FinTechAutomationDigitization and the role of the digital treasurer – part 2

Digitization and the role of the digital treasurer – part 2

Digitization also has the power to fundamentally reshape the way treasury operates and the services it can provide directly to the business. These can be grouped roughly into ‘process optimization’ versus ‘enablement’ of new capabilities and services

There are several opportunities where treasurers can use technology to support their respective business and while digitization can be a disruptor, there is a role the treasurer can play.

From an internal perspective, however, digitization also has the power to fundamentally reshape the way treasury operates and the services it can provide directly to the business. These can be grouped roughly into ‘process optimization’ versus ‘enablement’ of new capabilities and services.

 

Deploying technology to treasury processes

We can describe these capabilities and services collectively as the foundational technologies and characteristics of a digital treasury.

 

 

From a process optimization perspective, there are many examples of processes that could be improved within treasury including:

  • Automation of the end to end FX process by using Robotic Process Automation (RPA) software to aggregate FX hedging requests from business units, initiate a pricing request on an FX trading platform (such as 360T, FXall or Bloomberg’s FXGO), execute the trade within defined pricing limits and manage the confirmation and settlement processes
  • Deployment of RPA for many other repetitive processes such as checking account signatories against HR records, aggregating business unit forecasts, prioritising payments for execution in a payment factory, checking transactional volumes in a bank statement against recorded volumes in an ERP platform or Treasury Management System (TMS) to validate bank fees, monitoring market trends and initiating an alert or execution request when a market trigger level is reached
  • Use of behavioral forecasting tools that ‘learn’ to forecast better as they accumulate data on historical patterns of financial performance such as predicted versus actual revenue inflows for given products.
  • Application of big data techniques to a wider set of data within the business to better predict medium capital or liquidity requirements by recognizing relationships and patterns between different sets of business data. For example, looking at the relationship between revenue collection, inventory peak and valley over an extended time. This is particularly useful for businesses which experience seasonality variation in cash flow such as consumer electronics.

There are plenty of possibilities but the interesting question is how the same technology can be used to extend the remit of treasury into new areas and services. A few examples could include:

  • Performing deeper analytics on different business and product flows to advise on optimal liquidity buffer
  • Developing ‘plug and play’ settlement platforms and payment gateways for new online and app-based products
  • Developing advisory services on process automation and re-engineering to assist businesses develop more efficient processes or new products.

 

Where art thou digital treasurer?

The new digital landscape requires the treasurer to acquire new skills and master new areas of knowledge outside the current competencies of a traditional treasury function.

Whilst treasurers don’t need to magically transform themselves into ‘digital ninjas’ overnight, it does mean investing in the development of existing treasury staff or bringing in new staff with different skills sets to complement the often ‘finance heavy’ skills sets of most existing treasury teams. For example, should your next hire be a finance graduate or a data scientist?  A finance operations expert or process re-engineer? A treasury expert or a banking expert?

Experimentation is another way to acquire new skills sets and knowledge and one option can be deploying some low-cost data analysis tools or implementing RPA for low risk – but repetitive processes. As skills are developed and wins can be demonstrated, bolder projects can be attempted.

Likewise, regularly meeting with fintech firms and progressive banks like ourselves, committed to their own digital transformation, can expose treasury to new ideas and concepts, sparking the development your own ideas and initiatives.

Treasurers are by profession risk conscious and aim to achieve a right balance between cyber-security and innovation. At a recent Standard Chartered Treasury Leadership Forum, panel speakers unequivocally shared the view that bank performs the role of a trusted partner and advisor to provide professional and objective guidance to them during their journey of digitization.

They also highlighted the important role of the government in facilitating the creation of a transparent, fair and open ecosystem for the market participants. It is encouraging to see governments increasing bilateral collaboration such as the recent memorandum of understanding signed between Hong Kong Monetary Authority and the Monetary Authority of Singapore on joint efforts in the development of DLT, and taking more initiatives to encourage digitisation such as the Smart City Blueprint for Hong Kong and the Greater Bay Area Development Initiative that connects 66 million population within 11 cities in South China.

 

Building a digital roadmap

The key to starting the journey towards building a digital treasury is evaluating the areas that would most benefit from improvement and then carving out the time to do something about it. There doesn’t have to be a grand strategy, although a ‘digital roadmap’ which setsout some key objectives and milestones can be a useful way of anchoring day to day activities. and should ideally lay out the following:

  • Four to five key areas for improvement or to support new business development
  • Human skills set and capabilities required to deliver on these improvements
  • Potential technology needed to support above
  • Rough timelines and deliverables.

It is important not to over engineer the plan but rather take an ‘agile’ approach to learning, executing, learning from mistakes, and gradually building expertise in the key areas most relevant to your treasury and business.

 

Read part 1 of this article here.

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