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Unleashing treasury’s untapped potential - Industry roundup: 5 December

Unleashing treasury’s untapped potential 

Citi has released a new report that uncovers the challenges and opportunities for corporate treasury functions to offer true value-add to drive business growth.

The report, ‘Treasury 2030: Modernise or Risk Irrelevance’, depicts how corporate treasurers have a unique opportunity to create value helping their firms compete in an increasingly 24/7, real-time world. Citi’s research shows that treasury is underfunded in technology and resources, yet powerful new technologies including artificial intelligence and digital assets are becoming available to revolutionise processes. Treasurers need to plan beyond incremental improvement and adopt novel ways of thinking to drive proactive strategies.

The report also uncovered that corporate treasury cannot unlock its full potential in isolation. As a function, it is dependent on numerous stakeholders and counterparties, both internal and external. To drive the radical yet fundamental changes needed, corporate treasurers must actively participate in broader partnership and collaboration to move the dial towards enabling real-time treasury. The payoff is treasury with an expanded remit equipping businesses to make better decisions to deliver growth and returns.

“High-performing treasuries ensure efficient funding of working capital, identify and mitigate financial risks, and deploy liquidity to fund the company,” said Stephen Randall, Global Head of Liquidity Management Services, Citi. “The future, however, holds so much more for high-performing treasuries. Through astute investments in technology, talent, and partner collaboration they can become key contributors to company growth themselves.”

With greater collaboration also comes innovation with the report envisaging that the technology stack available to treasuries will evolve, enabling more agile solutions that legacy systems currently hamper. Companies must invest in real-time solutions to stay competitive and support digital business models. Those that develop an "always-on" treasury ecosystem will lead and shape the future of the industry.

“Technology-based financial services have the potential to transform how treasurers automate, manage liquidity and risk, and glean insights to support business growth like never before,” Randall added. “It’s time to boldly embrace the opportunity.”

 

AI adoption across finance functions achieves standout levels of ROI 

Research from KPMG International has revealed the dramatic extent to which AI is being deployed in organisations’ finance operations – with compelling levels of ROI and a wide range of benefits including better data and decisions, faster insights and reporting, lower costs, and greater operational effectiveness.

The report reveals that although investments are being made across a wide range of AI technologies, organisations are extracting the most value from machine learning, deep learning, and generative AI and report the ROI from these technologies is either meeting or exceeding expectations.

The research, published in the KPMG global AI in finance report, covered 2,900 organisations across 23 countries and built upon research conducted earlier this year across 1,800 organisations in 10 countries. A maturity framework was created to assess respondents into three AI-readiness groups: KPMG identifies a cohort of Leaders who are more advanced and more mature in their deployment of AI. A quarter (24%) of organisations qualify as Leaders, while 58% are middle ground Implementers, and 18% are Beginners. KPMG has also developed an AI maturity benchmarking tool designed to help organisations assess their progress in the AI transformation journey.

Over seven in ten (71%) organisations are using AI to some degree in their financial operations. Currently, 41% of them are using AI to a moderate or large degree – and this is predicted to rise to 83% over the next three years.

In just six months since the first wave of research, the spread of AI is already visible. Whereas in April 2024, 40% of organisations in the original 10 countries were using traditional AI in their finance operations to a moderate or large degree, this has increased to 45%.

The use of GenAI has also grown. The percentage of companies with no intention to use GenAI has fallen from 6% to just 1% now. GenAI has become a key focus and a top priority for the future, with 95% of leaders and 39% of others expecting to selectively or widely adopt it within financial reporting in the next three years.

Companies are turning to AI in every area of corporate finance. Financial reporting is the most widespread usage area, with nearly two-thirds of companies piloting or using AI for reporting, accounting and financial planning. But other areas are following suit: nearly half of companies are now piloting or using AI for treasury and risk management. This can generate better debt management, cash-flow forecasting, fraud detection, credit risk assessment, and scenario analysis in the treasury and risk management functions.

Tax management, however, sits slightly further behind. Less than one-third of companies piloting or using AI in this area, although about half are in the planning stage. Usage here may be further behind for a variety of reasons, including the complexity of tax regulations, a lack of up-to-date data, onerous legacy systems, and the reliance on human judgment for many tax-related decisions.

As the use of AI in finance grows, the dividends multiply, the report finds. When starting out, finance teams report two to three benefits. By the time they are leaders, that number is seven. Just as the benefits from AI can rise with its usage, so does the potential return on investment. As a result, a remarkable 57% of leaders say ROI is not just meeting but exceeding their expectations. Even amongst less advanced adopters, nearly one third (29%) report the same.

 

Equity funds see record inflows post-UK budget

UK investors flocked back into equity funds in record size in November, according to the latest Fund Flow Index from Calastone. After October’s record outflows, prompted by fears, subsequently justified, that the Chancellor would hike capital gains tax, November in turn saw equity-fund inflows at all-time highs, breaching the £3bn mark for the first time. The two months mirrored each other closely. October’s net selling was £2.71bn as investors took profits, while November’s net buying was £3.06bn as investors reinvested all the funds they had withdrawn the month before.

Global, North American and emerging market funds were the biggest beneficiaries of the inflows, with investors committing £1.22bn, £848m and £426m respectively. European funds also saw inflows, but Asia-Pacific, income and specialist sector funds suffered further net selling, though all at a much lower level than in October.

UK-focused funds experienced their first month of net inflows in November, ending a 41-month stretch of continuous outflows. Investors injected £317 million into these funds, reversing a trend that saw £25.33 billion withdrawn over the past three-and-a-half years.

Across other asset classes, fixed income funds saw inflows rise to £764m, meaning they have now reversed all the net selling Calastone saw across its network in August and September. Money market funds saw inflows drop to £131m, their lowest since April, mainly reflecting the allocation changes that have occurred around all the budget activity.

 

ABN Amro to centralise certain international asset-based financing activities

ABN Amro has announced changes to its Asset Based Financing organisation (ABF) in the UK and Germany, as part of the bank’s Northwest Europe strategy.

Following a review of its activities, the bank has taken the decision to materially reduce the international footprint of its ABF division. This will be accompanied by an orderly wind down of non-strategic client portfolios, especially in the UK, and a reorganisation in Germany. This strategic alignment aims to strengthen the position of the bank and ensure long-term profitability.

Going forward, ABN Amro and its Corporate Banking client unit will continue the strategic efforts to invest and grow in client segments in Northwest Europe. There is a focus on finance and advisory in our transition themes New Energy, Mobility and Digital.

The orderly wind-down and reorganisation of ABF is expected to benefit the CET1 capital ratio and the return on equity in due course and the majority of the changes are expected to be finalised end of 2026.

The decision is subject to the approval of the competent regulatory authorities as well as to applicable procedures concerning the employees involved.

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