What’s Keeping Treasurers Up At Night in 2019?
Three things dominate the minds of today’s treasury and finance professionals: strategic risk, cybersecurity, and the financial markets. That’s the picture that emerges from the latest research by my organization, the Association for Financial Professionals.
Our 2019 Risk Survey, which was conducted late last year with the support of Marsh McLennan Insights, polled nearly 400 treasury and finance professionals. The goal of this year’s survey was to take more than a quick snapshot of the industry. Instead, we sought to place the survey in a larger historical context to see where the profession is coming from and where it is headed. Here are the results.
Strategic Risk Still Tops the List
Sixty percent of respondents cited strategic risk, such as increasing competition and industry disruption, as their biggest area of concern. The good news is that that number is down five percentage points from the 2018 survey, suggesting that strategic risk is of slightly less concern for the profession.
Even so, this big-picture mindset demonstrates that treasury and finance professionals remain concerned about risks beyond their department. While it makes sense to be worried about potential existential threats to the organization, these risks cannot be managed within treasury and finance. To effectively understand, measure and mitigate strategic risk, finance professionals must engage and partner with other parts of the business.
Cybersecurity Is Changing, but Still No. 2
Cybersecurity risk ranked second among respondents at 51 percent—it was second in 2018 at 52 percent. So what does this mostly unchanged level of concern tell us? I speak with treasury and finance executives on a daily basis, and all of them remain vigilant about hackers and cyber breaches. After all, they are in charge of sensitive customer financial data—not to mention the organization’s money.
However, while cybersecurity risk remains the second biggest concern, the nature of cybersecurity appears to be changing. Last year, treasury and finance professionals worried about preventing breaches. Now, hacks are so common that they focus almost as much on how to respond in the event one occurs. Likewise, the profession worried about phishing a few years ago. Today, treasury and finance professionals worry about increasingly sophisticated criminals pretending to be the treasurer or CFO and stealing company funds via phony email requests.
Because risks cannot be managed solely in their department, treasury and finance professionals need to become strong business partners to management and business units.
A New No. 3: Financial Risk
This year financial risk (39 percent) replaces political risk (34 percent) in the top three. What’s most troubling about this rising concern is that our survey was conducted in October 2018, two months before markets plummeted. Perhaps the 2019 survey was a canary in a coal mine. Treasury and finance professionals say financial risks in the form of uncertainty over credit, liquidity, interest rates and foreign currency are on the rise due to bulging corporate debt loads and trade wars. And they are less worried about political risk now that corporate tax reform was signed into law.
The Common Denominator: Fintech
If there is a common theme to all the risks as well as the staffing levels, it can be summarized in one word: technology.
New technologies like artificial intelligence, blockchain, robotic process automation and faster payments initiatives promise to transform treasury and finance. Used proactively, new technology can liberate staff to focus more on strategic matters and less on rote tasks. But if treasury and finance professionals ignore fintech, they could find themselves at a competitive disadvantage.
While fintech is on the minds of everyone in treasury and finance, only 34 percent of respondents said they anticipate using nontraditional vendors, which include startup fintech firms among others. It remains to be seen if treasury and finance professionals are patiently waiting for more proof of fintech’s applicability and profitability or if they are simply being stubborn.
Staffing Is Static
The top risks identified are not coming out of the blue. And treasury and finance professionals don’t consider these risks as so dire that more full-time staff are needed to fight them. Treasury department staff levels are projected to remain virtually unchanged over the next three years. The median level of staffing is six full-time treasury employees. In three years, the median is expected to remain unchanged at six, while average treasury FTEs will grow to 15.59 from 14.75.
But because these risks do not originate and cannot be managed solely in their department, treasury and finance professionals need to become strong business partners to management and business units more than ever.
Their skills will need to evolve to address these risks and incorporate new technology if they are to remain relevant and effective in the future.