The Shifting Function of Treasury Management After COVID-19

Corporate treasury teams became strategic allies for navigating COVID-19. Now it's time to build on that success.

Nov 29th 2021

What do daily commutes, waistlines, and treasury operations have in common? The pandemic changed them all. But even in a world full of COVID-19-inspired change, it may be surprising just how dramatically the pandemic is transforming treasury management. COVID-19 highlighted the importance of cash flow forecasting, data analytics, and cybersecurity, which has elevated the role of treasurers.

Now that many economies have reopened, the role of treasurers will likely shift again. Our Journeys to Treasury alliance survey, conducted between mid-March and mid-April 2020, asked more than 200 treasury professionals for their practical insights applicable to senior finance leaders worldwide. More than a year later, as global economies continue to reel because of COVID-19, many of these insights are still relevant.

The findings illustrate treasury’s rapid evolution and offer actionable ideas for navigating a world still challenged by COVID-19.

Toward a Simplified, Modernized, Centralized Treasury

Companies of all sizes want streamlined operations, improved visibility into cash flow, and to optimize liquidity and manage risk.

In a world adapting to COVID-19, companies also recognize treasury as a strategic partner providing valuable real-time information about the company’s financial position and ability to weather abrupt changes in demand. Treasury centralization can deliver on all of those priorities.

In our survey, 28 percent of treasurers identified centralization as a long-term priority that will require work on multiple fronts. In coming years, we think centralization will become a more significant focus for companies.

The barriers to centralization have included:

  • fragmentation and lack of standardization across processes and controls
  • bank relationships
  • account structures
  • technology platforms.

Companies that already had a centralized treasury pre-pandemic have been able to respond more effectively to the crisis—information that has given other treasurers the leverage to call for an infusion of resources to restructure systems and streamline operations.

“Companies that already had a centralized treasury pre-pandemic have been able to respond more effectively to the crisis.”

Other Top Priorities for Treasurers

Treasurers are also reshaping how they work with teams and get things done. Creating the right culture and using the best tools have become crucial.

According to the survey findings:

  • Cash flow forecasting is the highest priority for 55 percent of treasurers, continuing a long-term trend and reflecting the importance of liquidity management during the crisis.
  • 62 percent use, or plan to use, data analytics—compared with just 43 percent in 2019.
  • 35 percent use, or plan to use, application programming interfaces (APIs) to facilitate integration for on-demand or real-time transactions or data exchange.
  • More than half (52 percent) of treasurers are interested in exchanging information in real time, and 47 percent are interested in real-time liquidity, real-time payments, and real-time collections.
  • 37 percent said that working capital management is a significant priority. But more than half (56 percent) indicated that they either have no role in working capital decision-making, or that they have influence rather than responsibility.

Cybersecurity: Heightened Vulnerability and Risk

Whether it’s Zoom meetings, fitness classes, or virtual happy hours, work and social life moved almost completely online in 2020—making the companies delivering those remote services or hosting those meetings more susceptible to fraud. Because some of that convenient access is likely to continue, much of the cybersecurity risk that spiked during the height of the pandemic will also persist. Many people prefer the ease of online transactions, so while more happy hours may happen in person, few aspects of treasury management are likely to revert to analog.

Cybercriminals are using an array of attack methods and techniques that require organizations to respond to threats across multiple channels. For example, despite the sharp decline in paper transactions and B2B check usage during the pandemic, 66 percent of companies still experienced check fraud in 2020, according to the 2021 AFP Payments Fraud and Control Survey Report. At the same time, the proliferation of payment types has introduced new risks to organizations.

Advanced technologies like multilayered security with adaptive authentication can help protect against threats, but treasury must also adopt a risk-management approach across the function.

“Cybercriminals are using an array of attack methods and techniques that require organizations to respond to threats across multiple channels.”

Treasury best practices:

  • Ensure processes and controls remain rigorous, given the extraordinary circumstances.
  • Allow extra time for key tasks to avoid making rushed decisions or taking action hastily and under pressure.
  • Build backups into approval processes and provide mobile access for critical business users to enable remote approvals.
  • Centralize master data handling.
  • Digitize processes, avoiding manual and undocumented workarounds.
  • Ensure systems deliver end-to-end traceability and drill down on individual transactions.
  • Use data analytics as an additional layer of protection and be particularly careful when dealing with new clients and suppliers.
  • Leverage sanctions screening as another potential line of defense.

Payments best practices

  • Make sure employees know you will never ask to make urgent payments that do not follow normal procedures. Make clear in your policy that refusing to act on an instruction that is outside normal processes will never result in a disciplinary offense.
  • Maintain vigilance against the risk of identity fraud.
  • Check and double-check that you know whom you are communicating with. Contact them using known and verifiable details, particularly when onboarding suppliers or amending suppliers’ settlement instructions.
  • Do not assume that callers are who they say they are (and don’t trust caller ID).
  • Never give anyone bank or security codes.
  • Check with management if you have doubts before executing a payment.
  • Participate in community fraud prevention and supplier validation programs.

The COVID-19 crisis unexpectedly elevated treasury’s role in managing existential issues around liquidity and risk. Treasurers have been empowered by technology providing transparency, as well as real-time data and analytics that support transactions, maintain flexibility, and accelerate supply chain and cash cycles.

Now, as companies focus on growth in a world still grappling with COVID-19, there is an opportunity for treasury to use its elevated profile to refocus on best practices and make the necessary changes to centralize and improve operations.

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