07 Dec 2017
Singapore’s first Prime Minister Lee Kuan Yew once said life is “a process of continuous change and a constant struggle to make that change one for the better”.
It’s a concept those in corporate treasury are well aware of. Market volatility, geopolitical strife and business-model disruption is happening faster than traditional markets have time to process let alone solve. The pace, scope and scale of change is unprecedented and serves up both opportunities and risks.
" The pace, scope and scale of change is unprecedented and serves up both opportunities and risks.”
A June report from The Boston Consulting Group shows economic concerns remain front of mind for treasurers globally, followed by cybersecurity and operational risk, all risks heightened in an environment of change.
To flourish in this environment chief financial officers and treasurers need to quickly assess the rapidly evolving landscape and dynamically position their companies to seize opportunities and manage new risks.
While capital, liquidity and risk management remain an important part of the role, finance and treasury functions need to prepare themselves and their organisation for these changes.
The shift from operational treasury to strategic treasury is virtually complete.
Five skills of the modern CFO
There are five increasingly important decisions new-order winning companies – and treasurers - are making. These are not one-off static decisions but a continuous stream of reinvention, innovation and culture.
Treasurers are today much more prominent at the table on:
These are decisions which will be fuelled by data in the years ahead – data incidentally captured by treasury held accounts.
This is a turbulent but exciting time in history to be in finance. The role of a treasurer has been elevated and expanded in the past decade as boards and CEOs look for greater sight on liquidity and risk-management controls in a post-crisis world.
However, in the last three years, the sector has seen the start of transformational change in the role span, spurred by the advent of real-time payments, APIs, robotic automation, smart contracts and AI.
APIs - application-programming interfaces- are part of the rapid digital evolution which pose a huge opportunity for businesses and their data – and could well determine their success.
Smart contracts are helping create tamper-proof while deeper automation causes unrest around the role of the human in the workplace – despite the jobs they are expected to create.
These factors are compounded by geopolitical and economic complexity arising from heightened risks of a trade war, increasing frequency of flash crashes and liquidity squeezes, synchronised central bank withdrawal of post-GFC stimulus and emerging market currency swings.
There’s also the rise of increasingly nationalist sentiments, epically modelled in the recent brinkmanship between Donald Trump and Kim Jong-un.
A changing world
The 2018 ANZ Finance & Treasury Forum: Navigating a Rapidly Changing World in Singapore explored these themes and more, bringing together business, political and thought leaders to share their perspectives on the trends shaping the region and the practical implications they will have on finance professionals.
The forum provided practical experiences, transformation journeys and successes shared. Real-life case studies brought to life new technologies, partnership models and solutions available for a future ready finance and treasury.
bluenotes will a series of key reports from the conference in coming weeks, subscribe to bluenotes to ensure you don’t miss out.
Take real-time payments, a technology that has become a reality in 45 countries including Australia, Singapore and HK. It’s very easy to see how instantaneous payments can help treasury manage liquidity and evolve the funding model to an intra-day or even an ‘interest per minute’ reality.
Just-in-time payments, shortened collection cycles, enhanced cash flow forecasting and dynamic hedging are easy to imagine. But the far greater opportunity - or threat - is the implication on business and operating models.
It’s up to treasury to harness cashflow data and be at the table on strategy as treasurers will be the recipients in real-time of transaction data on what - or where - is and isn’t selling.
Additionally, any previous limitations on the number of suppliers and distributors, driven by credit controls, could be virtually eliminated, through instant cash on delivery, in real-time payments enabled geographies.
This is a big opportunity to widen customer bases or build capacity. Likewise it is also a very real threat for many companies – and it should raise some very real existential issues the treasurer and CFO are best placed to challenge and recommend on.
It’s important to realise hard, conscious decisions should not require an existential threat to be considered. But if they do, those threats are in abundant supply - nearly nine in every 10 Fortune 500 companies in 1955 are gone, merged or contracted.
Where once it took Fortune 500 companies an average of 20 years to reach a billion-US-dollar valuation, today’s digital start-ups are getting there in four. Yet it is remarkable how long leaders can take to realise they are facing an existential threat and that they have to do something dramatically different.
Some industries such as retail and media have left it so late that they may have lost the financial flexibility to do anything meaningful to drive the change they need.
As the BCG report suggests, as treasurers operate in an increasingly uncertain environment, “half of the typical treasurer’s day [is] spent coping with day-to-day transactions, cash flow, and liquidity-related operations, and the other half spent addressing long-term strategic needs and business risks”.
It’s a time of change. However, that shift pales compared with the transformation currently in train for the decade ahead as treasurers and CFOs step up from an organisational perspective to the top table and navigate complexities and harness change.
Farhan Faruqui is Group Executive International at ANZ
This story is an edited version of a speech delivered at the 2018 ANZ Finance & Treasury Forum in Singapore.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
07 Dec 2017
22 Aug 2017