Uncertainty around economic growth is the number one concern for corporate treasurers, particularly in Europe, the Middle East and Africa, according to a new report from the Economist Intelligence Unit and Deutsche Bank.
In a survey, 40 percent of respondents listed global economic growth among the top three most serious macro risks to their firm’s finances over the next 12 months. This was followed by regulatory and tax risks, selected by 25 percent, and currency risks and inflation risks, noted by 21 percent and 20 percent, respectively.
In the EMEA region, 45 percent named economic growth in their top three risks, compared to 38 percent in the Americas and 37 percent in the Asia Pacific region.
The UK’s vote to leave the European Union was not found to pose a particularly significant threat in the short term, with 56 percent saying they do not believe it will affect their firms’ finances in the next two years.
Only 10 percent said they think Brexit will affect them positively in the short term, while 34 percent said they believe it will affect them negatively.
In the medium term—in the next three to five years—however, 43 percent believe Brexit will have a negative effect on their business, while 46 percent anticipate no effect and 11 percent expect a positive effect.
Some 55 percent of respondents said their treasury function struggles to stay on top of the changing macroeconomic environment, and results were split on whether this is likely to improve over the next 12 months.
While 39 percent said they believe the environment will get easier, 32 percent said they believe it will stay the same, and 29 percent predicted that it will get worse.
The survey, and several respondent interviews, also highlighted a sense of frustration caused by new regulatory requirements taking up a lot of treasurers’ time and resources.
Over the next 12 months, 39 percent of respondents said they think the time and resources spent on regulatory change will remain the same. A further 23 percent said they think it will increase slightly, and 16 percent said they think it will increase significantly.
Only 6 percent said they believe they will spend significantly less time and resources on regulatory change in the coming year.
The report said: “Having experienced several years of increasingly onerous compliance burdens, several treasurers express frustration with some pieces of regulation that are seen as creating a lot of work without delivering any perceived benefits, such as greater transparency or stability in the financial system.”
Regarding the pace of technological change, 73 percent of respondents said the adoption of new technology is gaining momentum in their company’s treasury departments, and 68 percent described their current tech infrastructure as sophisticated or highly sophisticated.
When asked which areas within corporate treasury are improved by technology, reporting capabilities came out on top, highlighted by 48 percent. This was followed by decision-making, noted by 42 percent and quality of information and data, named by 38 percent.
However, in the interviews, contributors suggested that treasurers are naturally risk-averse and tend to wait for innovations to mature before adoption. The survey itself also revealed some scepticism on the benefits of technology changes in corporate treasury departments.
Of those that said their company has implemented technological change in the last 12 months, 42 percent said that the benefits of that investment ‘materialised only partially’, and 3 percent said the benefits ‘failed to materialise’.
Only 21 percent said the benefits of their technology upgrade exceeded expectations.
There was also a certain reluctance to engage with financial technology start-ups. While 58 percent said the development of fintech companies is exciting, and could reduce reliance on banks for funding, 72 percent said they remain risk-averse about partnering with them.
The paper said: “In addition to risk aversion among treasurers, the interviews also reveal a widespread perception that the solutions on offer simply do not meet all requirements, suggesting that part of treasurers’ hesitation with respect to adopting new technologies is rooted in their belief that the right products and services are not yet available.”
The survey included 150 corporate treasurers and 150 CFOs, with 100 respondents from the Americas, 100 from EMEA and 100 from APAC. In addition, 20 senior treasury and finance executives were interviewed in July and August 2016.
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