The resilient treasury: Optimising strategy in the face of covid-19 is an Economist Intelligence Unit report, supported by Deutsche Bank. Our analysis explores attitudes among corporate treasurers towards the drivers of strategic change in the treasury function, the macro and financial risks that impact strategy, the effect of negative interest rates on investment plans and the regulatory initiatives that are currently top of mind for treasurers. The study also analyses the technologies that treasurers are using today, the skills that the treasury function requires and approaches towards cyber security. Finally, it identifies the priorities that treasurers will pursue up to 2025. 

The report is based on a survey of 300 senior corporate treasury executives conducted between April and May 2020. Of these, a third of respondents represent companies with an annual revenue of at least US$5bn. The 2020 survey also includes findings from previous Economist Intelligence Unit corporate treasurer surveys in this series, conducted between 2015 and 2019.

Executives were drawn from three regions (North America, AsiaPacific, Europe and the Middle East and Africa) and a broad range of sectors, including aerospace/defence (2.3%); agriculture and agribusiness (4%); automotive (7.7%); chemicals (6.7%); construction and real estate (5.7%); consumer goods (7%); energy and natural resources (7%); entertainment, media and publishing (6.3%); financial services (7.7%); healthcare, pharmaceuticals and biotechnology (7.3%); IT and technology (7%); logistics and distribution (4.7%); manufacturing (8.0%); professional services (1.7%); retail (5%); telecommunications (7%); and transport, travel and tourism (4.7%). 

As part of the research, we conducted a series of in-depth interviews in May 2020 with senior treasury executives from around the world. Our thanks are due to the following for their time and insight: 

• Rando Bruns, head of group treasury, Merck KGaA
• Charles Cao, group treasurer, Ant Financial
• Neil Peacock, global head of cash management, ABB
• Anita Polzhofer, head of treasury, Arup
• Jim Scurlock, head of cash management, Microsoft

Executive summary

No sooner had treasurers started to implement strategies for 2020 than the economic picture for the year changed irrevocably. The covid-19 pandemic spread across the globe at extraordinary speed and treasury plans had to alter dramatically. The treasury function had to quickly shift to a remote working environment and switch focus away from long-term cash forecasts in favour of shorter-term and more regularly interrogated forecasts to get an accurate picture of cash and liquidity. Covid-19 has also impacted treasurers’ short-term concerns about the outlook for the macro global environment and the likely consequences. Furthermore, non-core treasury activities, such as sustainable finance, are lesser priorities in the present climate.

In order to highlight the forces that will shape and define both the priorities of the future and the corporate treasury function itself over the coming decade, the first chapter of this report discusses the financial and macro risks that are impacting strategy and investment plans. The second explores the regulatory initiatives that are currently top of mind for treasurers and their implications. The third examines the technologies that treasurers are using today, the skills that the treasury function requires and approaches towards cyber security. The final chapter identifies and discusses the priorities that treasurers will pursue up to 2025. In each chapter we compare results from this year’s survey with those from previous years where relevant.

Key findings

• Macro risks will drive change within the treasury function and specifically the way in which strategy is defined. Respondents believe pandemic risk driven by covid-19 will have the most impact on corporate treasury, not just in the short term (43%), but also in the medium term (27%). Other pandemic-related risks also poll strongly: global economic growth concerns are high on the list (31%) and geopolitical risks are deemed problematic by a quarter of treasurers (25%) in the medium term. 
• Due to the current climate of uncertainty treasurers plan to diversify investment portfolios. The survey shows that the pandemic has pushed a variety of risk management techniques to the fore. Liquidity risk, foreign exchange risk and mitigation of interest rate risk have become vital to navigate increasingly volatile markets. Meanwhile, a focus on counterparty risk is critical for supply chain management as smaller suppliers face tough times as a result of the sudden economic downturn. Treasurers say that over the next 12-24 months they plan to increase investments in long-term instruments (55%), bank deposits (48%), local investment products (48%) and money market funds (47%).
• The replacement of the London Interbank Offered Rate (LIBOR) for lending and borrowing, and other Interbank Offered Rates (IBORs), is the most challenging regulatory initiative for treasury. Thirty-eight percent of respondents in this year’s survey consider it to be the main challenge for their function. Other regulatory initiatives whose impact will need to be managed include General Data Protection Regulation (GDPR, cited by 32%, up from 29% in 2019), the OECD’s initiative against base erosion and profit sharing (BEPS, 31%, up from 18%) and the Markets in Financial Instruments Directive (MiFID II, 30%, up from 7%). 
• Digital transformation, accelerated by the pandemic, continues to impact the corporate treasury and there is increasing reliance on technology dayto-day. Treasurers are increasingly seeing new technologies as a way to bridge existing data issues in the “Know Your Customer” (KYC) process, for example. The majority of treasurers (74%) have identified the use of new technologies as the most useful action to improve the KYC process. This is a significant jump from 58% in 2018.
• As corporate treasurers wade deeper into their data strategy, concern over data quality has grown. The survey found that 78% of treasurers say they are either very or somewhat concerned about the quality of data, which is up from 69% only a year ago. Internal data issues stem from having to link up numerous systems and software. Externally, the lack of standardisation on electronic bank account statements is particularly problematic.
• Treasury priorities for the future will be shaped by macro risks, regulatory changes and emerging technologies. The utmost priorities on the treasury agenda in 2020 are managing relationships with banks and suppliers (32%) and collaborating with other functions in the business (32%). Looking ahead, our survey suggests that the data-driven approach of treasury will allow the function to become an even more supportive and proactive partner to the rest of the business. By working with banking partners, suppliers and third parties to optimise processes, treasury can collaborate more closely with other business functions to drive corporate growth.