If 2021 was a challenging year for treasurers and demanded adaptability and resilience, 2022 will continue to test treasurers’ mettle on a number of fronts – currency volatility, rising inflation, supply chain disruptions, slower economic growth and regulatory changes – all while gearing up for the new normal.

So, what will treasurers be focusing on in 2022 to ride out these challenges and augment the pace of change to make it a year of opportunity?

Here’s what we expect will influence treasury thinking this year.

Speeding up digital transformation

HSBC’s 2021 Corporate Treasury Risk Management Survey Rethinking Treasury: The road ahead confirmed the accelerated pace of digitization in the treasury department as one of the largest trends last year. As per the survey, 53% of CFOs said they expect digitization to give their business model overall a large boost in the next three to five years.

“Digitization definitely improves cashflow visibility and optimizes liquidity across the organization. It also increases efficiency and reduces costs through economies of scale, as well as enabling more effective risk management,” observed Helen Fang, Head of Industrials Research, Asia Pacific, at HSBC Global Research.

In 2022, it is expected that treasurers will speed up digital transformation to unlock efficiencies in the treasury department. Automating manual and repetitive tasks, including the reconciliation process, will continue to be a priority for many treasury departments.

More corporations will change their treasury models and adopt centralized online tools through integration rather than fragmented technology and processes that are in use to manage multiple treasury functions. Progress will be made around improving the interoperability and security of different systems using application programming interfaces (APIs) that support cash management decision-making.

With the emergence of open banking and the use of APIs, more treasurers will avail themselves of the opportunity to trace transactions in real-time. By integrating this information directly into the corporate enterprise resource planning (ERP) or treasury management system (TMS), treasurers can gain complete visibility over the status of transactions, leading to a more dynamic and prudent approach to managing liquidity. Additionally, a growing number of treasurers will leverage artificial intelligence (AI) and machine learning (ML) to unlock strategic insights about financial supply chains and liquidity and risk scenarios.

Environmental, social and governance (ESG) issues will get real  

The pressure on organizations to meet environmental, social and governance (ESG) criteria is more widespread than most finance leaders might realize – 85% of investors considered ESG factors in their investments in 2020, according to research presented by Gartner, Inc., at the Gartner CFO and Finance Executive Conference 2021.

Banks are stepping up and investing in projects that tackle climate change. In 2021, Citigroup committed $1 trillion to sustainable finance by 2030. In December 2019, Goldman Sachs pledged to invest $750 billion within the next decade to combat the climate crisis.

In 2022, financial institutions worldwide will continue to intensify their support to build a sustainable future, and this will be the year when treasurers will focus on where they can make a difference and embed ESG in their business objectives and varied activities – supply chain, investment and debt portfolio. Interested corporate treasurers will partner with those banks on ESG matters that accord importance to sustainability and innovation and are in consonance with the company’s sustainability goals.

Ensuring that finance is tied to sustainable outcomes will not only assist corporations in growing responsibly, but will also aid in channelling economic flows toward creation of tomorrow’s sustainable society.

Staying invested in security and fraud prevention

According to Strategic Treasurer’s sixth annual Treasury Fraud & Controls Survey Report (2021) (underwritten by Bottomline), 87% of respondents indicated their perception that the threat level from fraud had increased from the prior year. Twenty-two percent of respondents planned to spend more or significantly more on treasury fraud prevention, detection and controls.

As per the key findings of the survey, opportunistic criminals leveraged the pandemic-driven push to remote operations to strike in a blitz offensive. The rapid transition to a work from home (WFH) environment created exposures that outpaced structural and procedural defenses, resulting in accelerated threats and fraud loss.

The risk that corporations will fall victim to fraud is considerable and growing. Corporations recognize that fraud is an enduring threat. Treasurers, who are considered as the superintendents of payment security and the stewards of the organization’s financial assets, will continue to stay focused on security and fraud prevention in 2022.

Increasingly, more companies will use employee security education and training, payments modernization programs, and technologies such as ML, AI and biometrics for fraud prevention or detection purposes. It is also expected that treasurers will make additional investments in security and fraud management to ensure that processes that are now highly interconnected, as well as the data therein, are more adequately prepared for cybercrimes. 

Risk management more important than ever

Risk management will become even more vital in 2022.  

Treasurers looking to manage financial risks this year will remain focused on interest rate, currency, commodity and supply chain risk management.

The transition from London Interbank Offered Rate (LIBOR) to alternative risk-free rates (RFRs), and the potential impact of the Federal Reserve’s (Fed) actions to tame inflation in the U.S. will be areas of focus for corporate treasurers. A rising interest rate environment will create both risk and opportunity, and treasury teams will be paying attention to benefit from improved returns on their short-term investments.

Because global central banks are tightening policy, it is expected to be a challenging year for commodities, and treasurers are expected to take a holistic approach to risk management and closely align commodity risk management to their business strategies.

Corporate treasurers will also be attentive to geopolitical risks and their consequences to stay on top of the critical threats that can affect their organization’s bottom line.

In 2022, major shifts are on the horizon for corporate treasurers. For the momentum of change and impact to continue, the discerning treasurer must also hone their functional and people skills so that they are on the right track to meet the needs of tomorrow’s treasury landscape.