François Masquelier, Chairman of ATEL
November 2018, Luxembourg
End of September 2018, if you remember, we have celebrated the ten-year anniversary of the Global Financial Crisis. It is maybe an opportunity to have a look at last 10 years of changes and innovation in treasury. The idea was to explain what has changed last ten years and what can be expected for the 10 coming ones. Let’s have a look int to the rear view to determine what were the main changes we all faced.
Last decade was a 400-meter hurdle race. However, we are better trained and better prepared to face risks, this was a tough period for all of us. Our functions of treasurers and CFO’s have evolved, as some other roles in finance. No one could contest we have all been shaken by the Global Financial Crisis (GFC). In September 2018, we celebrated the 10th anniversary of Lehman Brothers’ default followed by its bankruptcy. Who could have imagined such historical and large financial institution falling? No one I guess. It was a sad moment, which has changed the whole financial world forever.
To correct all the excesses of this terrible crisis, maybe the worst so far, the G20 determined lot of measures and regulations to reduce systemic risks and to prevent the next potential crisis. States of Western countries came to rescue banks through numerous bail-outs. All-in indebtedness levels have increased, despite a general significant reduction of debt of corporates. They have piled up cash to avoid any further liquidity issue. House-holds and States have never been so highly indebted, paradoxically. The bail-outs have saved number of banks and the whole systems, but it had a price for the OECD states. Despite low and even negative rates in some currencies, the debt level remains high and became a real concern. In the meanwhile, for many other reasons the geopolitical world has changed and populisms (r)emerged.
States took series of regulations to better frame the financial sphere. Even corporates, which were not responsible at all for this crisis, must respect new binding rules. Is our job more complex than 10 years ago, that’s a key question? I am tempted to say: yes, it has been complexified over years. Compliance has been the first objective and corp’s have implemented lots of solutions to be compliant. But, what were the benefits of the crisis, if any? I keep thinking there are some benefits from these corrective measures (even if the pendulum went as always, a bit too far in the opposite direction). We are better prepared to face next crisis. We have “cleaned” our processes and organisations to be less impacted in case of financial crisis. We are better equipped to anticipate and detect future liquidity problems and financial crisis. Have we learnt from the last crisis? I guess we did. These regulations, although we could contest some measures, are beneficent. However, the technologies have followed and enabled treasurers to cope with all these rules.
We should not summarise and reduce the last ten years to all these new regulations to better frame finance (as well as new reinforced international accounting standards). There were many other things including a technological evolution. We have seen many new IT solutions implemented, more standardisation, more centralisation, more automation and eventually more productivity, although paradoxically it resulted in more work at the end of the day.
But what our future will look like? We can imagine that robotics, artificial intelligence, business intelligence, algorithms and new app’s offered by FinTech’s will keep changing our jobs. The paradox of sophistication must be highlighted: we have never used so much spreadsheets, mainly because of software’s and solutions multiplication. Does technology mean less work and jobs made redundant? Not necessarily. Nevertheless, the future will require new skills for new types of jobs. How will our future job look like? Brighter or even more complicate? The world remains marked by lots of interferences: uncertainties, conflicts, geopolitical issues, trade wars, tax transparency, emergence populism and “we first” approaches, market volatility, climate change, business transformation and digitisation. The globalisation will remain.
With all major changes, do we really know precisely what’s going on? With all this fake news, “infox” (as French called them) and flows of information and disinformation we can be doubtful. GDPR and e-privacy are two major coming challenges for lots of businesses. We will continue to face an inflation of reporting: more reporting and faster delivery. PSD2 will open banks IT systems and revolutionise financial landscape, as well as the bank’s future. The paradox of this IT evolution is also illustrated by the adoption of solutions, added on each other as bricks. However, a gathering of IT solutions, not always interfaced and coordinated, prevents treasurers to consolidate data in a smart way and to produce robust dashboards. Unfortunately, the IT legacy makes any system change difficult. Starting from scratch with some new IT technologies seems to become possible and would make a lot of sense.
We also need to cope with new behaviours of consumers and move towards “B2C” models. More than a disruption, I can foresee a significant evolution. We are surrounded by GAFAN, which try to rule the world. The motto will remain transparency, substance and consistency, as for BEPS. The future will bring new changes with lots of new API’s and apps, a big bank consolidation, a high market volatility and more automation or digitalisation providing we are able to further standardize principles and formats. I remain optimistic providing we are all agile enough to adapt ourselves to our new moving environment.
We also must adapt our recruitment to the new “Z” gen and to on-board other specific skills in our finance teams to face challenges. The emergence of technologies derived from DLT or block chain will open opportunities far from the sole virtual currencies. Everything will become digital and virtual to make our life easier and faster. We will have to adapt treasury to future needs like, for example, the e-payments, new ways of doing trade finance, future cashflows based on algorithms rather than forecasts or even robotisation of basic processes.
The finance world will never be the same. For better or for worse, is the question the future will tell us about. After this brief retrospective of last 10 years and rapid description of the possible future of treasury function, I would mention David Bowie famous words: “I don’t know where I’m going from here, but I promise it won’t be boring”.