The Risk Landscape of Treasury – Are non-traditional Vendors the Solution?

The Risk Landscape of Treasury – Are non-traditional Vendors the Solution?

Technology is evolving at a bewildering speed. As a result, organizations face a tough feat of keeping up with a highly dynamic environment. It involves adopting the changes in technology as they plan or craft their development strategies. Consequently, treasury leaders also bear the brunt of rapid changes because they are key partners of these organizations. Since organizations transform at different levels, more specialized, flexible and scalable solutions are needed. This heaps pressure on traditional banking partners and vendors. They are looked upon by treasury professionals and in extension their clients (organizations) to pioneer technological changes and forward-thinking solutions. 

Problems arise when a long-standing partner or vendor is unable to provide specialized services that the new generation organizations demand. This leaves a strategic risk gap that needs to be filled. Could non-traditional vendors (vendors besides banks that deliver specialized services like fintechs, payment solutions, technology solutions, and task-specific contract workers) be the solution? The answers to this question can be found on the Association for Financial Professionals’ risk survey of 2019. 

 

AFPs Findings 

AFP interviewed 391 treasury respondents to find out the extent of use of non-traditional vendors by treasury sectors across the globe. They went ahead to examine the implications and risks that organizations can anticipate by adopting these new vendors. Here are some of the key findings. 

 

Strategic and Cybersecurity Risks are Still a Major Concern 

Treasury professionals are wary of the fact that their organizations face more risk by the day. The risk is associated with the need for businesses to widen their scopes. Similarly, with new technology such as automation, AI, and online payment methods, cybersecurity problems are ever on the rise. AFP survey of 2019 reports that these two, strategic risks and cybersecurity risks, are still a major concern for treasury professionals. In the report, 60% of the respondents agreed that strategic risks such as competition and disruption in the industry were among the top risks affecting their various organizations. Consequently, 51% of them were worried about cybersecurity risks. 

 

The Future vs the Risk Landscape 

The findings revealed that financial risks, in addition to strategic and cybersecurity risks, are and will still be a major threat in the next 3 years. This calls for a need for treasury professionals to foster relationships and partnerships with organizations and vendors that can deliver flexible and cutting edge financial functions. These include risk management such as improving cash flow to support the growing businesses, providing a capital structure to facilitate the growth and ensuring efficiency in treasury technology. But above all, the technology aspect should be stressed the most following that the current trend in treasury revolves around a “doing more with less” theme. 

According to the report, it is anticipated that treasury operations will be geared towards cash management and forecasting, as backed by 55% of the respondents. Second on the list of what needs to be addressed are financing and fund allocation (making for 41%). Third are treasury functions and current technology (36%). 

The report also revealed an interesting fact that a big number of treasury professionals were not keen on working with non-traditional vendors to find solutions to these issues. 

 

Implications of these Findings 

As explored in the first section of this post, treasury systems have relied on traditional or entrenched vendors for the best finance solutions. These solutions involve payroll management, e-invoicing, supply chain finance, FX hedging, and automation. They, therefore, value the existing relationship between them and these vendors. However, traditional vendors have proved to be rather slow in evolution as they stick to their niche with proven ROI. It then appears that organizations have an obligation to build relationships with non-traditional vendors too since they are more flexible and ever pushing the edge to provide specialized solutions. Similarly, traditional vendors need to build partnerships with non-traditional vendors to supplement their existing functions and capabilities.

Date: 1 March 2019, 13:03 pm
Das könnte Sie ebenfalls interessieren: