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Regulatory headaches move to top of treasury risk agenda

An increasingly complex regulatory environment has become the biggest concern for corporate treasurers, according to the latest survey conduced by TD Bank and consultant Strategic Treasurer.

The new Treasury Perspectives survey canvasses opinion from 340 corporate treasurers and finance executives, the majority based in North America and Europe, on their plans and economic outlook.

Respondents expresses growing concerns over political gridlock in the US and challenging monetary policy, which contributed to an overall decline in corporate confidence.

Both corporates and banks identified know your customer (KYC) regulations as their most pressing compliance concern, with nearly three in four businesses with annual revenue of $1 billion and above confirming KYC as their top challenge.

Just over half of respondents said current regulatory pressure is higher than historically considered to be the norm – with only 2% saying it is lower – and half said they expect those regulatory restrictions and oversights to increase in the next couple of years.

Washington gridlock

Asked about the current regulatory and political climate, survey respondents cited rising US interest rates as the greatest concern, along with political gridlock in Washington and an overall rise in complexity of current regulations. Trade concerns and the risk of an economic recession also made the top-five list of biggest concerns among treasurers and finance executives.

President Trump’s recent tax reform has made only had a minimal impact on the US corporate community. While 42% of treasurers surveyed in the 2018 report said they expected US tax reform to provide a significant benefit, nearly half said in 2019 that there has been no significant impact on their companies. Only 15% said tax reform boosted their total income, while 12% said financial performance has improved.

Polled on growing US-China friction and other trade disputes, respondents expect the conflict to make “ripples, not waves.” So far, most treasurers and finance executives report that trade disputes have not had an impact on their organisation, while only 18% said the conflict has made doing business more expensive, whether through an increase in the cost of procuring goods or of their own products sold to customers.

The latest survey suggests that corporate sentiment has deteriorated over the past year. “Ten percent fewer organisations expect the GDP of their headquarter country to increase in 2019 than they did in 2018,” the survey sponsors noted, while 7% fewer businesses reported optimism in their organisations’ outlook than last year.

Technological challenges

Corporate treasurers also face challenges related to the digitisation of their organisation, according to the survey findings. The majority of respondents said manual processes are their biggest operational challenges today, more so than issues such as fraud, regulatory changes or staffing. Most also said payments management is the most time-consuming process, followed by cash forecasting.

More than one-tin three admitted that they lack sufficient time to adequately perform all their responsibilities, with cash forecasting and risk management processes most likely to be put on the back burner.

Continued challenges related to manual processes reflect the struggle organizations are facing to digitize. While three in four treasurers said they are excited about technological innovation – and that they would prefer to upgrade technology than add new staff – actual adoption of automated technologies remains low.

In addition, more than one in three survey respondents said they are not adequately preparing for technological disruption, with only 7% having adopted artificial intelligence (AI). Just 5% have adopted blockchain, and only 2% use cryptocurrencies. 

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This item appears in the following sections:
North America
Risk Management
Financial Risk Management
Global Cash & Liquidity Management