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Treasurers Failing To Use Tech To Combat FX Risk, Deloitte Finds

In its biennial exploration of the evolving role of corporate treasurers, Deloitte is keeping tabs on how treasurers are embracing technology and gearing up to handle more responsibilities than ever before.

The company’s latest 2017 Global Corporate Treasury Survey was recently published, and it’s not surprising that, since its 2015 report, Deloitte found that treasurers continue to face new pressure from their executive committees and boards to become a strategic, value-added role within the enterprise.

But though there is evidence treasurers are stepping up to the plate, the research finds that not only are there ongoing risks that treasurers must address, many are not adequately doing so.

In a survey of treasurers across more than 200 companies in various parts of the globe, Deloitte found that the corporate treasurer continues to be positioned as a risk-management function of organizations: 97 percent said that the treasurers’ role in liquidity risk management is important. Ninety percent agreed that the treasurer holds an important role as a “steward for risk management for the company.”

Only 15 percent said the treasurers’ role of helping the organization become a profit center was important, representing a “shift,” Deloitte noted, in how the role of treasurer has historically been perceived.

FX volatility is top risk challenge for treasurers today, with 52 percent citing this issue, followed by the challenge of gaining visibility into global operations, cash and financial  risk exposures (cited by 43 percent).

In an interview with InvestorDaily, Steven Cunico, coauthor of the report and treasury and capital markets partner at Deloitte, explained that FX volatility is proliferating across the globe, affecting the U.S. dollar, yen, euro and others that “were fairly stable and predictable.”

“But the last couple of years have seen those currencies move around quite a lot, particularly, for example, sterling with Brexit,” Cunico said.

Analysts at Deloitte pointed to other concerns that are making their mark on the treasurer today.

“A key concern around technology,” Deloitte noted, “is the speed with which the market is moving and being able to identify ‘which train to jump on,’ and the impact of banking and tax reforms is an emerging challenge.”

Technology Tripping Up Treasury

While technology can aid treasurers in their complex risk-mitigation initiatives, Deloitte concluded that corporate treasurers are actually struggling to fully grasp the capabilities of innovations. More than a fifth of treasury management systems are managed in spreadsheets, the report found.

“While an increased percentage of survey participants [has] indicated system usage for  typical treasury responsibilities, systems are not being fully leveraged to support the whole of treasury function,” Deloitte concluded. “The challenge of visibility into global operations increased 43 percent, while 30 percent cited insufficient technology infrastructure to support their department.”

According to Deloitte, manual treasury management processes, from cash management to FX, can open up the organization to fraud. Interestingly, the majority of treasurers said their company has not been affected by fraud (60 percent), though for those that have, only 17 percent said they have implemented or improved their treasury management systems. Most, instead, said they reviewed and/or upgraded internal controls.

Further, despite the increased responsibility of risk management on the corporate treasurer,  Deloitte found that 75 percent of survey respondents aren’t monitoring key risks using “at risk”measures like cash-flow-at-risk, and less than half say they deploy sensitivity analysis.

“Given that FX volatility is the major concern for treasurers, there is significant opportunity for treasurers to invest in technology to deliver more sophisticated real-time analytics,”  Deloitte concluded. “CFOs and Boards should expect more dialogue in these areas.”

Deloitte’s Cunico elaborated on this trend in his interview with InvestorDaily.

“The key reason we’re not seeing [‘at-risk‘ measures] being monitored is a lack of understanding and awareness,” he explained. “Whilst the treasurer might be able to understand the complexities of at-risk measures, I think treasurers are struggling to get senior management on boards to also understand what these measures are to interpret them.

“Treasurers are probably not doing a good enough job at explaining the value [they] can add to the organization,” he added.

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