Byte marks: sinking treasury’s teeth into agile technology

Published: Nov 2017

The increasing pressure on all business functions to deliver more with less is not going away. What’s needed, argues Mark Evans, Managing Director, Transaction Banking, ANZ is a communicative, connected and agile business environment. For treasurers, this includes exploring new technologies.

Mark Evans

Mark Evans

Managing Director, Transaction Banking

There is absolutely no doubt, states Mark Evans, that over the past decade, the role of the treasurer has become more strategic. The role is no longer just about funding or managing short-dated risk as increasingly the treasury is relied upon to supply timely decision support for the board and C-suite’s long-term goals.

The need to optimise is one that all companies in all sectors would benefit from, says Evans. In particular, the larger publicly-listed companies, which are naturally subject to closer external scrutiny and the pressure of multiple reporting regimes, might experience heightened urgency to seek change. A different pressure to perform might also be seen by companies operating internationally; by virtue of their exposure to complex, multi-jurisdictional activities, they almost inevitably must focus on extracting maximum efficiency from their processes.

In treasury terms, progress to optimal status has in part been an extension of where the role has historically sought to achieve efficiencies. But as the wider business demands increase, moving beyond a pure accounting view of working capital efficiency, for example, risks missing the bigger picture, says Evans.

A helping hand

But in achieving that wider view, the treasury aim is not to run other functions but to have greater ability to influence how those functions achieve their goals, for the greater good. Through collaboration – including the appropriate deployment of technology – Evans believes there is more opportunity to drive enterprise-wide efficiencies. A sales department might benefit from lengthening trade terms but if this is not possible from a balance sheet perspective, the treasurer is in a position to assess the advantages of, and perhaps implement, a payables financing solution.

Over the years, the need for more treasury input at the corporate level has been a push-pull affair, with the business asking and treasury offering. Progress has been steady. But the speed at which global and domestic economies are changing, driven in part by technology’s enablement of more rapid processing, means business unit silos really should be a thing of the past, says Evans. “All good organisations have to collaborate to succeed.”

The C-suite increasingly understands that treasury has a broader role to play and is empowering treasurers with the right to engage with colleagues in other areas. But well-developed soft skills for all involved in seeking to optimise the business are critical here, Evans warns. “People are naturally protective of their roles and suspicious of those who seek to influence. But no one has all the information and all the ideas; the real need is to be able facilitate the sharing of opportunities.”

Softly spoken

To become the most agile, responsive and business-sensitive treasury, there must first be an acceptance that other functions may not necessarily welcome what could be seen as ‘interference’ from areas where there has been no previous engagement.

If success is absolutely dependent upon collaboration, then that must be derived from empathy for each other’s part in the business, says Evans. But he adds that it is also incumbent upon the treasurer to be upfront about the agenda of any proposed engagement, and why it is good for the business. “It helps to identify some quick wins with their colleagues so they can buy into the value-add that treasury can produce.”

For the treasurer, an “inquisitive mindset” is vital in helping bring about these quick wins. Taking an interest in the other functions will, says Evans, help create a learning curve that in turn delivers the capacity to identify pain points and where treasury can add value but to honestly assess where it has no facility to help.

The logical areas of development from where treasury can start building out an assistive role are commonly around automation and straight-through processing. In being able to harvest specific data to improve reconciliations on accounts receivables it could speed up the working capital and cash conversion cycles to the benefit of sales planning.

In managing multiple risks (credit, interest rate, country, currency et al), treasurers are uniquely placed to provide guidance to other functions on how to incorporate risk management into their own processes. Even something simple such as alerting sales to the possibilities of using different trading currencies, or advising on the commercial impact on buyers and suppliers of geopolitical risk, has value.

In the context of practical solutions, it may be that sales has willing buyers but the credit team places constraints on deals by putting on conservative limits. Extending credit terms through supplier finance or applying credit insurance to buyers are not traditional considerations for sales team, yet with treasury guidance on the options, sales volumes can be increased.

Keep it clean

One of the keys to success of any treasury optimisation plan will be the adoption of appropriate technology. Of course, treasury and technology are known associates but developments in the technology space in recent times seem to be ushering a new era of agility. With advances in APIs, robotics, artificial intelligence and distributed ledger tools (such as blockchain), progress can be rapid.

The overarching goal from the outset should be for clean data, explains Evans. This, he notes, “is what will unlock a lot of the currently constrained opportunities for the organisation”. APIs, used to connect third party systems through a variety of digital channels, will only be of worth if the underlying data is both accessible and sound.

The viewing of aggregated data from internal or external sources could be through an app or a bespoke dashboard, depending on the needs of the user. A departmental manager will already understand the impact of credit limits or the flow of receivables, for example.

With access to clean data of this nature, the treasurer will be able to overlay and configure relevant and possibly real-time external market, sector or client data, drawn through APIs to suitable third parties such as banking partners. This will start to bring a deeper and broader understanding of the fundamentals for each function, says Evans. With the application of modern business intelligence (BI) and analytics tools capable of processing multiple data sources, the level of information achievable today is unprecedented.

Outsource for expertise and advantage

This sounds like an expensive ideal rather than an achievable aim. With the outsourcing of some treasury activities to shared service centres or to cloud-based third-party service providers, treasury costs can be reduced, says Evans. Instead of having to build and maintain their own infrastructure, the operational element can be divested by treasury to professional providers whose expertise, developmental capacity and economies of scale in these areas could exceed those of treasury or in-house IT.

Where a provider works with a number of clients across sectors and jurisdictions, Evans says the accumulated knowledge allows each user to benefit from the insights and experiences of the other users whilst still respecting confidentiality. At a high level, this might be in terms of understanding and responding to emerging trends. Where these trends indicate a need for a system change across the board, the outsource provider can do so for all in a single iteration yet individual needs can still be met. Depending on sector, the early heads-up on trends provided by the vendor’s broader connection to the market could even be extended to its clients’ clients.

The new tools on the block

Few treasurers could have failed to note the recent increase in volume of conversation around robotic process automation (RPA), artificial intelligence (AI) and blockchain-type solutions. “These solutions will impact treasurers positively if they embrace them, or if they don’t they will impact them negatively,” warns Evans. “The technology is just getting better and better.”

RPA is focused on tackling high-volume repetitive processing. As a means to the end of straight-through processing, it is a means of reducing operational risk and increasing efficiency, explains Evans. “The technology is available, its application is clearly an efficiency driver and it is being embraced by corporates large and small,” he notes.

Looking at AI and the idea of machine learning is generating much more speculation and excitement. Where process repetition is a factor but decisions are not always black and white, judgement is required on every exception. Algorithms within RPA can adopt ‘fuzzy logic’ – the IT equivalent of a ‘maybe’ – so that decisions based on calculated probability can be made. As each decision is accepted, the basis of that decision can be formed into a rule for future action where similar conditions exist, further promoting automation.

Within ANZ, a number of fintech solutions are being explored in the trade finance environment. With some recent successes in this space, the accuracy rates of machine learning have risen from around 50% to over 90%. With some institutions now claiming over 98% accuracy “we’re getting at or beyond the levels achievable by humans,” says Evans.

The application of these tools is being deployed in areas such as document checking, reconciliations and the provision of customer advice and information. In this context, optical scanning and character recognition technology can be used to further automate data extraction prior to decisioning.

Fixing real issues

The exploration of further developments in this space is very much part of ANZ’s strategy. It has a dedicated in-house lab populated by engineers who fully understand the technology. Their skill is augmented by the Bank’s business units that are charged with bringing an understanding of the clients’ pain points, and thus commercial viability, to the IT concepts.

In taking on projects, it would be a mistake to work on a solution looking for a problem, says Evans. “First we must have an understanding of what the problem is that we are trying to resolve. We then have to work out what a good outcome looks like. Only then will we engage with the technologists and the operations experts to explore what options we should consider applying.”

One of the loudest conversations today is around blockchain as the great panacea. But the most appropriate solution for an issue, taking real client needs into consideration, may be as simple as moving them out of the branch and onto phone banking, says Evans. It could give a much better customer experience yet still reduce processing times and operational errors.

It would be a mistake too for a bank to doggedly pursue a technology roadmap that in some instances does not align with current client needs. “It cannot be a case of ‘our way or the highway’,” comments Evans. “We have to work hand-in-hand with our customers.” Indeed, he adds, progress through technology is not about banks investing in the latest and dragging customers with them. As Evans says, “we can’t do everything overnight and we have to respect that customers may not be able or want to either”.

In the spirit of collaboration – and in the spirit of finding solutions that really work – a key part of ANZ’s development strategy is to involve its customers in a collective discussion on how best to remove pain points and optimise the technology experience. The real benefit for customers here is that they stand to shape the solutions they need rather than explain how they should be developed after the fact. “It also demonstrates that we are listening to them,” adds Evans.

A business case for agility

The key activity-based metrics and KPIs (such as cycle times, treasury process costs, throughput and available liquidity) used by treasurers will remain as relevant going forward as they have always been, says Evans. However, the success of the treasury function across the business may not be reflected in these metrics.

If treasury is going to contribute to the success of the organisation, the way in which it has made an impact needs to be counted. It will be necessary to secure feedback from the functions that the treasurer has worked with in order to ascertain the level of value added as a result of that relationship. This may be tied in with a reduction in Days Sales Outstanding (DSO) or increased sales off the back of a working capital initiative. The bank itself may also be in a position to quantitively assess the value added by treasury to different functions through analysis of activity across different banking areas.

Get involved

More and better collaboration is the message for treasurers in the new technology landscape. Ensuring other functions understand the context and purpose of treasury involvement will encourage cooperation. But treasurers also need to exercise curiosity and learn about those parts of the business that may not traditionally be on their radar. Only then will they see the opportunities to add value that lie ahead.

“Engage with the financial services providers and ask what they are doing in the technology space too,” advises Evans. “Most will be more than happy to share their thinking around it and learn from the practitioners. A treasurer with a proactive and collaborative approach asking if they can work together on a problem is a signal that this issue could be affecting many more businesses.”

The end of treasury or a new beginning?

As the march of technology continues, will the treasurer eventually be automated out of existence? There may be no value in speculating what the treasury of 10 or 20 years’ time may look like, says Evans. But look back by that same period and who could have confidently stated the degree by which technology would have advanced by today and how it has helped treasurers reach a position of genuine strategic importance? It is, he adds, almost certain that the work of tomorrow’s treasurer will be intrinsically plugged into the company’s strategic roadmap, enabling them to continue to holding elevated positions within their organisations.

The role of the treasurer and the CFO will become more closely aligned, says Evans tentatively. It may be that the CIO function will also become more closely aligned with treasury, because technology will be deployed across the whole organisation for both external and internal benefit.

“Ultimately, if you think the job you do today will be the same in ten years’ time, you’re probably not going to be in that job,” cautions Evans. Today’s treasury professionals, including bankers, “have to be flexible, to anticipate and embrace change, and be responsive to the opportunities that those changes bring”. To avoid being bitten, agility, it seems is more than just having the latest toys.

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