Digitisation, balance sheet resilience and ESG were among the key themes when Kevin discussed the future of corporate treasury with the CEO of the ACT, leading corporate treasurers and the Head of Transaction Banking at Barclays at last week’s ACT Cash Management Conference.
As vaccine rollouts accelerate across the globe and we look forward to world reopening, a timely closing conference session from the ACT took place last week, “The future of cash management in the 2020s”. The panel included high-fliers from the world of banking, corporate treasury and our very own CEO Kevin Cook.
Whilst transformation in treasury has been a widely discussed topic for quite some time, changes to the workplace and the progress in technology over the last 12 months have fuelled growth in automation, simplification and robustness, adding critical value to the toolkit of treasury, an often under-resourced but thankfully now far less overlooked functionå.
2021 sees digital adoption well underway, as access to the office has remained limited and important processes such as payment approvals and instructions, cash visibility and cashflow forecasting have been forced to evolve at a rapid pace. These advances represent a significant silver-lining, driving efficiency and resilience, which will no-doubt assist institutions in moving faster and more effectively as we inch towards a return to more “normal” times.
The panel discussed how support for firms in the shape of RCFs and Bank of England programs to provide critical liquidity (following its disappearance overnight) highlighted how prudence over penny-counting put corporates back on the front foot. Banks have been in a position to be a large part of the solution this time around, which should be celebrated. This not only applies in the context of borrowing, but also in relation to homes for excess liquidity, which must be readily available with certainty of access at required intervals.
Whilst the regulations implemented following the previous crisis helped ensure banks were there when they were needed most this time around, it must be remembered that not all banks are created equal. As I type, the Greensill scandal is in full swing with both Greensill Bank and Wyelands Bank being forced to freeze operations by the BaFin and the PRA respectively. It seems very likely that the fallout from the demise of this former “unicorn”, and a darling of investors and Governments alike, is only just beginning to be understood.
Looking to money market funds, the other primary recipient of excess cash balances, we are increasingly hearing from clients that they are being warned of negative rates in GBP & (potentially) USD and not just in government funds (where this has already happened to varying degrees). Prime funds are also in the firing line, given the decimation of short-term interest rates and gigantic central bank support in all its various guises. The frequency and depth of discussion around further regulation of these products is gaining a great deal of momentum and at the most senior of levels. Change is coming.
Foreign exchange volatility has added additional challenge to an already tricky playing field. We were pleased to announce our partnership with Global Reach in February, offering our respective client bases access to best-in-class streamlined solutions to solve for both short-term investing and risk mitigation around global foreign currency payments. This key area is being tested with disruptions to supply chains continuing to persist, Brexit aside, including the steep rise in shipping costs with empty containers sitting on the wrong continents creating additional challenges for treasurers to manage.
One thing that was unanimously agreed by the panel was that accurate and timely cash flow forecasting has never been as important, a theme that should persist as the world settles down once again and we all turn our attention to the future and what “ideal” looks like in our personal and professional lives. Gone should be the manual tasks that can be automated with technology-enabled solutions. Looking forward, digitisation is rightly set to continue over the course of the ‘20s.
The 2020’s also look certain to be the decade where ESG will break out from the fringes. We heard from the Chancellor just this week on how important environmental matters are from a policy perspective as the Government drives for a carbon-neutral economy. A helpful guide to where we are on this front globally is below from our friends at the Visual Capitalist – I was pleasantly surprised by how the UK stacks up. Further disclosures relating to ESG are becoming mandatory by 2023 in the UK and similar initiatives such as Italy’s first green bond being issued, and more than nine times oversubscribed this week demonstrates that ESG is quickly becoming much more than just a fashionable accessory.
As the panel highlights so well, one thing is for certain, the future looks bright, digital but also different. Understanding credit, being flexible and having prudent liquidity provisions can serve every organisation to best weather whatever may lie ahead for us all.
Articles of interest
An FTF or Fixed-Term Fund is a regulated fund investment that offers exposure to a single investment-grade obligor for a fixed term, without the need for any client infrastructure. An FTF has many of the same characteristics as a term deposit, but can offer exposures outside of the banking sector. TreasurySpring is originating FTFs with sovereign, financial and corporate obligors.