The changing role of Treasury: COVID-19, a catalyst for transformation

Invisible liquidity represents lost opportunity. Trapped cash or unutilised liquidity weakens working capital and supply chain. And while it may have been acceptable pre-lockdown, ignoring these issues certainly won’t be in a post-lockdown environment. Bill Wrest, Senior Strategist at Gresham Technologies (Gresham), explores the impact of COVID-19 on the Treasury from shifting expectations to new opportunities.

Stay alert, Protect liquidity, Save the company

More than ever before, Treasury is responsible for maintaining liquidity, cash flow and ensuring the supply chain remains robust and healthy. CFO’s will be looking to Treasury to maintain and improve cash, working capital and protect the company through these unprecedented times. This is moving Treasury pivotally from being operationally driven to strategically driven as the first wall of protection for the company.

Treasury is faced with the need to be reactive, not proactive, in managing its cash and payment flows. At the same time, it may need to look at receivables and terms of settlement to ensure better cash flow and use of liquidity, whilst also looking at contingency and back-up facilities with key banking partners. Irrespective of how a Treasury entered lockdown, there is now a heightened need for a single consistent view of all bank accounts, irrespective of the number of banks and accounts involved, that requires consolidating multiple data streams that use a myriad of data formats and underlying technologies. In these times, repatriating excess liquidity can also act as a protective buffer and mitigate the need for drawing down on banking facilities or reliance on intra-day facilities to ensure daily payment flows.

Banking reality check

For most corporate treasuries, multiple bank relationships are simply a fact of life. Everyday realities such as winning a new contract almost inevitably also involve opening an account with the same bank as the customer. It's therefore easy to see how treasuries can find themselves with hundreds of banking relationships and systems to manage, often resulting in disparate pots of liquidity.

Lockdown is driving Treasury to work differently and with that comes the need for an efficient Cash Management System. Some corporates have already invested in top end Treasury Management Systems (TMS’s) that are also sometimes promoted as potential solutions to multibank (in)visibility. However, the reality is that the core competence of a TMS is sophisticated financial analysis rather than system integration. Therefore, a TMS will only usually be connected to just the top few of the corporates' bank relationships.

Real time liquidity management

Real-time balance visibility potentially opens the door to simpler, more cost-effective methods of inter-company funding and the optimal use of internal liquidity. Consolidation of multibank information through a single system gives Treasury a holistic and manageable view of cash. This, coupled with more timely reconciliation, becomes the bedrock for better cash flow forecasting –which is probably the question that most Treasuries face at the moment: “Do we have enough cash, and for how long?”

Doing nothing is not an option

One of the ironies of the growth in real-time payment systems is that, in a sense it re-emphasises the sheer scale of the liquidity visibility problem that has plagued Treasuries for decades. It represents an important new opportunity, but one that is effectively inaccessible without consolidated multibank connectivity. A further irony is that complete connectivity and visibility are achievable and have never been needed as much as through this current crisis.

Recognising the impact of COVID-19 on Treasury, key suppliers and therefore cash flow, the big question is: “Do we batten down the hatches, stay as we are and hopefully ride this out – or do I need to review my connectivity and my use of data to ensure Treasury is both future-proofing and protected throughout the crisis? Clearly, large-scale projects and large budget spend on systems is untenable during the crisis but the cost of fixing key addressable gaps in cash management and supply chain may not be too onerous, and potential gains may well mitigate the small spend involved.

About the author— Bill Wrest

Bill was Head
BW March 2020of Innovation for Non-Bank Financial Institutions at Barclays Corporate. Prior to Barclays, he was with Bank of America Global Payments Solutions in London. As a Senior Vice President and Relationship Manager. He also has extensive experience working with multinational corporations and managing treasury system sales. Bill joined Gresham in 2016 where as Director of Sales and Strategy he works to create innovative cash and treasury solutions.

Gresham Tech’s Clareti Multi-Bank platform handles automated channel banking integration for corporate and wealth management clients and supports various payments-related business processes such as cash and treasury and trade finance.

To talk to Bill about future proofing your Treasury or on any of the areas covered in this blog – you can get in touch with him here


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