Global Treasury Leaders Summit

As technology, regulatory and political influences disrupt and impact the business world, treasury has its part to play in ensuring it remains agile and fit for purpose.

April 18th – 19th 2018, New York

Treasury in an age of disruption:

As technology, regulatory and political influences disrupt and impact the business world, treasury has its part to play in ensuring it remains agile and fit for purpose.

Treasury is critical to many of the key tasks facing any organisation and its importance has only grown in response to changes in the global economy. It has become a more strategic operational player seeking to deliver enhanced value and efficiency.

In the first of a series, The Economist Events Global Treasury Leaders Summit, sponsored by Deutsche Bank, brought together leading corporate treasury and technology experts in New York in April 2018 to discuss how technological developments, regulatory change and political influences are disrupting business, and the role treasury needs to play to remain agile and fit for purpose. Summing up the New York event, Barbara Valentine, finance director of BASF, noted that “keeping up with the different aspects of treasury is very critical, so coming to a conference like this…[and] sharing other perspectives is very valuable.”

These summits will explore how treasurers are responding to business model disruption, technological innovations and regulatory developments around the globe. The next summits will take place in June in the UK, followed by Hong Kong in Autumn 2018.

Treasury in the geopolitical context

At the geopolitical level, 2018 is already proving to be extremely volatile. This is manifest in the regulatory challenges posed by the implementation of the revised Payment Service Directive (PSD2), the General Data Protection Regulation (GDPR) and US tax reform. The rising risks from Brexit and US mid-terms to China’s growing role on the world stage, as well as G7 disunity on Iran and the West’s engagement with Russia, are also contributing to an especially challenging environment for businesses’ profits and losses.

As noted by Daniel Franklin, editor of The Economist’s The World in 2018 and executive editor of The Economist, geopolitical and business cycle changes, technological innovations such as artificial intelligence (AI) and robotics, and regulatory developments are disrupting business models and forcing a rethink of corporate financial structures. He believes that these changes will require a new type of treasurer, one able to embrace software engineering, data science and project management skills. These developments will provide treasury with the opportunity to take on a more strategic role, to become the go-to reference for good risk management practices, and to offer insights that will drive value for the business.

Building a digital treasury

The importance of technology was on the agenda in New York

The future of treasury and finance

Although the world is changing, the core challenges for treasury remain forecasting, risk management and liquidity management. The New York summit set out to address how technological developments can positively contribute to the refining of bank relations, improve liquidity management, and reduce treasury and enterprise risk. Speakers examined how technology is affecting the required treasury processes, whether it is possible or even appropriate, and considered what new priorities may emerge in the future. In interactive sessions, participants discussed how efficiencies created by AI and robotics are freeing-up treasury to expand its remit beyond a traditional working capital focus into data analytics, and expand its risk portfolio to include physical as well as cyber risks.

Participants revealed they are now often leading cyber-security efforts. This is reflected in new working arrangements in the case of Stripe, a Silicon Valley start-up and online payments company, it is hiring coders and engineers to work alongside its finance professionals. Treasury has gone from being a numbercrunching ivory tower, according to one multinational corporation’s treasurer, to being “cool”.

The digital treasury: managing skill-sets

This “coolness” factor may be directly attributable to treasury’s willingness to use new technology and adapt its culture. Treasury has slowly been moving towards digitisation: to remove manual processes, improve reporting, enhance cash visibility and reduce risk through better execution. However, developing the best processes may be easier when there is no pre-existing process. San Francisco-based Stripe, founded in 2011, was able to avoid legacy issues, as it did not have an existing treasury. Stripe relies on metrics-based automation led by its 20 engineers, seven finance professionals and two data scientists. All its operations are geared to eliminate noise factors from FX to payments. All stakeholders have access to full company data, allowing complete visibility and the ability to analyse situations quickly in order to build solutions. As Christopher Van Woeart, Stripe’s treasurer says: “The objective result of delivering a digital treasury is very much around operating leverage and bottomline impact to a company — leveraging technology and machine learning to automate a lot of otherwise manual and repetitive processes, such as forecasting and cash management, can yield efficiencies, improve controls, and and reduce costs.”

Such actions are expected of a Silicon Valley start-up, but not of a 200 year old company like GE. However, GE now has a digital treasury team. As Kristen Michaud, managing director of treasury operations at GE, noted, “You want to understand treasury and have the expertise, but you also want to make sure you’re also complementing that with skill-sets around data and analytics.” GE has leveraged data as a foundation for their transformation coupled with contemporary digital skill-sets and culture. This may be due to its ideas on creating a structure that encourages change. As Ms Michaud noted, “a flat organisation where people feel empowered to challenge one another, to try new things, fail, but try again. I think that is the new treasury.” Although its initial programme focused on its only partly centralised payment, collection, forecasting and reporting processes, it quickly gained management buy-in. This led to pilots focused on application programming interfaces (API), robotic process automation, cognitive computing and blockchain. GE has found productivity benefits by leveraging RPA in areas such as manual balance reporting and static data management.

Kristen E. Michaud, Managing Director, Treasury Operations, GE

GE and Stripe are only two examples of the changes in treasury’s technological journey. For New York conference participants, the summit provided an opportunity for further discussion about which technologies and innovations could help solve their pain points around cyber, payments and Know Your Customer (KYC) requirements.

“You want to understand treasury and have the expertise, but you also want to make sure you’re also complementing that with skill-sets around data and analytics.”

—Kristen E. Michaud, Managing Director, Treasury Operations, GE

The role of AI in treasury transformation

The pace and scale of technology change is forcing significant structural change in treasury operations. New technologies like AI may offer treasurers new ways of doing business, but it also requires new skills, including the ability to understand the software-dominated environment of multiple non-bank providers, to analyse the data they generate, and how to best utilise those data. Author and professor Ajay Agrawal, speaking about the impact of AI on the treasury, cited the example of an idea based on predictive analytics that Amazon recently patented called “anticipatory shipping”. Although data analytics should help in the planning process, Professor Agrawal was certain that it didn’t endanger the future of treasury employees. In fact economic theory suggests that AI will substantially raise the value of human judgment. Although the costs for machine prediction are falling, human judgement will still be needed to interpret and best use those predictions. AI still cannot replace human ability to see the wider picture that is often necessary in decision making.

Planning for the future treasury

The New York summit’s discussions revealed the key requirements for future success lay not just with the use of new technologies like AI and robotics to solve fraud issues and cash management processes. Success will be dependent upon management’s support, including its openness to recruiting staff with new skill-sets capable of fully utilising these new technologies. Company management, human resources and treasurers will have to be willing to look beyond the traditional treasury skill-set. As Simon Taylor, co-founder and director of blockchain at 11:FS, says, “it is being in a position of upskilling and that may mean bringing in new people with technical skills, but most of it is creating the time and thinking space for [the treasurer] to learn these things themselves.” Treasury will now have to include engineers able to create APIs to solve many common cash management obstacles or data scientists able to work with large data sets to report trends that will help in everything from working capital to risk.

To finalise the major tech trends that are disrupting treasury, author, venture capitalist and former CEO of 1871, Howard Tullman, engaged the audience with his vision of the future. He foresees that treasury will be required to radically change its connectivity with other corporate teams. He noted that our decreasing attention spans mean that treasury needs to develop new ways to remain responsive and relevant in a world where it is becoming too easy to become overloaded by information.

Simon Taylor, Co-Founder, Director of Blockchain, 11:FS

Overall, the summit highlighted that technological disruption was causing a change in business processes and staffing requirements. For treasury to maintain its strategic position, it must adapt quickly to be able to respond to regulatory and tax changes, new cyber risks, the growth in data and overall reputational risk. If it is unable to do so, treasury risks becoming irrelevant and losing its position as holder of the company’s financial architecture.

“It is being in a position of upskilling and that may mean bringing in new people with technical skills.”

—Simon Taylor, Co-Founder, Director of Blockchain, 11:FS

“Geopolitical and business cycle changes, technological innovations such as artificial intelligence (AI) and robotics, and regulatory developments are disrupting business models and forcing a rethink of corporate financial structures. These changes will require a new type of treasurer, one able to embrace software engineering, data science and project management skills.”

—Daniel Franklin, editor ‘The World in…’ & executive editor, The Economist