Corporate TreasuryHow Oracle is reimagining next generation corporate treasury

How Oracle is reimagining next generation corporate treasury

Corporate treasurers are under pressure to provide their boards with daily data on cashflows and liquidity. Oracle has addressed this challenge with a solution set, designed with the treasurers’ needs in mind

For many years the relationship between banks and corporates has come under the spotlight with the former looking to offer a wide range of automated transaction banking services.

Treasurers, meanwhile, have sought a more efficient way to access banking services – a need made all the greater by the pandemic, which demanded faster information on payments and collections, liquidity, cash flows and a host of other parameters to financially safeguard businesses.

“Across various industries, it is evident that the core theme for corporates and their treasurers today is how to stay resilient and have clear financial policy foundations. One area that emerged is the need to strengthen liquidity and maintain a constant eye on it – and this cannot be done on just a weekly or monthly basis,” says Karthick Prasad, vice-president, software development at Oracle.

“The pandemic was a wake-up call, and led to a focus on managing finances in the short- and medium-term. Treasurers now need a good view of all their interactions with the market and their banking partners on an ongoing basis so that they can support the business in its strategy.”

Anand Ramachandran, vice-president, solution consulting , global banking practice at Oracle, takes notes of the many challenges facing corporate treasury.

“At board level, the  near zero interest rate policy over last few years has been a major challenge and treasurers need to figure out a way in which they can deploy spare cash resources their companies have built up as war chest,” he says.

“Secondly, resilience has to be built into the supply chain. Treasurers have to ensure that suppliers are well funded so that their companies continue to receive the shipments they need as normal.”

The recent pandemic has also put the onus on corporates and their treasurers to focus on building controls and putting in appropriate rules to ensure they identify any internal gaps, adds Ramachandran.

Increased Digitisation

For many corporate treasurers, these goals can be achieved through increased digitisation of their operations. However, any move in this direction is not straightforward. In the first instance, treasurers must assess how much automation is needed and illustrate its business outcome and return on investment (ROI).

“When considering the digitisation process, a treasurer has to think about the problem he/she is trying to solve,  what is still being done manually and what can be automated,” says Prasad. “A bank cash management portal provides digitisation but the question that remains is what does the treasurer actually want to achieve and what will his/her bank actually enable him/her to do?”

This is particularly pertinent to the whole area of cash management.

“Treasurers must now have a complete overview from their bank services providers for cash & liquidity positions, payments due and accounts receivable,” continues Prasad.

“Digitisation helps treasurers to move away from looking at transactions in isolation, and see real time cash & liquidity positions, dynamic impact of all payments and collections throughout their entire lifecycles. It also helps them look at their entire company’s liquidity structure, and examine it from a historical trends perspective, thereby enabling them to do simulations, make appropriate changes and organise their liquidity better.”

He adds that increased digitisation also enables treasurers to quickly and easily set up new accounts for new business units as and when they are formed.

Potential of Virtual Accounts

To date, many treasurers have relied on their banking partners for traditional, online means of managing the services they need from payments and collections to cashflow forecasting and liquidity management. However, questions remain as to whether bank portal offerings can fulfil the expectations of treasurers amid such uncertain times.

Oracle has sought to address this with Next Gen Treasury Services, which facilitates greater automation on a range of services and encompasses Virtual Account Management (VAM).

“Bank-to-corporate connectivity is not yet that well organised,” says Parag Ekbote, head of business development at Oracle, noting that treasurers are usually oblivious to many of the tasks performed for them by their banking partners.

“As innovations drive ahead, corporate and transaction banking must also upgrade to enhance the end-user experience. Corporate banks need partners who can provide these collaborative solutions.” says Ekbote.

“Corporate treasury departments deal with segregated payments, which can be manged in a traditional way. However, we are seeing the rise of VAM solutions that can facilitate these payments and produce insights to help treasurers conduct analyses. A VAM solution can potentially solve for varied use cases including cash & liquidity visibility, reconciliation,  ‘on-behalf-of’ propositions and help treasurers understand any cash flow gaps.”

Oracle believes that its VAM offering goes further than most other solutions on the market by enabling banks to take their corporate clients into the new virtual world of managing transactions with a solution designed with treasurers own needs in mind.

Prasad explains how Oracle took account of corporate treasuries and the digital experience already being offered to them by their banks, while also looking inside corporate banks, their operations and their needs.

“A solution provider has to look back over the last two to three years and consider where the main challenges lie in both treasury and corporate banking,” he says, pointing out that Oracle has been doing this type of analysis for several years.

He explains that in designing the solution, Oracle took account of the main actor wanting the service and tailored a digitised solution to meet treasurers’ needs. It then considered the banking side, and what all the different actors are doing for each type of financial flow and what they themselves want.

“We built our solution in a consumable fashion, looking at things from the treasurers’ side and the banks’ side while also giving consideration to the fact that treasurers use different banks for different things,” he adds.

The end result is Oracle’s VAM solution, which takes treasury to a new level by providing treasurers with a variety of capabilities including Cash Visibility, Capital Clarity. Segregation and reconciliation of AR/AP and also enable Corporate Treasurers to realise untapped synergies/ efficiency at scale through “on-behalf of” structures for group companies payables, receivables & collections

“Corporates have full visibility into how their transactions are processed, and this helps them, ultimately, in their cash flow forecasting,” says Ramachandran.

Real-time Payments

Ramachandran points out that achieving real-time payments is also becoming critical as corporates move towards real-time treasury. This can have a big impact on commercial cash flows, enabling treasurers to operate a 24/7 treasury that can facilitate instant payment forecasts.

This is typical of Oracle’s VAM offering, which also enables automatic reconciliations, thereby improving treasurers visibility into cashflows and working capital. They can view how much additional cash is needed on a 24/7 basis and make decisions to move cash. This provides banks with opportunities to offer treasurers investment options for cash surpluses.

“Many banks are still working with legacy payment systems. The new ISO20022 standard, designed to support open standards for payments, is not going to work as effectively as it can with these legacy systems,” says Ramachandran.

Predictive analytics

A lot of focus is also now being placed on predictive analytics and its role in enhancing cashflow forecasting. Ekbote points out that available historic data can give an insight into what may happen in the future in terms of payables and/or receivables.

“Many treasurers now want information on past behaviour to help them understand what will happen in the future,” he says. “Historical patterns indicate inflows and outflows. For example, a treasurer can get a better idea of what will happen on a Black Friday by using predictive analytics – he/she can look at historical data to project what the inflows are likely to be.”

Oracle’s VAM solution is also designed to meet treasurers’ growing and changing needs. It is available as both an on-premises and Software-as-a-Service (SaaS) solution, with best-in-class security and access management.

Demand for cloud-based solutions is now growing at three times the pace of on-premises solutions, says Ramachandran. Banks and corporates need the flexibility to scale and descale VAM offerings according to their needs and also want future-proof solutions, which can be continuously enhanced by the solution provider.

“There are big benefits to the cloud, and one of the main ones is that in today’s environment, a business needs to move at the speed of commerce,” he says.

“All businesses are now selling online as well as offline and companies need the speed required to provide services as required to their own customers.”

Pick and Mix Offering

Oracle’s VAM solution also comes as part of its wider Next Gen Treasury services, which enables treasurers to pick and choose as much of the overall offering as they want.

“We have taken all factors relating to the players involved across a spectrum of bank to corporate services including cash management, liquidity management and also supply chain finance,” says Ramachandran.

“In the case of the latter, we have taken account of what the supplier is looking for and brought this together in one solution that delivers for banks as well as  corporates while addressing their suppliers needs.”

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