Treasury departments have always operated at the crossroads of risk management and strategic growth, but recent years have tested their resilience like never before. From navigating the uncertainties of COVID-19 to adapting to the rapid shift to high interest rates, treasury professionals have faced a tumultuous economic landscape.

Today’s changing political environment and fluctuating economic conditions increase the pressure to adapt and future-proof treasury operations. In fact, resilience has become a defining theme for treasury.

As we look ahead, it's imperative to explore how treasury leaders can evolve their departments to meet both immediate challenges and long-term priorities. In a companion webinar to the AFP Executive Guide: What Does the Future Look Like for Treasury?, underwritten by Wells Fargo, three treasury experts discussed factors affecting the future of treasury, from advancements in AI and real-time commerce to broader macroeconomic forces.

Transitioning to real-time treasury

The transition to real-time treasury is a significant macro trend, improving cash forecasting, liquidity management and operational efficiency. Automation helps treasury teams shift their focus from manual processes to strategic, value-added activities. However, the adoption process requires clarity on where these technologies fit into the broader payment system.

“It's really important to look at all of these new tools and solutions that are available to our clients through banks and also through non-bank providers,” said Tim Faley, Executive Director of Working Capital Solutions for Wells Fargo. “There are a lot of tools that facilitate real-time data gathering, whether it's APIs or other methods, that are going to help inform better cash forecasting and really have a big impact on the day-to-day life of a treasurer.”

The first step, according to Faley, is to have a clear data strategy. Then you need to focus on the technology available, figuring out what makes sense for your organization to adopt in order to leverage the data correctly. “It’s really easy to get bogged down in all of this new data that's coming in, and if there's no strategy in place beforehand, it could create an overload of activity and information without any real clear path to what's happening,” he said.

AI in treasury applications

AI is recognized as a key tool for analyzing large data sets, which offers treasury capabilities such as identifying trends in payment behaviors, spotting seasonal cash flow patterns, and providing more accurate and timely forecasts. “These are areas where AI can really help,” said Safeer Mirza, Assistant Treasurer of Tyson Foods.

“The availability of more rich data is going to enable better forecasting, which, for the majority of participants [more than 50% in the webinar], is a priority area for applying AI,” said Tom Hunt, CTP, Director of Treasury Services for AFP.

The potential of AI also extends to automating complex tasks such as FX hedging. However, Mirza pointed out that this future scenario depends on the development of trust and validation processes for AI-driven decision-making. "I imagine that for a large multinational organization, AI could go ahead and make the trade without human intervention once we get comfortable,” he said.

Speaking of trust, the experts agreed that AI offers transformative potential in fraud detection as well. It could help treasurers identify irregularities and unusual patterns in payment or receivable data, which could significantly reduce fraudulent activities and errors. “Any tool that can protect against [cyber] risk would be a big step up,” said Mirza.

For all the possibilities AI offers treasury, the absence of clear AI privacy and usage regulations in the U.S. complicates its adoption. Treasury professionals, often acting as risk managers, are cautious about deploying AI systems without a clear understanding of data privacy and ownership.

"There isn't one [AI privacy rule] at the federal level,” said Hunt. “Europe has one that a lot of states are looking at as a starting place."

Balancing efficiency with risk management

Treasury’s risk-averse nature creates hesitancy in adopting real-time payments, particularly when it comes to concerns about error management and compliance. Errors in high-value transactions can be costly, so it’s essential to ensure your organization’s risk management processes are strong. While this cautious approach slows adoption, it’s vital for safeguarding operations.

“Treasury is risk-averse, so the adoption of any processes where money is being sent out will take longer for people to get comfortable with,” said Mirza.

AI and other technological innovations can significantly enhance treasury operations; however, they need to align with the risk management mindset. Organizations should focus on reducing errors and streamlining processes while ensuring that new technologies do not expose them to unacceptable levels of risk — striking this balance is key to sustainable adoption. 

Before adopting new technologies, treasury teams need to assess the potential risks and benefits, including the challenges of quantifying intangible advantages like improved information accuracy. “You have to do a cost-benefit analysis,” said Mirza. “How do you quantify the dollar value of better and more timely information? You need to address the unknowns and risks around adoption.”

For example, “If you're using more technology, are you opening yourself up to more cyber risk?” said Hunt. The adoption of these advanced technologies creates new entry points for cyber threats, such as data breaches, ransomware or fraudulent transactions.

That said, there is no standardized method for measuring and understanding cyber risks, particularly in financial operations. Mirza underscored the importance of developing tools or metrics that allow organizations to assess their exposure and strengthen their defenses.

Having proactive discussions with your organization’s insurance brokers and legal teams when implementing new technology is encouraged. These discussions should address gaps in existing policies and determine whether additional coverage is necessary to protect against cyber threats. “Ask them, ‘We're thinking about using AI. What do we need to consider? Do we beef up our insurance? How do we protect ourselves internally?’” said Hunt.

Talent development in treasury

Developing the new generation of treasury talent requires a multifaceted approach, including mentorship, rotational assignments, and technical and leadership training. Mirza emphasized the importance of proactive career development planning, where team members outline their aspirations and identify skill gaps.

“Treasury leaders have to assume they are custodians of financial talent,” he said. “It's part of their responsibility to develop and progress their teams.” Such an approach helps build a versatile and resilient treasury team that’s ready to tackle future challenges. 

“The proactive approach to training and education is a pendulum a lot of times because, depending on when economic cycles go from boom to bust, it's usually training and education that get cut first if they go into a difficult cycle,” said Hunt. “I always tell people, stay curious.”

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