EuroFinance

EuroFinance International Treasury Management was a dynamic gathering that fostered valuable networking opportunities among treasurers from around the globe. Attendees engaged in insightful discussions and shared best practices, making it a hub for knowledge exchange and lively debate. Here are five key takeaways that highlight the trends and strategies shaping the future of treasury.

1. AI will change everything, but not yet

Everyone was talking about artificial intelligence (AI) and specifically, the power and potential of AI to transform processes within treasury. Yet there aren’t many specific AI use cases in treasury right now—although many treasurers are experimenting with the possibilities. The main application of AI is focussed on cash forecasting and the predictive analytical capabilities of AI to learn from historical data in order to predict future cash flows. Some delegates said that the potential for increase in accuracy is significant, potentially saving the companies millions of dollars in working capital loans, through more accurate cash flow forecasts. 

Many treasurers are searching for insights into how to best apply AI to help automate tasks, especially in back office processing. Many were keen to understand more about AI skills including prompt engineering, python scripts, and data security within treasury systems. Data management for treasury in particular is a key focus, with treasurers experimenting with AI tools to bring ever more accurate visual reporting to the CFO. We hope to uncover more practical AI use cases when we revisit these technologies next year in Budapest.

During a poll conducted at the conference, the majority of respondents expressed that they would most like to see more AI solutions in real-time cash flow forecasting and liquidity management. This was followed by a strong interest in automated fraud detection and prevention. The results reflect a growing demand for AI to enhance cash flow forecasting, a crucial business function, while also bolstering the security of their systems and data against fraud.

Technological innovation, with a focus on AI’s transformative potential, was a central theme. The discussions emphasised AI’s potential to transform processes and improve decision-making in critical sectors. Speakers highlighted the necessity of developing customised compliance frameworks that safeguard interests while encouraging innovation.

Going forward, a key question persists: how can we leverage this transformative power to foster a more efficient and transparent treasury environment?

2. Rates and markets are uncertain 

The uncertain rate environment was on the minds of many treasurers. Everyone is expecting interest rates to continue to fall in the US and Europe, just how fast and how far, the ‘goldilocks zone’, is still unknown. In anticipation of rate reductions, treasurers are looking at their capital structures; they’re looking at loans coming to maturity, at revolving finance facilities and their working capital ratios, and at their liquidity provision and reviewing their funding partners. 

The significance of the decline in rates cannot be underestimated; there are trillions of dollars worth of debt coming to maturity in 2025, and many treasurers will be looking to refinance loans, which have been taken out at historically low rates, at now higher rates. Treasurers are also very keen to preserve or improve their credit ratings, and so are looking carefully at the group capital structures and at funding for subsidiary entities. 

Everything is on the table; equity and rights issues, share buy-backs, divestment, private equity, to reduce corporate debt where possible. The flip side for changing rates is cash investments where many treasurers are looking to optimise yields in the new rate environment.

During the poll at the conference, 77% of participants indicated that they expect interest rates to continue declining in the first quarter of 2025.

Liquidity risk is considered one of the most critical financial risks for a company, with 42% of participants agreeing during the polls that it directly impacts the ability to meet short-term obligations. The liquidity of a company is closely tied to future interest rate movements, which can affect cash flows, borrowing costs, and overall financial stability. 

3. Geopolitics will disrupt and fragment trade

Actually, geopolitics is the top concern of treasurers in the EuroFinance global treasury survey, where some 60 percent of treasurers cited the issue. The keynote talk from the ex-prime minister of Denmark, Helle Thorning-Schmidt, encapsulated much of what treasurers are worried about. De-globalisation and the fragmentation of global markets, the bifurcation of trade, finance and technologies, between US and China, with Europe in an uncompetitive position in between, and the destabilisation of post cold war peace, with wars in Russia and Ukraine and the Middle East. 

With the US election looming and potential for a rise in import tariffs, treasurers might yet see inflation rise again in some markets. Attacks on shipping in the red sea, continues to drive up the cost of freight and supply chain insecurity, leading to on-shoring of manufacturing and a rise in political nationalism, especially in the US. 

Thorning-Schmidt discussed probable geopolitical scenarios including the possibility of China’s invasion of Taiwan after 2027, and that the US semiconductor industry was gearing up to meet demand. The conference was left with little doubt that global markets will be disrupted if not changed significantly in the decade ahead.

4. Cash is still king

There was some discussion about the changing financial architecture, especially in connection with CBDCs (Central bank digital currency) and stablecoins, tokens and digital wallets, new payment modalities including real time payments—although there was next to no mention of crypto, (as if FTX had made that topic taboo)—but what treasurers really wanted to talk about was good old cash. 

Cash management is still top of mind for treasurers and the conference covered every angle, from optimal cash pooling structures and cash concentration, intercompany netting arrangements, bank account management and cash sweeping, and how to manage trapped cash scenarios, as well as FX management, automation and hedging. 

Treasurers also discussed the optimisation of the order to cash cycle, the DPO/DSO conversion, and the closely correlated receivables and payables financing programmes, including SCF, to optimise working capital ratios. Working capital has been in particularly sharp focus in the current rate environment, and even as rates ease, the management of balance sheet assets for liquidity remains a top focus, alongside improved forecasting.

During the polls, 91% of the participants agreed that treasury plays a crucial role in making cash investment decisions for the company. This underscores the significance of the treasury function in managing liquidity and optimising cash resources to support overall business objectives.

Key takeaways from the conference included the movement toward efficient and interoperable payment technologies and the evolution in infrastructure including digital currency. Blockchain technology was noted for its potential to enhance supply chain logistics, while smart contracts were recognised as mechanisms for facilitating more secure and efficient transactions.

The concept of cash as utility was discussed and highlighted a treasury truth: we all have an appreciation for cash and thrive on its efficient flow.

Half of the participants, or 50%, indicated that they would invest cash surpluses in money market funds, demonstrating a preference for investments with maturities of less than one year. This reflects a cautious approach to cash management, prioritising liquidity and short-term returns while minimising risk.

5. People matter most

Amid all the discussion on AI, economics, business change and treasury management, the people who make up the treasury operation, and how the composition of treasury personnel, with their unique blend of skills are changing to meet new challenges, was very much on the minds of treasury professionals in Copenhagen. 

Discussions on what the modern treasury team looks like now, in terms of the diversity of skills, culture and backgrounds required to make a successful treasury team, were on topic, as treasurers sought to scope and shape the treasury teams of the future. Core to these considerations are how technology will change the treasury functions, and the blend of technical and financial skills that treasurers will need to keep pace with the treasury of tomorrow. 

Consideration also, on how the treasury will be organised, in terms of what will remain in-house, what will be outsourced, and where people will work in remote and office scenarios. What seems true is that every company and treasury is different and there is no optimal model except that which works best in each unique situation. 

Join us for more at EuroFinance Budapest.