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Is treasury’s ‘strategic role’ a delusion?

Nordea’s annual research report into Nordic treasuries focuses this year on the role of finance and treasury departments in driving changing business models through digital transformation. The Treasury 2025 report is based on around 300 survey results received from people working in both treasury and business functions in large Nordic based companies.

“Evolving customer requirements and new emerging technology are the most important drivers for business model transformation," said Taru Möller, Head of TxB Propositions at Nordea. "We can see significant changes in the way products are being manufactured and delivered to consumers. This is causing a demand for automation and real-time transactional capabilities across all aspects of the supply and delivery value chains. Basically we see that the treasury has two options in how to respond to these changes; either they will evolve and understand how they can enable business model transformation or they will stay as a utility function. This is the key difference the Treasury 2025 report tells us compared to previous research reports we have conducted in this area.”

Treasury finding its place

As technology transforms how businesses operate, the treasury is still working hard to establish its place in the new organisation. Nordea’s Future Treasury Report 2018 found that people working in the treasury expected it to strengthen its position as a strategic partner over the coming years. This year’s research showed that this has yet to happen but the ambition still remains - 76% of respondents expected the treasury to be moderately or highly involved as a strategic partner for management by 2025.

According to the findings from the report, only 12% of companies surveyed said the treasury is currently driving digital transformation. Although the rate of digital change and innovation within businesses continues at an ever increasing pace, only 39% of companies said the Group Treasurer was responsible for treasury digitalisation. Just 12% of treasury respondents report that their department has a digitalisation strategy. Almost all (95%) of respondents anticipate robotics and automation having an impact on their business.

Overall, treasury respondents remain optimistic about the future of the department and have high hopes for new technology, especially automation. However, most business leaders surveyed regard the treasury mainly as a specialist function. Although the treasury is seen to be good at what it does, it is considered isolated from the rest of the organisation and not particularly innovative.

Differing views on role in transformation

Corporate treasuries and management teams expressed a notably different view on the kinds of roles treasuries are skilled and capable of taking on when it comes to digital business transformation. Less than a third of treasury respondents express the view that business leaders see them as a strategic partner in digital business transformation.

”The positive forecast by members of the treasury is not reflected by those working in the wider business," noted Johan Trocmé, Nordea Corporates, Institutions & Investment Banking. "A common complaint about the treasury is that as a department it is too detached from the rest of the business. If the treasuries want to become more involved in more strategic decision making, as they expect to, they have a lot of people to win over.”

Increased automation creates impact

Treasury respondents in Nordea’s survey said that they expect to see increased automation in everything that they do. The study suggests that automation offers treasury the chance to free up the time to focus on innovation and digitalisation projects, develop new relationships and play a bigger part in the wider business and ultimately become more involved in strategic decision making. But for now, the automation efforts still lack prioritisation.

"Automation has the potential to bring benefits wherever it is applied, but treasuries need to make sure that their adoption of automation is focused," Trocmé said. "Right now, few treasuries have the experience required to run wide-scale transformation. Focusing on getting a few targeted wins under your belt could help build skills and give the business confidence in your plan.”

Bigger role for treasury requires new data skills

With increasing automation within the treasury, the skills required within the department are set to change. Many of these new skills will focus on how treasuries draw value from new data streams.  The research shows that the treasury is still focused on having the skills needed to do the job as it stands, not looking ahead to build the expertise needed to redefine its role.

"Capabilities such as system integration, business development, data analytics and programming will all be vital for coping with the expected increase in automation and digitalisation," added Trocmé. "The same is true when it comes to strategic influence. With treasuries expecting their role as a strategic partner to management to grow, their competencies will need to keep pace.”

Turning expectations into reality

According to the Treasury 2025 report, there are five steps treasuries can take to be viewed as more of a partner by the rest of the business. These include building bridges and changing perceptions, demonstrating relevance, becoming an innovation role model, building the skills needed for innovation and leveraging new business models. Treasury departments will need to build trust and the impression that they are open and enthusiastic about new technology.

The report also argues that the treasury needs to become more involved in strategic planning and earn a place at the table by showing a willingness and desire to engage in other areas of the business. The treasury is often seen as a purely internal function with little direct impact outside its traditional remit. Treasuries need to show that they can have a positive impact on customer experience and other factors that are important to the business. Barriers to successful innovation include limited experience, unproven business cases and legacy technology. The treasury must demonstrate how it can help the company overcome these.

The report suggests that, wherever possible and with IT’s support, treasury should investigate and drive its own technology initiatives. This would create natural touch points with the rest of the business, increasing collaboration. With some successful innovation projects under its belt, the treasury can then build credibility with the rest of the business.

Leverage new business models

As companies digitalise and adopt new business models, the Treasury 2025 report notes that the treasury will face new challenges to how it operates and how it supports the rest of the business. How well the treasury can transform to these new business models - such as usage and subscription-based pricing - will affect the overall success of innovation projects. New business models also provide an opportunity for the treasury to realign as a strategic resource. By getting involved early, co-creating and adding value, the treasury can present itself as an enabler or driver of innovation, not an obstacle.

“It is important for treasuries to understand that even though many have begun on a path towards automating their processes, they need to make sure that they take a new position and undertake these initiatives in coordination with the other parts of the company" concluded Möller. "Business model transformation demands buy-in from across the organisation, otherwise the treasury risks being left out. If the treasury is left out, then key processes such as payments and liquidity management can begin to live their own life outside of the department without their participation, risking a loss of control and a fragmented approach towards changing business models. We see the importance of helping treasurers to take the business view on value chain thinking and focus on how they need to address automation from that perspective. Prioritising the activities where they should be taking a more active role. This will allow them to be the enabler of the business transformation instead of being left out from those discussions.”

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