Denis O’Brien, Co-founder of Ceviant shares his thoughts on the economic outlook for treasurers in 2023 and highlights the key areas treasurers should consider to guarantee a successful year:
The economic outlook for treasurers in 2023 will be eventful; therefore most corporate leaders should focus on planning and preparation. Corporate FX strategies will be tested to new levels and the effects of increased market risk and economic volatility, and the changing role and responsibilities of the treasury department will have an impact on the sector.
It is now more crucial than ever that treasurers play an active role in assisting in the development of strategic plans as well as updating different liquidity and risk management rules and regulations to mitigate these challenges. Following my review of the sector and learning from 2022, here are five key areas treasurers should think about to ensure a successful year ahead.
Increased innovation and regulation
As 2023 progresses, we hope to see increased collaboration between banks and treasurers. Banks are critical partners for treasurers, and it is essential that both parties take an active role in developing the relationship.
Banks are natural partners for a mutually advantageous relationship in which fintech companies can provide banking products without being required to comply with banking regulatory standards. Banks benefit from these collaborations as well, with increased low-cost deposits and fee income.
In 2023, we expect to see the most demand from high-growth sectors such as energy and real estate. Real estate is excellent because of its predictable cashflow and lower volatility, which has many advantages over stocks, bonds, and mutual funds.
The energy sector, too, has high volumes of cash movement and a high need for foreign exchange, a critical issue facing corporate businesses and treasury departments in Nigeria. Through our services we can leverage digitisation and next-generation treasury technologies and tools to meet their FX needs.
Furthermore, the energy and infrastructure sectors emerged as the biggest targets for hackers and cyberattacks in 2017, accounting for one-third of all occurrences in 2017.
In Q2/3, there will be an increase in products and services that can protect treasuries from cyberattack. At Ceviant we will introduce a variety of products that corporate treasurers will find useful, particularly those relating to risk management through the use of government security and sovereign bonds.
For corporate treasurers, the pandemic and continued economic uncertainty have made the years 2020 to 2022 difficult and unpredictable. Companies entered 2022 hoping for a return to some semblance of business as usual due to improved economic conditions. However, multiple challenges stayed on the horizon for corporate treasurers, including rising inflation, energy prices, and additional concerns about global economic growth.
Central banks decided to raise interest rates to contain inflation, while increased foreign exchange volatility threatened to make risk management a major challenge for treasurers worldwide in 2022.
We will still face the challenges of a lack of foreign exchange, multiple taxes, and a lack of capacity in 2023 because none of these issues were resolved last year; however, despite the difficult environment, people will continue to trade. Economic activity will slowdown but will continue.
Increased digitalisation, open banking and API
One of the most significant trends in the treasury department last year was the rapid pace of digitalisation. It is expected that digitisation will significantly boost business models over the next three to five years, as it improves cashflow visibility and optimises liquidity across organisations.
It also improves efficiency and lowers costs through economies of scale, allowing for more effective risk management. With the emergence of open banking and the use of APIs, more treasurers will benefit from the ability to track transactions in real time.
Treasurers can gain complete visibility over the status of transactions by integrating this information directly into the treasury management system, resulting in a more dynamic and prudent approach to managing liquidity.
Recruiting and developing top talent has never been more critical for a thriving industry. With the world becoming more tech-focused, it is critical to inspire and train the next generation of talent and provide them with the resources and skills needed to succeed.
More investment in digital skills, as well as entrepreneurship and business skills training will be required to help them discover meaningful careers in the fintech space. This includes launching training programs, organising career fairs and facilitating guest lectures with veterans from the industry.
As we’ve left 2022 behind, we find that 2023 has begun with both high volatility and increased expectations for risk management.
As treasurers examine the environment and how to address it, it is critical to consider FX volatility management strategies as well as data and artificial intelligence, and faster and real-time treasury solutions.
As African markets continue to grow and experience rapid technological advancements, there is still much to be extracted.
About the writer:
Denis co-founded Ceviant along with Kehinde Dabiri, and Idris Alubankudi Saliu in 2014 to facilitate payments and simplify liquidity management for corporates. He oversees Ceviant Nigeria and is responsible for its business development, strategy and growth. Denis is focused on facilitating businesses with their treasury and payments requirements, both regionally and internationally. In 2005 Denis co-founded Vanso Nigeria Limited, a software and telecoms company delivering solutions throughout the financial services industry. Denis led Vanso until it was sold to Interswitch in 2016. Following the sale Denis became Deputy CEO of Interswitch and helped its Pan-African mobile strategy. In 2018 he co-founded SOLAD Powe Group an investment holding company and manager of decentralised energy grids across Nigeria. Denis is one of Africa’s leading digital entrepreneurs and has spent over 20 years working in the telecommunications and payments services sector.