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Treasury and Payments

Top Trends and Priorities Driving the Treasury Agenda in 2021

New macroeconomic trends are emerging at the start of 2021—defining a new way of doing business in an ever-changing landscape. Treasurers will serve an increasingly strategic role within their businesses and continue pushing digital transformation, as maturing technologies and evolving business models become the new normal. J.P. Morgan’s Global Market Management and Solutions teams in North America, Europe, Asia, and Latin America have identified six major trends that will impact businesses for the rest of the year, as well as the top five priorities for the corporate treasury in this dynamic landscape.


Six Trends Shaping the Landscape in 2021 and Beyond

Five Priorities for Treasury and Payments to Navigate the New Environment

Amidst uncertainty and crisis, the role of treasury and payment teams in supporting business objectives has been amplified. Across our client engagements, we’ve helped teams take advantage of the positive trends and mitigate the negative ones. Here are the top five priorities every corporate treasury department should consider this year:
 

Priority #1: Enable business model pivots

More than 60 percent of our clients globally cited business model pivots as the driver for their priorities this year.3 As they become must-haves for businesses to drive immediate and long-term growth, corporate treasury and payment teams need to join the journey and have a seat at the table.
 

Existing business models are predicted to gain more ground:

  • Recurring revenue models are expanding beyond the typical industries and into B2B.
  • Platform and ecosystem models are common in APAC and will likely now rise in NAMR and LATAM.
  • Direct-to-consumer (D2C) was a common “Band-Aid” solution, but many businesses look to make the pivot permanent.

With the explosion of e-commerce, two new models will likely rise in prominence:

  1. Contextual commerce is currently small but fast-growing, especially as consumers gain familiarity and use more of the various digital channels—such as social media, voice-enabled, IoT and so on.
  2. The sharing economy model will likely gain popularity in the emerging e-commerce economies to bring more goods and services online and, therefore, grow the e-commerce environment further. 
     
Priority #2: Strengthen your supply chain

With the continued disruption on supply chain, as the economy rebounds, it is critical to strengthen the resiliency of your supply chain. Doing so will likely help position your business to capture the opportunities as demand comes back. A few practical considerations for the short and long term:

  • Digitize your supply chain to help shift supply chain and trade processes away from paper, including using tools such as online bank platforms or industry tools.
     
  • Review solutions for supplier resiliency and ensure your treasury processes align to your objectives whether it’s prioritizing critical suppliers or ensuring alignment with your ESG goals.
     
  • Work together with procurement to analyze the full impact of supply chain sourcing and financing shifts. For instance, what are the FX risks associated with geopolitical pressures?

Priority #3: Optimize your working capital and liquidity management

With the environment in 2021 being ripe for M&As, with expected fluctuations in the economy and with supply chain disruption, having a good pulse on working capital and visibility to liquidity is important for resiliency. 
 

Priority #4: Accelerate your digital transformation

About 50 percent of our clients globally identified accelerating their digital transformation as a priority for 2021.3 This was expected given the holistic push for digital acceleration and because leaders across all levels of the organization—board, executives and treasury—are aligned on prioritizing digital transformation.

Many clients are focusing on eliminating manual legacy processes with automation, but also look to redesign the core business for fundamental, meaningful shifts. It’s crucial for treasury and payments to align with their peers’ digital transformation plans.
 

Priority #5: Increase your focus on ESG

Start on your journey today

ESG pillars are increasingly being incorporated into targets and objectives within organizations, even though it is still relatively early stage for treasury and payments. The corporate treasury can help support their organization’s ESG agenda through a broad set of treasury activities like payments strategy and execution, capital planning and allocation, working capital management, insurance purchasing, counterparty risk analysis, long-term investments, and long-term borrowing.

Other areas for corporate treasury to get involved include: (1) Making ESG-friendly investments (e.g. sustainability, green funds), (2) deploying ESG principles into supply chain management, (3) using sustainable financing and (4) incorporating ESG as an evaluating factor for counterparties.
 

As you and your teams dig deeper into their 2021 priorities, you may face a multitude of solutions, partnerships and strategies. As you evaluate how to evolve your business in the face of volatility, you don’t need to figure it out all at once or on your own. Connect with us, and we’ll help you find the right path forward for your business.

 

About the Authors:

Alison Livesey, Global Market Management

Varoon Mandhana and Sim Ung, APAC Solutions

Yousif Mohammed, EMEA Market Management

Lucia Li, NAMR Market Management

Dennis Paula, LATAM Solutions

 

1.J.P. Morgan Markets Report, Economic Outlook for 2021
2.McKinsey 2020
3.J.P. Morgan Proprietary Survey, based on the responses of 800+ clients

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