Trade Disputes, Fraud Aren’t Treasurers Biggest Concerns

Corporate treasurers are increasingly concerned about a complex regulatory environment, according to the latest analysis from Strategic Treasurer and TD Bank.

The two published their newest “Treasury Perspectives” survey this week, a report that polled corporate treasurers and finance executives about their plans and economic outlook. The 340 survey respondents, based mostly in North America and Europe, revealed their rising concerns over political gridlock in the U.S. and challenging monetary policy, which contributed to an overall decline in corporate confidence.

Both corporates and banks have said Know Your Customer (KYC) regulations are their most pressing compliance concerns, with nearly three-quarters of businesses with more than $1 billion in revenues pointing to KYC as their top challenge. Slightly more than half of respondents said current regulatory pressure is higher than historically considered to be the norm (while only 2 percent said it’s lower), and half said they expect those regulatory restrictions and oversights to increase in the next year or two.

Taking a deeper look into the current regulatory and political climate, Strategic Treasurer and TD Bank found that rising interest rates are the greatest concern, as is a “gridlock in D.C.” and an overall rise in complexity of current regulations. Trade concerns and the risk of an economic recession also made the top-five list of biggest concerns among treasurers and finance executives.

Unfortunately, the report found, recent tax reform in the U.S. has only had a minimal impact on the corporate community. While 42 percent of treasurers surveyed in last year’s report said they expected U.S. tax reform to provide a significant benefit, nearly half said in 2019 that there has been no significant impact on their companies at all. Only 15 percent said tax reform boosted their total income, while 12 percent said financial performance has improved.

With regards to trade disputes, analysts noted that the conflict is expected to make “ripples, not waves.” So far, most businesses said trade disputes have not had an impact on their organizations so far, while only 18 percent said the conflict has made doing business more expensive, whether through an increase in the cost of procuring goods or of their own products sold to customers.

On the whole, corporate sentiment has deteriorated since last year’s report, according to Strategic Treasurer and TD Bank.

“Ten percent fewer organizations expect the GDP of their headquarter country to increase in 2019 than they did in 2018,” the companies noted in the announcement of the report. “In addition, 7 percent fewer businesses reported optimism in their organizations’ outlook than last year. These year-over-year swings show that organizations are increasingly wary of an economic slowdown following years of low rates and high growth.”

Technological Troubles

Separate from issues of politics and regulation, corporate treasurers are facing challenges related to the digitization of their organizations.

Strategic Treasurer and TD Bank found in their survey that the majority of respondents said manual processes are their biggest operational challenges today, more so than issues like fraud, regulatory changes or staffing. Most also said payments management is the most time-consuming process, followed by cash forecasting.

More than one-third admitted that they lack sufficient time to adequately perform all their responsibilities, with cash forecasting and risk management processes put on the back burner most often.

Continued challenges related to manual processes reflect the struggle organizations are facing to digitize. While 75 percent of treasurers said they are excited about technological innovation (and that they would rather upgrade technology than add new staff), actual adoption of automated technologies remains low. Furthermore, more than one-third of survey respondents said they are not adequately preparing for technological disruption, with only 7 percent having adopted artificial intelligence. Even fewer — 5 percent — have adopted blockchain, and only 2 percent use cryptocurrencies.