The Corporate Treasury viewpoint: An interview with Johan Bergqvist, Vice-president, Treasury, Spotify

The traditional role, structure and staffing of treasury are being challenged on all sides. Customers, supply chains, banks and transaction services providers alike are being disrupted by digitalisation and new technologies. Corporate treasurers face the direct challenges of new compliance, tax and regulatory initiatives in Europe, the US and elsewhere while coping with the ongoing evolution of their own companies’ existing business models.

These changes create a dilemma for treasury. Treasury cannot de-emphasise its core functions of cash and liquidity management, accounts payable/accounts receivable (AP/AR) oversight, funding, and financial risk management. But at the same time, it has progressed from being a transaction and reporting centre to a more strategic risk holder and analytics centre of excellence. This strategic evolution means treasury has to mobilise new automation technologies such as artificial intelligence (AI) and robotics, open application programming interfaces (APIs), and cloud services if it is to free up resources and add more value.

The future of best practice in treasury is inextricably linked to next-generation data analysis. Treasury is the company’s natural financial data depository and analytics engine for future planning. However, to take on this strategically important role, treasurers will have to go beyond their traditional finance training. They will need to embrace wider software engineering, data science and project management skills themselves or at least be able to lead a team that includes those disciplines.

So, do treasurers understand the nature of the challenge? Are they ready for a future that is, in many ways, already here?

Our survey results suggest that while some companies are well advanced in their preparations, others are, at best, ambivalent about the profundity of the changes they face. Some do not believe that disruption affects them. Others seem complacent about the new skill sets and knowledge that treasury will require to function well within this new environment. Most of the respondents were unable to think about the “unknown unknowns”; they believe that existing systems are the future of treasury technology and existing functions will be the main areas that new developments in AI, blockchain/ distributed ledger technology and automation will be applied.

The survey results indicate a growing divergence between those treasurers possessing the resources that enable a longer term strategic view and those forced to solely focus on traditional tasks, leaving them vulnerable to decisions taken by their more strategic thinking CFOs and CIOs.

Key findings

Disruption is real and the causes are manifold. More than 55% of treasuries say that their company is changing operational models as a result of sector disruption and that this is having a knock-on effect on treasury.   Business models are being disrupted from all sides. Treasurers see the most disruptive influences as multi-channel payments (47%), mobile-based solutions (43%) and changes in supply-chain product life cycles (41%).   Respondents are highly confident that they have the right skill sets in their teams to respond to the rapid pace of technological change. The vast majority (80%) of treasurers believe they have all or the majority of the skills necessary to meet the challenges posed by ongoing technological change.   Stay with what we know. Treasurers overwhelmingly believe that treasury management systems (TMS) and enterprise resource planning (ERP) systems will remain the core of treasury technology, with 35% and 36% respectively choosing existing TMS and ERP systems as the most useful technologies. Treasury is still hesitant to fully embrace the cloud; however, 31% of treasurers would consider moving in-house systems to it.   Treasury is behind the open API curve. Although treasury recognises the benefits of big data analytics, with 56% of respondents citing it as one of the most beneficial new technologies, only 13% are thinking about open APIs.   US tax reforms challenge corporate treasurers. The top regulatory concern for respondents is US tax reform, cited by 28% of respondents. Other regulatory concerns, each cited by 25% of respondents, were anti-money laundering (AML), know-your-customer (KYC) regulations and International Financial Reporting Standards (IFRS)

 

In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.

Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.

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Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.