The advent of Covid-19 gave many organisations no choice but to adapt and adopt, whether they were ready for it or not. More than ever before, it enabled first-time customers to initiate and fulfil their buying journeys digitally, experiencing first-hand what an ‘always on, 24/7 digital economy’ could feel like. It also enabled organisations to get a sense of the increased productivity this could create, and the additional data and insights generated that could be leveraged for growth.

Here are nine trends for 2022 and beyond.

Treasury reimagined infographic 01


The full article below was originally published by the Association of Corporate Treasurers of Southern Africa (ACTSA) on www.actsa.org.za in partnership with Treasury Management International (TMI). It is reproduced here with their permission.

Many companies in Africa are at various stages of elevating their treasury to their target operating model. However, new business models are accelerating the pace of change even more, resulting in an opportunity to elevate the corporate treasury function, enabling it to sit at the heart of the digitisation strategy for the organisation.

The advent of Covid-19 gave many organisations no choice but to adapt and adopt, whether they were ready for it or not. More than ever before, it enabled first-time customers to initiate and fulfil their buying journeys digitally, experiencing first-hand what an ‘always on, 24/7 digital economy’ could feel like. It also enabled organisations to get a sense of the increased productivity this could create, and the additional data and insights generated that could be leveraged for growth.

Changes to the way we communicate and share information, increased collaboration, the use of cloud computing and artificial intelligence (AI), as well as the emergence of mobile-first business environments are creating a tidal wave of progress.

Even as the corporate treasury continues to prioritise resources on the basics of cash, liquidity and risk management, the future treasury will quickly evolve to become a real-time business partner, bringing to the table critical insights and key levers across the client’s value chain that will facilitate growth into new business models and markets.

Key themes that can shape the role of the future treasury

  1. Accelerated digitisation of the value chain

One of the key outcomes from the pandemic has been the acceleration of digital value chains across all sectors in the economy. Businesses have rapidly established new sales and distribution practices, with a focus on digital channels and contactless logistics solutions. E-commerce has become central to top-line growth, and will be a key driver of growth going forward.

This evolving digital model may also lead to the reshaping of physical distribution chains that are currently in place. Other institutions, including banks, have also embarked on their own initiatives to guide clients through this journey, reduce some of the friction in the marketplace and help clients connect and leverage each other’s strengths. This is facilitated through the launch of super apps and platforms like Avo by Nedbank.

Digitisation of the value chain right from the customer buying process will also drive the shift of financial flows from ‘batch’ to ‘real time’, requiring key treasury functions to relook and rethink how they can respond to this shift.

  1. Real-time processing

The rapid evolution of real-time payments, both globally and across Africa, through traditional and non-traditional payment options like mobile money, is one of the enablers of value chain digitisation. Corporates can gain significant value from real-time operations and ensuring they are geared to servicing an ‘always-on, 24/7’ economy – with the corporate of tomorrow likely demanding real-time information, visibility and settlement of its cash.

  1. Data-driven decision-making

Most corporates have evolved from the point of relying on spreadsheets and manual processes to manage their day-to-day tasks. As corporates progress with the digitisation of data across the company, they can better sift through the vast amount of data insights to enable better and quicker decision-making. Whereas this has traditionally been focused on the delivery of higher operational efficiency and improved return on investments and assets, the true potential of this data for growth is in most instances yet to be leveraged.

In addition to having control and visibility across the working capital cycle, treasurers in the corporate of the future will be able to leverage the power of cloud computing and AI to generate strategic insights and decision metrics right across the value chain. These treasury insights could unlock new means of partnerships and collaboration with suppliers, distributors and the ultimate product users. This should enable treasury to sit at the heart of the digitisation and e-commerce strategy of the organisation.

  1. Advanced liquidity management

Day-to-day liquidity management, including the ability to shore up liquidity at short notice, particularly during volatile periods, remains a critical role for the treasury to perform. This strategy would have been stress-tested over the last year – with many corporates drawing down on existing credit facilities to ensure sustainability of operations as required.

The importance of the day-to-day visibility of cashflows for better planning and urgent deployment of funds as required would largely be executed through a backbone of treasury technology connected to financial service providers and the client’s Enterprise Resource Planning (ERP) system, and this would also facilitate the execution of available sweeping solutions, including on-demand, target balance and zero-balance sweeping to optimise and maximise liquidity.

As the treasury evolves to a 24/7 function, it is expected that global corporations will continue to leverage a ‘follow the sun methodology’, taking advantage of time zone differences between the key financial centres to leverage liquidity. This can be executed through the movement of funds across borders between Europe and Africa to Asia and to the United States within a 24-hour cycle.

  1. Accurate cash forecasting

Many organisations still use a basic, monthly cycle for cash forecasting, tying a generic forecast with manual and best-guess decisions, considering very few variables. There is often a reliance on Excel-based inputs for multiple business units – resulting in the accuracy and value this creates constantly being questioned.

Through having visibility and control of data across the working capital cycle, the ability to leverage machine learning techniques to improve the forecasting algorithms becomes a clear possibility.

In addition to improving forecast accuracy, this would also provide the ability to customise a view of what could drive the cash position over different intervals (every week or every two weeks), during key milestones and seasons – transforming a tool that was originally engineered for longer-term, directional forecasts into something that could create significant economic value for the organisation in the short and medium term.

  1. The advent of digital currencies

There have been increased developments on Central Bank Digital Currencies (CBDCs) in markets including China, Europe and South Africa. Even though it is still early days, a recent World Economic Forum survey predicts that 10% of global GDP will be stored in digital assets as early as 2027.

The impact of these changes could see a dramatic reduction in settlement processes and timelines, a marked change to the cross-border payments environment as well as the ability to push further towards a cashless or cash-lite environment. However, some of the challenges include the ability to manage traditional and digital assets in parallel, as well as potential privacy and cybersecurity issues.

Unlike many other countries, the advent and widespread adoption of mobile money across many markets across Africa has presented corporate treasuries with some initial use cases and valuable experiences on the management of digital currencies.

  1. Supply chain resilience

Covid-19 unleashed a crisis of mammoth proportions across companies from a supply chain perspective, exposing complexities and inefficiencies in global supply chains that would otherwise be working seamlessly.

Relationships with suppliers became just as important to secure priority on orders and we saw an increase in the use of trade finance facilities as a tool to manage risks in these areas. We have seen a shift away from ‘Just In Time’ (JIT) to ‘Just In Case’ (JIC) models, with companies holding inventory as a buffer to see them through any potential restrictions and disruptions in the supply chain. We expect to see more of this model in the short term, even with the additional strain on working capital – as companies keep a very close eye on their supply chains to keep running smoothly.

  1. Security and fraud management

In addition to the strategic insights mentioned above, the shift to an always-on and real-time world will also require a fresh perspective on areas, including financial risk management and cybersecurity. The use of algorithms and data will also play a critical role in mitigating financial risk through tools, insights and trends that have not previously been available.

However, additional investments would likely be required to ensure that processes that are now highly interconnected, as well as the data therein, are more adequately prepared for cyberthreats. This would be even more critical with the advent of real-time processing and evermore complex implications of an always-on environment – where any disruption to capabilities could result in a knock-on effect to other parts of the business.

  1. Africa Continental Free Trade Area

The potential impact of the Africa Continental Free Trade Area (AfCFTA) is extremely exciting – connecting over 1.3 billion people across 55 countries with a combined GDP value of over $3.4 trillion. Intra-Africa trade has traditionally been the lowest among other regional blocks, but it is expected that this will become one of the key drivers to economic recovery and a significant contributor of growth in the future. It will enable countries to diversify exports, accelerate growth and attract additional foreign direct investment.

As companies also re-engineer their supply chains focusing on diversification, taking some of the learnings from the pandemic into account, the AfCFTA presents the opportunity to inject production and trade capacity into the global value chain.

The AfCFTA also caters for trade in services and not just goods. With over 500 million Africans already connected to the internet, this creates additional opportunities for the development of the service industry through the deployment of digital platforms – and this could also lead to an evolution of the treasury landscape across the continent.

Conclusion

Although most organisations currently have a digital strategy in place at a treasury level, this is in many instances focused on the implementation of a base treasury model, looking to optimise and standardise transactional processing, integrated technology implementation as well as centralising and accelerating decision-making.

The pace and scale of disruption in customer buying behaviours, technological innovations and increased data intelligence will only accelerate. It is expected that with flows evolving from being ‘batch’ to ‘real time’ processes will become even more interconnected, and that ecosystems will evolve to being ‘always on, 24/7’. This presents some increased risks – including cybersecurity. However, as we emerge from Covid-19, it may be a good time for a reset of the current treasury roadmap, taking some of the themes above into account.

There is a strong opportunity to re-invent treasury as a core, real-time partner for the evolving digital strategy for the overall organisation – with many organisations already investing in capabilities to help treasurers facilitate this change and navigate future growth.


Gary Marais – Divisional Executive, Transaction Services, Nedbank
Gary is the Divisional Executive for Transactional Services at Nedbank with over 25 years of banking experience covering all aspects of transactional banking & operations with a focus on strategic & financial management. Gary has extensive experience in specialist operations management and has an intricate understanding of the local payment environment in South Africa

Sheetal Shah – Head: Transaction Banking Sales, Nedbank
Sheetal is the Head for Transaction Banking Sales, at Nedbank with over 20 years of international experience providing treasury, trade and working capital solutions for corporates in Africa. She has collaborated with corporates in optimising and future proofing their treasury models globally, pioneered the development and deployment of some of the largest trade finance transactions in Africa, and is extremely passionate about helping clients grow into and across Africa.