“The top priority set by CFOs for their treasury departments continues to focus on enhancing liquidity risk management”, according to the biennial Deloitte 2022 Global Corporate Treasury Survey.

This biennial report included responses from 245 treasury professionals across various industries and regions (North America, EMEA, APAC and Other Americas), with nearly two-thirds of the respondents being treasury team leaders in their organization.

The Global Corporate Treasury Survey explores the issues and treasury levers corporations can pull to act during these unprecedented and challenging times.

Most important treasury mandates in 2022

“With 54% upvotes, enhancing liquidity risk management is considered as the most critical mandate given to treasury departments by the board or the CFO”, states the survey report.

                                                                            Top Treasury Mandates by the CFO

Source: Deloitte 2022 Global Corporate Treasury Survey.

Acting as a steward for financial risk management is the second most important mandate prioritized by the CFO for treasury. Given that treasurers have been tasked with navigating economic and geopolitical uncertainty to sustain liquidity, they are looking to control their own destiny and build a scalable corporate treasury to boost organizational growth.

The report shows that mandates such as “lead, govern and drive working capital improvement” and “enhance governance and control over domestic and overseas operations” have moved up by two and five positions, respectively, compared to the 2019 survey results. While persistent supply chain disruptions are the primary reason for treasurers to stay focused on taking ownership of working capital optimization, working from home for most of last year also increased the focus on enhancing control over domestic and international operations, putting treasury digitisation and centralisation higher on the agenda of corporate treasury.

The mandate considered least important by respondents, turning treasury into a profit centre, had gained some momentum in prior surveys. However, “It is still considered an exception as it tends to be limited to companies in certain industries (e.g., financial services and commodities trading businesses).”

Key treasury challenges

“Visibility into global operations, cash and financial risk exposures” continues to top the list of challenges, as it was identified as a key challenge by nearly two-thirds (64%) of the surveyed treasury professionals.

Source: Deloitte 2022 Global Corporate Treasury Survey.

Digital capabilities, liquidity, limited treasury systems and foreign exchange volatility were the other critical challenges faced by corporate treasury.

To address these challenges, most surveyed respondents are planning to take actions within the next 12 months to enhance liquidity management with a focus on internal capabilities. These capabilities include better visibility to cash and financial exposures, improved cash forecasting activities, optimized overall capital structure, mitigation of market risk, and increased operational efficiency to better deliver on CFO mandates to treasury. “This may take place in forms of transforming the cash continuum (cash in, manage liquidity, cash out)”, the report explains.

Regulations and trends that will impact treasury over the next 12 months

When asked about trends and regulations, around 60% of respondents shared that the Interbank Offered Rate (IBOR) transition and ESG are top of mind and will be increasingly critical to treasury decision-making over the next 12 months.

                                          Regulation focus on IBOR transition and ESG

Source: Deloitte 2022 Global Corporate Treasury Survey.

“While IBOR transition to Alternate Reference Rate (ARR) is still on progress at corporate level and across geographies, this is likely to ultimately become business as usual. On the contrary, we expect ESG regulation to becoming much more prevalent in the future driven by financial institutions and corporate policies”, observed the survey.

In addition, the report explains that depending on the industry, or the region, ESG discussions have made their way to the boards, even as corporate treasurers are reviewing their investment policies to include more sustainable instruments and taking a proactive role in the “net-zero” agenda.

Foreign currency regulation and the emerging trends of open banking and application programming interface (API) are the other areas that are most likely to have a significant impact on the treasury organization and its process in the next 12 months, the survey report further mentions.

Conclusion

The Deloitte 2022 Global Corporate Treasury Survey report comes at a time when corporate treasurers face little respite in the light of inflation, market volatility and geopolitical uncertainties.

As challenges continue to mount for treasurers and their treasury teams, they have to remain vigilant to spot the next crisis or black swan event and prepare for it. Enhancing liquidity risk management and being the steward of financial risk management will help treasury mitigate key risks related to changes in interest rates, credit, currency, commodities and business operations, as well as address any gaps related to business continuity planning and fraud risk management capabilities.