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Treasury leveraging data to optimise investment portfolios and improve in-house banking and netting

The global economy is being imperilled by the intensifying fears of recession. The COVID-19 pandemic may be at the root of this economic shock, but the surging inflation and the ongoing Russia-Ukraine conflict and its ramifications have left treasurers confronting a more uncertain recovery.

Against this backdrop, the Deutsche Bank-sponsored Economist Impact survey, Manoeuvring uncertainty: Treasury priorities in a volatile, post-pandemic market, was conducted in April-May 2022 and elicited responses from 150 treasurers across North America, EMEA and Asia Pacific.

The survey revealed rising macroeconomic concerns within the treasury community, but more importantly highlighted how the value of data is becoming more apparent, particularly for adjusting investment portfolios, improving in-house banking and refining exposure identification.

Adjusting investment portfolio: investing more in long-term investments, bonds near maturity dates, and local investment products

According to the survey, over 30% of treasurers are planning investment portfolio optimization.

Soaring inflation and interest rate hikes are factors that have caused treasurers to reassess their investment plans, especially as the latter can either positively or negatively impact yields of different instruments.

“Over the next two years, over 40% of surveyed treasurers plan to increase their long-term investments and investments in bonds nearing their maturity dates while reducing investments in repurchase agreements and commercial paper”, the survey noted.

Long-term investments or investments held for longer periods tend to exhibit lower volatility and higher yields, which in the current uncertain environment may be more appealing. In addition, long-term investments require more accurate cash flow forecasts. The rising adoption of advanced forecasting technologies, spurred by the increasing availability and accessibility of data, has helped treasurers become more confident in locking up more money in long-term investments.

“Additionally, 39% of treasurers plan to ramp up investments in local investment products, that is, in countries where business units operate and not necessarily where the treasury is headquartered”, the survey further added. This may mean increased in-country investments rather than cash repatriation to the group treasury centre that is driven by preferential rates in the local country or currency controls.

As a general rule of thumb, bond prices have an inverse relationship with interest rates. So when interest rates rise or go up, bond prices go down, and investors want the shorter duration bond, and when interest rates drop, bond prices go up, and investors will want to own bonds with a longer duration.

Treasurers surveyed also indicated that they are investing more in bonds near maturity dates, rather than new bonds (36%) and may look to proactively extend debt maturities if the funding rate becomes more attractive. With interest rates going up because of inflation, “the costs associated with new bonds may be less attractive in comparison with extending locked-in ‘pre-hike’ rates”, the survey explained.

Treasurers are split on how to manage cash as bank deposits. Thirty-six percent of respondents say they are increasing investment in bank deposits, with an equal percentage stating that they are reducing investment levels in the asset, i.e., holding cash as bank deposits. An important reason for doing so is ensuring immediate access to liquidity in an uncertain and volatile business environment, or even to execute short-term business plans.  

Of those drawing down on bank deposits, some companies attribute it to paying down debt (in a rising-rate environment) rather than retaining cash on the balance sheet. The other reason for the draw down on cash balances is because bank deposits as assets are “Typically slower to respond to interest rate hikes compared to instruments such as money market funds (MMFs)”, as per the survey.

Forty-one percent of treasurers are also looking to reduce investments in repurchase agreements, or repos. Even though repos are generally considered safe investments, in a rising interest rate regime, treasurers may consider shifting some focus away from safe harbour protection in favour of new yield opportunities.

Improving areas of treasury

The momentum towards a data-driven treasury has only increased, particularly because of the acceleration in digital transformation during the COVID-19 pandemic.

Areas of treasury that can be improved by leveraging data, Apr-May 2022 (%)


Treasurers surveyed see the greatest value in harnessing data to improve in-house banking and netting (cited by 29% of respondents) and exposure identification and management (25%).

“An in-house bank–a centralised treasury structure that provides services such as executing internal loans, deposits, and foreign exchange to the organisation’s subsidiaries that would otherwise be handled by a bank–thrives on automation, driven by data. This automation can facilitate improved visibility into all business subsidiaries that use the in-house bank, ultimately offering greater operational efficiency and enhanced liquidity management”, the survey explains.

A quarter of the survey respondents realize the benefits of unlocking data’s full potential to transform exposure identification and measurement. By leveraging data, treasurers can use predictive analytics to drive business value and identify material risks that could result in a financial loss, from supply chain inefficiencies to fraud and money laundering. Turning raw data into actionable insights can allow treasurers to discover potential risks and threats, and work with internal teams to take corrective action sooner.

Tangible paybacks of a data-driven approach can also be applied to other core areas of treasury. Nineteen percent of survey respondents mentioned that organization data is of high value in liquidity management, execution and settlement, and cash flow analytics and forecasting.

Treasurers recognize the primary benefits of becoming more data-driven, including higher operational efficiency, improved return on investments and assets, navigating complex regulation, and enabling faster decision-making. Treasury is at a tipping point, and enhancing data intelligence through real-time data that presents a dynamic view of the business will help treasurers improve identification of business opportunities.

To conclude, while challenges remain in harnessing data to deliver smarter insights, the opportunities for data in treasury seem ample. Becoming data-driven and making the most of company data will reinforce the treasurer’s role in driving business as a strategic profit centre and help them manage the core treasury functions better.

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