The digital reinvention of corporate treasury

Corporate treasury

Prior to the global financial crisis of 2008, complacency in transparency was best reflected in treasury operations as Chief Financial Officers throughout the world brainstormed with bankers to roll out the most complicated financial products for their treasury operations. A decade later, the scenario has completely changed – and maybe for the better!

In 2019, Asian financial leaders are most concerned about their treasury operations being digital because it provides them with transparency, efficiency, cost-effectiveness and speed, according to a survey of close to 2,000 high ranking officials conducted across many countries in the continent including India by Greenwich Associates.

According to the survey, nearly 22 percent of Asian corporate treasury officials cited digitisation as a top priority in 2019 – nearly double the number one year ago. This clearly shows that digitisation of treasury operations has not only become a major goal for corporate treasury department across countries, it is also leapfrogging other priorities such as foreign exchange risk management.

“Digitization now ranks behind only core treasury functions like funding and liquidity management. Furthermore, digital capabilities are cited by nearly half of large corporate respondents as among the key selection criteria for their cash management provider(s),” the report stated.

But what does digitisation really entail?

For a corporate executive, digitisation can come in many forms and factors ranging from the Internet of Things to hardcore data analytics. However, the major forms of digitisation can be wrapped up in the following categories which are both interrelated and overlapping:

  1. Automation
  2. Digitisation of payments and receivables
  3. Seamless integration of information flows
  4. Data and insights

A broad overview of the scope and scale of each of these themes from a corporate treasury perspective is necessary to understand how the industry is changing.

Automation

Through technologies, manual input and interaction can be reduced as it saves time, lowers costs and otherwise makes their operations more efficient. Automation efforts are now embracing robotic process automation (RPA), artificial intelligence (AI) and machine learning (ML). Automation can help a treasury department in their daily interactions with the banks which have now become cumbersome with stronger anti-money laundering laws and know your customer guidelines in place, specifically in the Indian context.

In this light, automation efforts can help fill various and often duplicate copies of the same forms with lightning fast speed and accuracy thus taking away the burden of onboarding from the customer. Moreover, streamlining of these processes through digitisation is also leading to multicountry flows of information and data in different regulatory environments but there’s automation to manage what the human mind can’t.

Digitisation of payments and receivables

Even as India and other Asian countries have seen a leapfrog in offtake of digital retail payments by their customers, digitisation of payments among corporates still has a long way to go.

“Companies are interested in the benefits of digitizing payments and receivables, especially for the faster or eventually even instantaneous transactions times. However, the major challenge facing companies using banking payment options at this point is real-time reconciliation and settlement,” the report states.

AI and ML come in here and not only improve the process flows associated with settlement of large corporate accounts but also reduce the number of false positives/negatives which can reduce fraud significantly. Corporates are now looking at banks to offer a better interconnection which strengthens the interlock between real time payment solutions and bank-owned or third party platforms.

Seamless integration of information flows

At the same time, there’s a huge push among the corporates of the 21st century to not only digitise process flows but also make them more streamlined and scale for a multi-country, multi-platform experience in order to build dashboards which help with better management. At the heart of these new custom offerings are application programming interfaces (APIs) which act as information pipes between platforms and seamlessly facilitate the uninterrupted flow of information.

“ The goal is  achieving the long-held promise of straight-through processing. Regulators around the world are also creating enabling environments, like sandboxes, to spur innovation and competition by opening systems to new technology vendors. Facilitating the integration of systems and improving interconnections with banks will inevitably require more time and attention of CFOs and other senior treasury executives,” the report adds.

Data and insights

Data is the new oil could be a cliche in the information age where practically everything is fuelled by data and insights but the importance of high-performance analytics for the corporate treasury department has only just begun to come to the fore. The ally in this endeavour are banks which are in the process of integrating data analytics into workflows with the goal of closely aligning with their corporate clients. Tech-savvy banks are not only optimising treasury functions but also equipping client-facing personnel with insights that can be shared with clients to improve performance in various areas ranging from cash optimisation to liquidity management.

“In addition, the ability to aggregate data insights at both the company level and the broader industry level will help corporate treasurers better visualize key opportunities and challenges they are facing. Leading banks are actively curating and normalizing data sets to create insights that are hyper-customized analytics for key roles inside important clients,” the report states.

With all this going on in the digitisation space, the corporate treasury function is set for a reinvention and this time, it will be the efficiency of systems that will determine the future rather than the complexity of the banking products. In such a scenario, it becomes important for both corporates and banks to find the right partner and forge a partnership that relies on trust and compliance.

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