Corporate treasurers play an increasingly critical role as advisors to their organizations. What are the biggest challenges they see in 2018, and what are the regulations that will most affect their business?
At a recent Association of Corporate Treasurers (ACT) event, we interviewed senior industry professionals and clients from a range of companies to find out their views for the treasury profession in 2018 and beyond.
Enhanced reputation
For Ritu Singh, our Head of Market Development for Corporate Treasury, Europe, the profession has strengthened its reputation in the past year.
She said: “Treasurers are playing a more critical role as business advisors to their organizations, and there will be more collaboration with other business divisions including procurement, compliance and corporate strategy going forward, which we are already witnessing today.
“Treasurers are also increasingly playing the role of advisor to the board, and all this is enhancing their professional status both within their respective organizations as well as externally, as they provide their companies with a lens to the outside world.”
Incoming regulations
Incoming regulations that may affect treasurers and their organizations in 2018 include the General Data Protection Regulation (GDPR), which is due to come into effect in May 2018.
This will force companies to exercise more control on the personal data of clients and suppliers held within their organizations.
January’s IFRS 9 Accounting Standard introduces hedge accounting that aligns accounting treatment with risk-management activities.
The Base Erosion and Profit Sharing (BEPS) directive of the OECD will see wider adoption as more countries adopt country-by-country reporting.
On top of this, corporates who wish to trade derivatives will need to supply LEIs (Legal Entity Identifiers) under MiFID II, which goes live in January.
Reputational risk
Looking at the biggest challenges in 2018, Singh cites the threat of risk.
Within corporate treasury, technology has been a huge enabler; however, as treasury operations become more automated, the exposure to cyber risk increases.
Singh adds: “The need for data is greater than ever – however, controlling and analyzing that data from both internal and external sources is a huge challenge.”
Individuals in organizations need to use separate systems for their different functions. However, on an executive management level, the corporate risks need to be managed holistically. Organizations need a platform to connect these various risks that allow them to be identified quickly as a basis for business decisions.
FX volatility
FX and its associated risks will continue to challenge corporate treasurers in the coming year as geopolitical movements trickle through to FX markets.
Michael Payne, Assistant Group Treasurer of National Express, says fuel hedging is a particular challenge as the markets are volatile: “Trying to manage volatile costs in our business is a key part of what we do.”
Singh adds: “Heightened tensions between the power brokers of the Middle East, such as Saudi Arabia and Iran, will continue to escalate, as witnessed in the recent example of Lebanon being used as the pawn between these two powers.”
“We will also continue to see the U.S. drive a wedge between Russia and China, and of course hardened stances against North Korea including sanctions propagated by the U.S.”
What will this continued geopolitical upheaval in 2018 and beyond mean for treasurers?
Singh said: “It means treasurers will have to employ more vigilance around trade sanctions that are occurring more often than in the past, which might present some challenges in securing cash and liquidity for the purposes of business operations.”
