve real-time decision-making. Treasury Management System will also become real decision-making tools, suggesting actions and strategies (to be validated by treasurers). We will do more with less.
3.??? Evolving Skillsets:
o?? Hard Skills: Treasurers need to master advanced tools and techniques, including data analytics, coding and report crafting, digital payment systems and new e-payment methods, and compliance management. The treasurer will be less a “report writer” (or report producer) and more an interpreter of the reports produced, suggesting strategies, or validating actions proposed by machines. He/she will be more of a controller than an executor. He/she will no longer be a figure cruncher (as they will be produced automatically upon demand) but the validator of what a machine will have produced and recommended.
o?? Soft Skills: Flexibility, adaptability, and problem-solving are crucial for navigating volatile environments and adopting innovative solutions. It will also be key to be agile to adapt to new and fast-changing environments. Appetite for innovation and new technologies will be essential to succeed in treasury management.
Challenging Situations Require Adaptability
In periods of disruption, treasury teams must:
Opportunity to Reposition Treasury
Crises make treasury more and more important and offer opportunity to reposition the function closer to the C-level. The enhanced quality and rapidity to deliver accurate pieces of information enable treasury to become more vital.
Every crisis is an inflection point, offering treasury the chance to:
Inverted pyramid principle
Evolution from highly Operational Role towards an exclusively Strategic Role:
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Future Evolution of the Treasury Function
From Operational to Strategic Partner
The treasurer’s strategic role in decision-making is growing. Treasurers are becoming advisors to the C-suite, providing insights on capital allocation, risk management, and global liquidity strategies. The risk mitigation role goes beyond the financials, but also helps financials to remain positive and sustainable. Beyond financial risk, treasurers are now responsible for supply chain risks, geopolitical instability, and financial regulatory changes.
Focus on Sustainability
Treasurers will lead ESG initiatives by managing green finance, optimizing carbon footprints in portfolios, and aligning cash management strategies with sustainability goals. Treasurers will use more and more “green” financing tools. Central Bank Digital Currencies (CBDCs) are emerging. Treasurers will need to navigate new payment systems, new e-payment methods and evaluate their impact on treasury and liquidity management. Global Cash Pooling and advanced liquidity management technologies enable real-time global cash pooling, optimizing the use of capital across multinational corporations.
Focus on cross-collaboration across functions
Cross-functional collaboration with IT, legal, tax and procurement teams will become essential, especially as treasury management systems integrate more deeply into the organization’s digital infrastructure. Treasury is now able to generate value to operations, for example through new payment methods, by hedging any single currency to allow business with partners abroad while dealing in their own local currency, by being the pulse of the business and alerting on risks and many other support actions to operations.
Future-proof treasury
The treasurer's role is undergoing a surreptitious transformation, thanks to technology. He is entering a new era that will reposition him at a higher level. Treasury has entered the “all-in-time-real” era, with access to data and the action to be taken based on data processing. Speed is the key to success. Being faster than your competitors, and reacting or acting in a timely fashion, makes you more resilient. The power of the treasurer is immeasurable and often underestimated. Treasurer 5.0 will undoubtedly be indispensable to the C-level.
?Treasury 5.0
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Extinction of Treasurer’s species?
With so many professions, the question is whether the profession will survive. Would the treasury profession disappear in a world dominated by AI and robots? The answer is obviously no. There will certainly be greater productivity, which will enable those with the “right skills” to remain employable and necessary. The machine won't replace the human treasurer, but it will enable him to perform his tasks better and be more relevant. The breed of treasurer is not going to die out, but rather mutate into a more technical, supervisory and controlling role. So, we're not facing a predicted disappearance, but rather an evolution that will enable treasurers to fulfil their mission more effectively, thanks to hyper-performance tools. Like other professions, the treasurer's role will require more technical and technological skills (not just technical, but also legal, regulatory and fiscal), with the specificity of being able to adapt. The function creates the organ, according to Darwinian theory, and in treasury the function will adapt to the environment, thanks to technology. Rather than extinction, we should be talking about “de-extinction”, because the treasurer’s species is not at risk, if the treasurer evolves and adapts to new needs and requirements.
To significantly improve cash flow, it is essential to automate processes that are still too manual or based on XL sheets. Before talking about AI and other new technologies, there's still a gap to be filled and automation or hyper-automation to be achieved before claiming the next level. This explains why evolution may be slower than expected. The 2030 horizon seems more reasonable to us.
Fran?ois Masquelier, Chair of EACT – Luxembourg December 2024
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Treasury Professional helping companies maximize bank relationships and services
1 周Absolutely agree that Treasury must continue to enhance their role within the organization. The constant innovation of Treasury products impacts the efficiency and capabilities of other departments (Accounting, AR, AP, and Risk).