Future of treasury in financial services

The treasury setup must be directed towards tapping into P&L-relevant potential. Enabling the firm to manage its liquidity and funding close to defined targets is a key driver for this. The reduction of buffers that address timeliness and accuracy gaps is an ongoing goal that the function should not become tired to pursue, especially in a non-profit centre setup.

A powerful cloud architecture that is embedded into the firm’s overall data strategy is a key enabler for a timely view on the firm’s L&F situation, for predictive analytics to be run and for fast feedback to the business. A group-wide data strategy with strategic partners facilitates a closer risk/finance integration that allows treasury to build its tools on a harmonised and holistic data basis that serves multiple purposes. 

The cloud architecture enables running powerful analytics that helps with understanding the complex interconnectedness of economic resources. Predictive analysis moves processing from ‘end’ to ‘intra’ and helps steer these sources closer to the target values. However, especially with AI in (intraday) liquidity, funding and capital there are challenges to be prepared for to transform it from buzzwords into a business tool.

Global financial firms face a growing complexity of constraints in various dimensions. A highly accurate and timely funds transfer pricing setup enables a pricing and thus business steering that takes a business’s true contribution to the constraint set into account. In a technology-driven Future of Treasury, business partners use cloud-integrated business intelligence solutions to understand ex-ante how they will use economic resources and how their usage affects profitability on a trade-by-trade level.

Edge technology such as DLT can hold promising use cases for treasury and the risk/finance integration… or not. It’s vital for treasury to explore such use cases and to understand the meaning of industry developments such as blockchain-based trading for treasury and asset liability management. Being at a crossroads of data from finance, trading, risk and the market, treasuries at large firms often deal with a complex and fragmented system landscape. Private blockchains can play an important role to increase the accuracy of data arriving in treasury in follow-the-sun L&F management across the globe.

Taking the next step towards the Future of Treasury requires significant transformation efforts and often also overcoming old thinking habits. A coached, agile delivery approach with strong stakeholder buy-in plus collaboration in line with the group-wide data strategy as well as a modular build-up are key success factors.

Treasury operations and transactions have a significant tax impact in a global financial services firm, especially related to funds transfer pricing. The tax implications of debt issuances, cash pool pricing, short- and long-term provisions of funds within an entity and liquidity premia are an important factor to consider and to be diligent about. Tax investigations can take up to one or two years to resolve and then require a significant amount of data.