J.P. Morgan Details The 6 Trends Shaping Corporate Treasurers’ Futures

It’s been nearly a year of roller coaster-style shifts in the global economy that have tested corporate treasurers’ ability to remain agile, responsive and proactive. With finance leaders now settling into new routines, the way they operate doesn’t look like it used to — nor should it.

Despite the volatility, the pandemic has created plenty of opportunity for corporates to accelerate their modernization efforts, and the treasury function has found itself front and center of many of those initiatives. Naturally, despite plenty of uncertainty, corporate treasurers are now tasked with answering what everyone wants to know: What’s next, and how do we prepare for the future?

J.P. Morgan has identified six global trends shaping the frontier of the treasury department, according to Alison Livesey, head of global market management within the firm’s wholesale payments business.

Those trends include a global synchronous recovery, acceleration of M&A activity, rising pressures on supply chains, shifts in business models being driven by digitization, transformation of the treasury and finance function and accelerating momentum of ESG (environmental, social and governance).

Some of these trends were well on their way before the pandemic hit, while others surfaced as a result of immense and sudden effects of the crisis. Regardless, Livesey recently told Karen Webster, treasurers who work with, not against, these market forces will be those who can ensure corporate resiliency in the months and years ahead.

Interconnected Disruption

Although J.P. Morgan has identified six individual trends affecting today’s corporate treasurer, Livesey noted that finance leaders must understand that many of these market shifts are actually interconnected, with widespread implications beyond the treasury department itself.

Changes in business models driven by a digital-first mindset are likely to have a significant impact on supply chains and the pressures they face — which, in turn, will impact how the treasury department transforms.

“Making sure supply chains are resilient and ready to capture either demand that comes back, or new business opportunities, will be incredibly important for companies,” said Livesey.

At the same time, she added, treasurers looking to promote supply chain resiliency and support suppliers within new business models must also place a greater emphasis on how they wield technology to support those initiatives. For instance, changing from a warehouse model toward a direct-to-consumer model must take into consideration consumer payment preferences — from new payment methods to user experience expectations, which will have a profound impact on cash flow and liquidity management as they transfer from high value and low volume flows to high volume and low value flows. Moreover, this will also shift their supply chain management — from ensuring their working capital and supplier solutions fits their new inventory flows and maybe even new suppliers who may be smaller or based internationally. Likewise, adoption of online commerce models will place increased and different pressures on supply chains, too, with the financial health of suppliers an increasing priority that may lead some firms to develop targeted supply chain finance programs across their supplier base.

As a result, treasurers need to embrace a collaborative spirit with other units around the enterprise, like procurement and IT, as well as their financial partners, to develop an effective finance and modernization strategy moving forward.

Closing The Treasury-IT Gap

Whether organizations began their modernization efforts years ago, or were prompted by the pandemic to digitize, finance chiefs can no longer ignore the intrinsic relationship between technology and finance.

Indeed, noted Livesey, business model evolutions, supply chain strategy changes and the emergence of real-time data and treasury on demand has treasurers paying closer attention to how these disruptions impact their overall ecosystem. Real-time payment, for example, has sparked conversations about the opportunities within real-time transaction data, 24/7 processing, and the value in accessing that information and integrating it within other parts of the enterprise.

“Treasurers are spending much more time with technologists,” she said, noting that these professionals are especially zeroed-in on understanding API connectivity, as an existing technology, and how to take advantage of interconnected real-time data within their ecosystems.

Every enterprise is different, and each corporate evolution will be different. But as a whole, said Livesey, treasurers are on the hunt for agility and resilience, and today largely understand that technology is the key to getting there. Treasurers have a complex road ahead, having to juggle the short-term benefits of digital transformation today, with understanding the innovations that may have the potential to drive further transformation tomorrow. That’s why it’s vital to find a banking partner which has invested in digital technologies; even the most ambitious treasurers won’t be able to achieve their digitization goals if their provider falls short.

Real-time data, automation and integration are common themes guiding finance leaders through that process, but they cannot go it alone. Not only must treasurers understand how changes within their departments will have ramifications throughout the entire enterprise and its partner ecosystem, but they must also embrace collaboration across treasury, finance, IT, procurement, sales and other teams that will all undoubtedly be reshaped by those six global trends.

“There are a couple of ways to think about resiliency,” said Livesey, whether it’s focusing on the resiliency of employees, processes or controls. Regardless, she added, “A good financial partner can help you build a multi-year plan which incorporates achievable, realistic goals so you make steady progress in your focus areas, whether that is optimizing liquidity and achieving real-time access to data, cross-currency management or business model pivots and embedding ESG goals.”