The rapidly changing banking and financial environment has created major challenges for Treasurers of Banks or Financial Institutions. As they recognise the criticality of treasury activities in their overall strategy, treasurers are challenged to develop new strategies and solutions to enable their organisation to maintain a competitive advantage and implement effective treasury management. As a result, several key trends can create growth opportunities for modern treasurers.
Treasury Management Systems driven by innovation
The rise of digital currencies
The first trend is the continued rise of digital currencies. We are already starting to see the adoption of these new currencies and it is likely that more organisations will turn to digital currency solutions as an alternative to fiat currencies.
As a response, the newly introduced Central Bank Digital Currencies (CBDC) offers a digital representation of fiat currencies, proposing a direct claim over real currency reserves. According to research, this is a growing trend primarily as a settlement currency for trading in cryptocurrencies.
The emergence of real-time Treasury
Traditional treasury operations were often carried out on a daily or monthly basis, with all activities consolidated together. In real-time treasury, activities can be carried out much more dynamically, as new information becomes available. This allows for quicker decisions about allocating funds and responding to situations, creating opportunities for more effective cash management.
According to recent survey, 50% of the firms value real-time visibility into payables and receivables. This trend is likely to be driven by an increased focus on treasury automation and the use of Treasury Management Systems (TMS) to help manage processes more efficiently.
Automation in Treasury Operations
Automation in treasury departments has become a critical aspect for banks, transforming the way they handle operations. With the implementation of automated Treasury Management Systems, banks can streamline processes such as cash management, liquidity forecasting, risk analysis, and compliance reporting. By reducing manual intervention and automating repetitive tasks, banks can improve operational efficiency, minimize errors, and enhance productivity.
Technology driving automation, has always been closely intertwined with treasury, offering a wide range of cost-effective, accessible, cloud-based and software-as-a-service (SaaS) solutions to banks, regardless of their size.
Embracing automation in treasury operations, enables the banks to achieve comprehensive Straight Through Processing (STP) and streamlined workflows and remain competitive, driving growth in an increasingly digital and rapidly evolving banking landscape.
Treasury Risk Management
Treasury managers are increasingly focused on ensuring that their organisation is well-prepared for all potential risks. This includes hedging strategies and the use of derivatives to reduce the level of risk they are exposed to.
The use of a Treasury Management Software that offers workflow management, STP and a holistic monitoring of the front-to-back-to-risk activities across departments and client segments, is critical in achieving efficient monitoring of foreign exchange and interest rate risks including the cost of borrowing. This leads to significantly lowering the organisation’s financial and operational risks.
Sustainability in treasury activities
Recognising the importance of sustainability initiatives, global treasury plays a vital role. ESG portfolio scrutiny is across all investing – with asset management (SFDR), loan portfolios (ECB), and treasury – including shorter term funding as well as longer duration credit instruments. And, by navigating regulatory frameworks, securing funding, and mitigating environmental, social and governance (ESG) risks, bank treasurers understand best the value of ESG initiatives, both in financial and non-financial terms.
While ESG regulation remains a significant driver for their initiatives, a large percentage of respondents (44%) expressed that the main challenge hindering the successful implementation of their initiatives is the evolving regulation and uncertainty surrounding ESG compliance which can be accommodated through a flexible TMS that integrates the latest market trends and regulatory requirements.
Transforming your Treasury Management System
Treasury management is likely to continue to be an ever-evolving area that is driven by innovation and advanced technologies. In the coming years, treasurers should focus on strategies and solutions that enable their organisation to remain competitive by taking advantage of digital currencies and leveraging the latest advances in risk and sustainability management.
Acumen.plus, a cloud native and cross-asset Treasury Management System available as SaaS, is designed to effectively manage the evolving regulatory and digital transformation requirements for Treasury and Capital Markets, empowering modern bank treasurers to make quicker and more informed decisions.
References
- How finance sector treasurers can get ready for CBDCs and stablecoins [McKinsey & Company]
- Unlock the treasury management treasure chest [Accenture]
- Why treasury automation is a must [Deutsche Bank]
- Treasury’s role in sustainability: Balancing compliance, capital and costs [The Economist]
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