Disconnect between aspirations and action in treasury digitalisation

There is continued and growing interest from corporate treasuries to digitise their core functions.

According to a report on balancing digitalisation and risk management conducted by Citi, 57 percent of treasurers indicated they are looking at “transformative opportunities” for both core business and treasury functions, up from 49 percent in 2018.

Nearly three-quarters (74 percent) of treasures indicated they expect digital technologies will help drive efficiency within the function, while 70 percent believe it will improve decision making.

“Digital transformation is now a priority focus for most,” says Duncan Cole, director of the treasury advisory group at Citi. “There’s a shift in digital transformation priority across corporate Treasury.”

However, while there is growing appetite to invest and harness new technologies, there remains a disconnect between seeing the opportunities and taking advantage of them.

For example, data analytics/machine learning was ranked the biggest area of opportunity by three-quarter of treasurers, yet only 34 percent said it was an area being pursued.

Likewise, APIs saw interest from 41 percent but only 26 percent had projects underway.

“We see through the study that companies are expressing digitalisation aspirations, but they really do remain challenged by their legacy infrastructure,” says Stephen Randall, global head of liquidity management services at Citi.

“For most treasuries, what we’re seeing is that fundamentals need to be addressed first, to lay in the foundational data layers in order to realize the future aspirations around those digital objectives.”

A somewhat sizable number of respondents were still in the early stages of digitising the treasury function, with 19 percent reporting not having an ERP while nearly a third (32 percent) not utilising a TMS. Of those who do have an ERP/TMS, more than half said their technology did not support cash forecasting or financial risk management.

“Despite the availability of advanced cashflow and cash forecasting technologies, only 34 percent utilize statistical analysis from previous patterns to predict forward, says Randall. “80 percent remains reliant on Excel as a component of the tech stack supporting the forecasting.”

Although the majority of treasures do have an ERP/TMS solution, most have not fully integrated these solutions, leading to manual processes and interventions. Nearly four in five (79 percent) corporates reported they have not fully integrated their TMS/ERP with their banks.

“Because we’re seeing the platforms aren’t joined up, our treasuries aren’t able to be fully operationally efficient, they’re actually inefficient because of manual processes and many touch points,” says Randall.

To help address the disconnect, Citi categorised its clients through two indices – a digital treasury and a treasury diagnostics index. Nearly three-quarters of treasury departments fell into two categories, where the next steps were either: “strengthening fundamentals”, which included centralising function, establishing infrastructure and others, or “advancing data & digitalisation”, which involved removing repetitive manual processes and partnering with third parties to learn and experiment with new technology.

“The first step is for clients to really understand where they are, and where they are in that relative peer group to really understand their true needs,” Cole said.

“Once that’s understood clients can determine how to take the appropriate next step to move forward.”