Three Ways to Meet the New Treasury Challenges
The lines between models of commerce, once distinct, are now blurring. As ‘digital first’ culture impacts nearly every industry, business models are being revolutionized. The need to become flexible and adaptable to consumer demand has taken center stage. But what does that mean for treasurers?
In the embedded payment era, corporate treasurers face a fresh challenge: managing other peoples’ money safely and effectively – whilst harnessing the benefits for their own business.
Traditional brick and mortar players are now following the ecommerce path – automating and digitizing the supply chain, and the way they distribute their products. Within this digital ecosystem, there is a wealth of data being shared with businesses, and with thoughtful consideration, the treasurer can become a critical growth engine within the evolving payments landscape.
1. Face new challenges
The challenge? To take advantage of new business models, businesses must now embrace new financial responsibilities unrelated to their own assets and liabilities. This is third party money (3PM), and it is a trend that is growing in uptake every day in both B2C and B2B businesses. The opportunity is for the treasurer to be at the heart of the model, steering activities at the enterprise level for maximum impact and this evolution is possible when corporate treasurers understand the business expansion plans of each line of business, so they can respond with underlying cash management solution. As different commercial arrangements often mean different obligations, there is no one size fits all, and this brings new challenges that they never had to face before.
2. Think differently
3PM represents an exciting new frontier for treasurers – but it’s a concept that can also feel fraught with uncertainty if you are new to it relative to your organization’s ambitions. Building-out a 3PM capability is so compelling because it allows businesses to better monetize their existing infrastructure and platforms and tap into the huge online market, but it also requires the treasurer to think differently. The time-honored role of a corporate treasurer (CT) is to take care of their company’s cash. They’re concerned with working capital as it pertains to their own businesses including addressing the funding, and deployment and risk management needs of the enterprise.
With the advent of modern technology and greater regulatory freedom, many corporations are discovering that embedding payments and financial services into their business can create stickier relationships and new revenue sources with buyers, suppliers, and employees. While engaging in financial transactions with these parties was commonplace, handling money or payment activities belonging to them has historically not been their concern.
A key learning is to ensure the dialogue for the right account structure is in place, with the right settlement processes, to service the ecommerce operating model.
The treasurer can’t be seen to be playing catch up. Treasurers can use the skills that are core to the role in order to be a strategic partner and make sure you have a place at the table. For this, treasurers need to adapt to an environment that includes safe-guarding, licensing, contractual considerations, local entity setup, more accounts, more currencies and cash handling that cannot be managed in the same way as corporate own cash i.e. for working capital or investing.
It is a journey, and one on which the treasurer should be front and center. Use the solutions at hand to advance your technology, but core to any overarching strategy is the understanding of the critical role treasurers can play in capitalizing on ecommerce opportunities. Navigating this new frontier can be an advantage for business growth and your own role within an organization. Take it!
ABOUT THE CONTRIBUTOR
is an Executive Director and Head of Global Liquidity Product Solutions Specialists, Asia Pacific for J.P. Morgan, who, through complex technical sales, develops and carries out strategies that enable corporates to optimize their working capital through treasury centralization and currency management.