In a time of political and economic uncertainty, there’s more pressure than ever on corporate treasury functions to run efficiently. In this new blog series, we’ll be examining the treasury landscape across a number of regions, beginning with the Nordics and assessing the challenges, proposed solutions and how technology can help. This week we’re speaking with Lars Beckman, Managing Director, Partner at Core Process Finance & Treasury – a leading strategic partner of Taulia in the region.
Could you summarise three key challenges for corporate treasurers in the Nordics in 2020?
First, I would say is the ability to support the business organisation with easier and faster processes. Here it’s important to identify bottlenecks and work out a business plan for change. Many corporates of the Nordics have been hesitant in developing the area and there is a need to change current systems and processes to interact. The treasury area has been regarded as an admin function and not a business supporting organization.
Second, corporate treasurers need access to critical business data in order to stay ahead of their competitors and effectively quantify the risks and opportunities. This challenge is about being ahead of the curve by predicting what’s around the corner instead of only looking behind.
The third challenge is to set up a technology roadmap – businesses need to question how they want to work, how to structure the organisation and what supporting systems do they really need. Is it time to think differently and maybe reorganize your corporate treasury structure? Corporates should recognise the need for a new corporate role: that of an enterprise cash optimisation officer. If you want a long term commitment from your organization and a fast ROI – then hire this person to focus on this area, securing sponsorship from the CFO and CEO. By changing the organisational structure and focusing on cash optimization as a functional role the whole operation of a treasury can change from a reactive to a pro-active function. Cash should be managed with a long-term perspective in mind. Implement the treasury technology road map for cash optimization and drive change.
Are there any particular industries where treasury departments are facing challenges right now?
Any industry verticals dealing with big volumes and small margins on a global scale will be facing challenges right now. If you lack in the overall analysis, you’ll have difficulties defending your market position. The recent outbreak of coronavirus shows just how sensitive these industries are if they’re dependent on one country to source all their components. If your competence in treasury is not up to scratch or hasn’t adapted to deal with these issues, you will run into problems with cash flow and profitability. If you have a global business, then you should always be sure to have the skill sets needed to bring both systems and people up to par with processes and routines.
With the increase of fintech and digitisation, do you think the future is looking good for people working in corporate treasury?
Definitely! If you effectively set your agenda, then I think treasury can become one of the leading corporate functions. This area usually understands business perspectives and, of course, financing. If you embrace the right supporting fintech tools you can create a function that develops the business by understanding what will happen, rather than simply reacting to what has happened.
What technology/technologies do you think should be on companies’ radars this year?
Business intelligence solutions that take care of open data from different sources, for example, bank ERP-systems and market data such as exchange and interest rates or commodity prices. Use different sources to make an analysis that’s adapted to your specific situation. If you have direct access to all bank balances and ERP output, then it will be easy to work out your net future cash position with a robust cash forecasting tool. Of course, with Core Process being a fintech company and providing different solutions on the Nordic market, I hope more corporates evaluate the benefits of third-party solutions and get moving. The CFO of a corporate should be more involved and put pressure on treasury to change. Treasurers must, in turn, understand the impact they can make by introducing new tools with a short ROI that creates business value.
How would you describe the current lending climate in the Nordics? For example, are companies becoming risk-averse, embracing new technologies etc.?
The lending climate for banks is good and access to capital is fairly easy for investments and funding. There are several alternatives to choose from for a corporate in the region. I think a corporate funding strategy needs to include different tools and it’s always important to have alternatives ready if you foresee a more difficult period ahead. The treasury perspective should be safe but still open to supporting opportunistic business plans, when needed. SME enterprises will need to scale up alternative financing solutions for their respective markets, such as working capital solutions. The conditions for this strategy are developing in the Nordics but the corporates need to be ready to embrace this strategy.
Be sure to come back for the next instalment of the ‘Spotlight on Treasury series’. Follow us on Twitter, LinkedIn or Facebook for more timely updates on this series and future working capital topics.