Treasurers need for visibility, optimised working capital and control over enterprise liquidity has never been greater thanks to the pandemic and ongoing market volatility resulting from the war in Ukraine. The double whammy is, according to cloud-based finance and IT solutions provider Kyriba, driving unprecedented demand from companies for novel solutions that exploit data and real time operations.
Bob Stark, Kyriba’s global head of market strategy, says treasurers are currently highly sensitive to the exposure of their balance sheets and net income statements to factors such as interest rates and FX.
“The vulnerability of their financial statements and their business to macro-economic driven factors remains an issue, just as it was six months ago and a year ago. It has heightened the need for more intentional – and I stress the word intentional – liquidity and working capital strategies,” he says.
Improving the reliability of liquidity forecasting and more efficient execution of payables and receivables programmes to generate greater control over liquidity are some of the measures corporates are heavily focused on.
With market and operational instability highly unlikely to abate any time soon, Stark says CFOs and treasurers need to be much more precise with their cash visibility and liquidity management, which requires harnessing data to gain more insight to drive better action.
“How to better leverage data is one of the biggest concerns we are seeing amongst corporates,” he says. “They understand that in an uncertain, unpredictable operating environment, it is the most powerful means by which they can gain better visibility and help ensure, for example, that the cost of liquidity isn’t something that affects their ability to grow.”
The live treasury
Alex Lheritier, global head of working capital solutions at Kyriba, points out that even as little as two years ago, having 100% daily cash visibility was a challenge for many organisations. The pandemic altered expectations, however, with consolidated bank reporting and cash forecasts at the end of each day no longer sufficient.
“Suddenly such approaches became invalid or irrelevant”, says Lheritier. “Many CFOs came to us and said they wanted to know what was going on with their account right now, this second. And that’s a massive change and it’s why there is now so much talk of the ‘live treasury’ and ‘live reporting’ – these concepts aren’t new but the intensity of demand for them now is.”
But even the live treasury, as currently envisaged or actioned by corporates and banks, tends to have limitations, operating around the clock but still broadly operating on a conventional Monday to Friday night schedule.
Such limitations are being exposed by the rise of digital currencies, whether they be crypto or central bank offerings, as they operate on truly 24/7 markets, according to Lheritier.
“They are demanding that we take the concept of the live treasury one step further. Firms may potentially have transactions coming in and out of their accounts 24/7 but unlikely to have a team operating 24/7 to oversee them, which means the processes they have been relying on are partially unfit,” he says. “This is where technology, particularly machine learning and artificial intelligence, is becoming more and more important.”
The extraordinary extent to which financial data is now being captured, managed and analysed is accurately reflected by volume of data channelled into Kyriba by clients today. It currently totals a mammoth 24 terabytes, with the company having experienced exponential growth in that data volume over the past two to three years.
A lot of this data is fed into Kyriba’s machine learning and AI solutions and is employed to directly benefit clients, for example in cash flow forecasting.
“Using the data, we can leverage the trends we’re seeing across sectors across geographies, further refine our algorithms, and be able to say to clients, this is what we’re seeing happening, and this is where we see your treasury standing from a liquidity perspective over a specific time period,” says Lheritier. “That analysis is provided to them with a clearly defined degree of confidence, which is critical as a 25% chance of being mistaken is not the same as 5% – helping clients set their level of tolerance is part of our job.”
There’s an app for that
Stark and Lheritier have great hopes for the benefits that will flow in the coming years from Application Programming Interfaces (APIs). As the invisible plumbing that supports open banking by enabling data to be transmitted securely, APIs promise to provide treasurers with a new level of speed, control, versatility, and visibility. They can generate increased levels of automation and efficiencies by enabling a seamless connection between treasury management systems and services provided by banks. Benefits include real time visibility over cash and liquidity positions and inter-company load positions across geographies; faster payments and matching and reconciliation; and a sharp reduction in errors than can result from manual processes.
Stark says there has been a sharp uptick in the acceptance of open platforms and APIs right across the financial space in recent years and that the last couple of years have only accelerated it.
“APIs enable a whole new level of connectivity between a firm and its banks across multiple markets, currencies and regions, and between head offices and local subsidiaries, with treasurers able to access all the information they need in real time, 24/7,” he says. “They are about far more than just bank connectivity though. They can give companies an edge in exploiting new and emerging opportunities across markets quickly.”
While it’s still relatively early days in companies, and their treasurers, fully exploiting APIs, their interest is palpable: Kyriba alone is working with more than 200 organisations in developing and implementing API solutions, including financial institutions, ERPs, system integrators, data services, and software providers. Stark says an API network offers paths to market for fintechs and introduces new functionality to treasurers that they may not otherwise benefit from.
With acceptance of open platforms across corporates and the financial service industry growing fast, Stark and Lheritier also foresee a bright future for the development of “apps” to support the API ecosystem. Such apps, the enterprise equivalents of their retail counterparts in the Apple App Store or Android app market, have discrete functions such as for sanctions screening, KYC, AML, bank account validation, market rates, compliance, and trading. Kyriba continues to invest in the development of new apps, often in partnership with fintechs.
Lheritier sees the concept of “plug and play” in API apps has the potential to have a positive impact on corporate resilience, noting how CFOs and treasurers typically rely on many kinds of software packages – dozens in the case of global multinationals.
However, these packages can be challenging and costly to both integrate and, once fully integrated, remove. Lheritier envisages that one of the big advantages of open enterprise platform apps would be the ease with which they can be unplugged and replaced, as is possible with apps on our mobile device.
“That is so much more convenient and customer friendly,” he says. “It would also avoid major upheavals in data collection, management and analysis, ultimately supporting a company’s ability to tolerate, overcome and be strengthened by adverse events and experiences.”