Treasurers play a crucial and unique role in any organization as they oversee financial planning, risk assessment, reporting, budgeting, as well as statutory and regulatory compliance. The COVID-19 pandemic altered treasury plans last year. Strategies penned down for 2020 were quickly washed away, and treasurers had to think on their feet and pivot to ensure business continuity in light of changing scenarios with the spread of the virus. 

The lockdowns and closure of international boundaries brought the spotlight on Treasuries to strategically lead the defense and safeguard the survival of the business. By pulling the plug from all aspirational growth plans, treasurers switched focus to fund availability, business continuity, and spend tracking. Corporate treasurers prioritized establishing ongoing and clear communication with bank providers, monitoring credit lines to customers and clients, and reducing costs to improve cash flows. 

Several forces shape and define both the priorities of the future and the corporate treasury function. And, the role of financial and macro risks impacting strategy and investment plans needs to be considered. It is also essential to evaluate the regulatory initiatives that treasurers are working on and their implications. Additionally, treasury technologies adopted have to be reviewed for data quality, security, and scalability in the coming years.

Here is a look at the changing role of treasurers’ post-pandemic

Monitor Macroeconomic Trends

Despite 2021 beginning on a promising note with the distributions of vaccines, the markets globally are far from stable and require close monitoring. Besides international economic growth concerns, the current climate of geopolitical risks and uncertainty will continue keeping treasuries on their toes as they closely watch the unfolding of events in the coming months. Focusing on counterparty risk is vital for supply chain management because the sudden economic downturn has disrupted the operations of several smaller suppliers and customers.

Treasurers would likely diversify investment portfolios and continue the emphasis on liquidity and risk management till things stabilize. Secure investments that ensure ease in access in stressful times like bank deposits and money market funds shall remain the preferred investment avenues until the crisis is entirely over. 

Accelerate Digital Transformation 

Several changes were induced and accelerated by the pandemic, and one of them is digital transformation. It continues to impact the corporate treasury, and there is increasing reliance and dependence on technology every day. Automation of regular treasury operations and compliance activities enhances efficiencies as they narrow down and eliminate errors and associated risks. Treasury teams also benefit from automation as they have more bandwidth to focus on data analytics and strategic decision making. 

However, with continued digitization, treasury teams are increasingly questioning data quality and security. Internal data issues stem from having to link up numerous legacy systems and software. Externally, the lack of standardization on electronic statements from financiers is particularly problematic. As more information is exchanged digitally, safeguarding data from cyber threats or misusing information is a growing concern. API-driven integration allows systems to talk to each other and exchange data securely shall remain the focus as more treasurers adopt the digital way forward.

Additional Read: How Digitalization transforms financial services

Relationship with Financiers

Treasuries have prioritized staying connected with their counterparts in financial institutions in times of the pandemic. Keeping communication channels open with banks and financial institutions is vital even in 2021 to ensure an adequate line of capital is accessible in case of an emergency.

At Tata Capital, we continue to go above and beyond to support CFOs and Treasury Heads with ample access to capital and structured financing options to help navigate this period of uncertainty.

Improve Cashflows

Treasuries are acutely aware that we are still not out of the woods completely. In the coming year, they will continue keeping their eyes on outflows- monitoring payments and ensuring the availability of liquidity to meet time-sensitive payment obligations. 

Treasuries must continue reliance on trade financing solutions to improve revenue and collections. Establishing access to trade finance using letters of credit and supply chain financing solutions to get paid faster and boost cash flows remains a key priority. Treasuries must ensure uninterrupted availability of guarantees and letters of credit and continue monitoring cash flow positions.

Additional Read: Ways to Manage Cash Flow for your Small & Medium Businesses

Mitigate Risks

Treasurers must remain invested in conservative investment instruments until the COVID-19 pandemic is entirely behind us. Enough precautions should be taken to mitigate risks that are within control. Relationship banks must be leveraged to minimize exposure to currency exchange risks in global markets susceptible to volatility. 

Additionally, financial markets need to be observed closely, especially in the case of maturing market instruments. Timely access to alternative financing sources becomes crucial in case of any disruptions.

The treasury agenda in 2021 will involve closely monitoring macro trends, embarking on digitalization, working with banking partners, suppliers, and third parties to optimize processes, and collaborate with other business functions to drive overall growth.

Our team of corporate bankers and customer service representatives at Tata Capital work round the clock to support the treasurers with structured financing solutions to meet their unique needs. Reach out to us for assistance here.

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