For Treasurers, Innovations That Reduce Risk Are A Welcome Disruption

1. November 2017.








Corporate finance executives and financial service providers quickly acknowledged a dramatic change in the treasury department: Over the last decade, the corporate treasurer has become a strategic component of the enterprise, driving growth in a challenging, constantly changing market.

GTreasury, a treasury management company that’s been around for more than three decades, has seen its fair share of changes in the corporate treasury field. Warren Davey, Executive Vice President of GTreasury, told PYMNTS that there are certainly factors that have forced treasury departments to evolve over time.

“Treasury was typically an afterthought — an entity that was a required evil,” he explained. “Once a company got a certain amount of money, treasury would spin off from the finance or accounting departments. Treasurers would make sure that there was enough money to keep the lights on and pay the bills.”

In the last five to ten years, though, the treasury department has taken on new challenges for the organization as a whole.

Davey described this as a “perfect storm” of factors, including government regulations, cybersecurity risks and other forces at play.

“In conjunction,” he added, “there have been a number of credit crises that have come down. It all mixes in to impact a company’s money, how it accesses money, how it moves money — and that’s really what the treasury wheelhouse is.”

Globalization has exposed businesses to newer risks that the treasury function must address, like cybersecurity. “Effectively, when you go global, you have to go onto the web,” the EVP explained. “And when you go onto the web, you face purely technical risks, when you have to be sure your systems are protected and secure, and you have the proper checks and balances in order to see and move money.”

Risk, of course, is a broad term, and Davey added that there are additional risks like financial, liquidity, operational and more. All of these risks change as companies grow, expand across borders and implement new technologies.

But there are some positive forces at work, too, that encourage treasurers to become progressive, innovation-embracing figures within the enterprise, said Davey. Two innovations in the financial services space in particular are helping treasurers take on their more strategic roles within their organizations, he said.

“One is SWIFT’s gpi,” he said. “It enables you to track payments across borders in real time, to know where they are. That’s definitely something that is front and center in our industry.”

SWIFT’s payment messaging standards are similarly boosting transparency in the movement of money around the world, he said.

APIs are another top-of-mind technology for today’s corporate treasurers. According to Davey, it’s helping organizations migrate away from flat files and streamline communication (and movement of data) between systems.

“A lot of financial institutions are creating their own APIs, where vendors like us can, on behalf of our clients, create a single channel into these FIs,” he noted. “It’s a much more secure, repeatable channel than the one-off flat file messaging that has really been predominate in this industry for many years.”

There is also the proliferation of centralized payment factories that enable treasurers to gain a single view of money and currencies across subsidiaries, he added.

All of this signals a broad embrace of innovation in a time of accelerated economic change and, often, uncertainty. According to Davey, it all comes down to the nature of the corporate treasurer.

“Treasury in general is risk-averse,” he said. “If things like gpi and APIs create a greater security around their payments, then they’re definitely interested in it.”

Adopting new technologies can be a risky move too, though. The executive acknowledged that treasurers are often hesitant to embrace new tools, but once they’ve been proven in market, treasurers are on board if it helps with risk management and supports their newfound, strategic role in corporate finance.

“It does take time to make sure these solutions are done right,” he said. “In the example of gpi, it’s still a new technology not yet adopted by all financial institutions. But it is definitely on the radar of the corporate treasurer. Same with APIs — they’re a more secure, robust way of communicating back and forth between two systems, and because of that, it mitigates risk. And that makes the treasurers happy.”

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