Until fairly recently, the vast majority of corporate treasury departments were segmented and siloed off in order to promote regionalised activity. That’s changed dramatically over the course of the last decade thanks to regulatory convergence and huge leaps in fintech capabilities.
After all, while decentralisation does empower regional teams to utilise their local knowledge and action rapid responses to market-specific change, a decentralised treasury function also tends to lead to duplications of effort and fails to insulate large corporates against stagnating regional economic activity.
By contrast, centralisation allows for economies of scale, greater efficiencies and lower overheads. A central treasury function also offers the C-level a clear, bird’s eye view of a company’s overall cash positions and hands treasurers a fairly simple way in which to rationalise in-country cash management on a global scale.
Centralisation is definitely the way the industry is headed. According to CGI’s Transaction Banking Survey 2019, an overwhelming majority of corporate practitioners reported they’d centralised every key treasury function – yet as new regulatory requirements and improved tech functionality continue to call for and collect more and more information than ever before, the sheer magnitude of data volume has actually become a huge barrier.
Too much of a good thing
For a long time, treasurers have been calling out for more data to assist them in shoring up cash positions and unlocking new value. But now that increasingly centralised functions are calling upon a variety of tech and reporting solutions to feed that data back in tandem, treasurers and CFOs have run into quite a few serious hurdles that prevent them from harnessing the real power of all that data and making sense of it all.
Believe it or not, one of the greatest challenges treasurers are working to combat (particularly in developing markets) is low rates of digitalisation. Despite the apparent benefits that go hand-in-hand with centralisation, a large proportion of treasury departments are still struggling to carry out their increasingly wide remit as it relates to data in an effective way due to their respective organisations’ fragmented data and IT landscapes.
Although corporates are opting to reel more and more treasury functions like FX, cash pooling and supply chain finance in-house, a challenge those same organisations then face is the need to navigate multiple systems in order to get the data they actually need at an enterprise level.
This takes time, money and manpower – which often negates the supposedly streamlined efficiencies treasurers hope to gain by centralising. Use of multiple operating systems not only makes it difficult for practitioners to harness data quickly and effectively, but it also often leads to duplication of efforts like cash flow forecasting on multiple systems. Worse yet, different systems using different (and often outdated) legacy models tend to produce different forecasts at the same time, which can make reconciliation tasks a complete and utter nightmare.
Bearing that in mind, the bottom line is this: centralisation and the huge amounts of big data are only as effective as the TMS or ERP tools and processes an organisation has put into place in order to collect and utilise those data flows. Fortunately, there are plenty of viable pathways forward that treasurers can call upon in order to breach these gaps – and they all start with digital strategy development.
Strategy is key
Before treasurers are able to exploit multiple data streams and provide the C-level with the sort of valuable insights they’re so desperately craving, corporates must first develop and execute an enterprise-wide digital strategy that correctly identifies and focuses on data for what it truly is: an asset.
To unlock the true value of data, practitioners have got to eradicate the corporate mindset that data is simply a piece of information to be processed. According to research commissioned by Deutsche Bank, 46% of treasury professionals say their organisation’s digital strategy is not well-defined, indicating a large proportion of corporates have taken that first step towards developing a centralised data strategy but still have a way to go.
Simply put, firms need to get a firm grasp on where data is coming from, what it is, why it’s being collected and (most importantly) who needs that data – be it regulators, clients, compliance officers, sales, operations managers and so on – before they can ever hope to harness its potential.
Next, treasury must work with internal stakeholders to produce an enterprise-wide data governance protocol as part of its digitalisation strategy. This ensures that everyone operating within a treasury capacity is aware and disciplined concerning how data is fathered, scrubbed for quality and subsequently consolidated and submitted so that treasurers are able to identify patterns, recreate an event, forecast and create resourceful and credible narratives that can in turn guide decision-making.
From there, any and all journeys towards digitalisation and centralisation must carry on by aggregating raw data into one consolidated data pool – and more important still, this data pool has got to be pulled into a single, enterprise-wide TMS or ERP solution capable of segmenting, processing and understanding the information that’s coming in. Cloud computing is absolutely key to the effectiveness of such a solution, and so any treasurer wanting to harness the true power of big data would do well to make the case for a TMS deployed in the cloud.
Cloud-based TMS solutions offer teams a number of data benefits – namely, only cloud-based solutions are able to collect the volumes of data from both traditional and non-traditional sources that are actually required to leverage the tools like RPA, AI and machine learning which can streamline the data analysation process. According to PWC’s 2019 Global Treasury Benchmarking Survey, over a third of treasurers say the biggest roadblock their organisation faces in implementing a new enterprise-wide treasury management solution is the underlying presence of insufficient data or a lack of quality around data.
Cloud-based systems tend to offer both enhanced volume in terms of availability as well as higher quality.
Likewise, it’s also far easier for horizontal teams to connect with clients, partners and subsidiaries and report back to an otherwise centralised department in real-time using a cloud-connected TMS. Cloud-based tools ensure that all relevant team members have constant and direct access to the information they require (and are kept away from the information they don’t), which eliminates a huge degree of data collection, entry, security authentications and sources of human error.
That being said, even the most innovative cloud-based TMS or ERP solution will fall flat on its face without an effective and enterprise-wide digital strategy to guide and dictate its use. At the end of the day, a treasurer’s ability to harness the power of enterprise-wide data relies upon corporate-wide buy-in and adherence to a data-focused strategy that empowers a centralised treasury function with the ability to understand and control where data is coming from, how it’s structured and what it’s being used for.
Developing such a strategy is no small feat. Yet it’s undeniably any organisation’s first big step towards establishing a shift in corporate culture around centralisation and analytics. It also empowers practitioners to work alongside stakeholders to forge a digital-driven treasury that utilises big data to inform and guide bigger and better decisions within all levels of an organisation.