Supercharger: how to build a digital treasury

Published: Sep 2018

With the concept of ‘digitisation’ now firmly embedded in the consciousness of the treasury community, the time for action is now. But there is so much more to building a successful digital future than simply implementing new technologies.

Karin Flinspach

Regional Head of Transaction Banking, Europe

Victor Penna

Head of Cash Management, Europe and Americas

Talk of technology and digitisation in treasury is hard to escape. Whilst it is enhancing treasury operations in some leading treasuries, it could be doing so for many more.

For this to happen, sooner rather than later, the talk must turn to action. For Victor Penna, Head of Cash Management, Europe and Americas, Standard Chartered, a good place to start the journey is to build an image of what their treasury will need to look like in five or ten years. Not just building a more efficient and sophisticated treasury but fundamentally to respond to the needs of the whole enterprise.

“If you have a vision of being able to operate treasury around the clock, using real-time information, then certain building blocks will be needed,” he says. “Operating in the cloud becomes essential, treasury technology needs to be upgraded to operate in real-time, software needs to be able to connect via APIs, and thoughts really should be turning to automation and AI.”

With traditional treasury technologies, such as the TMS and ERP, evolving along these lines, forward-looking treasurers should be going on a similar journey, seeking the features and functionality that ease integration, automation and real-time processing.

Treasury will need to create a ‘roadmap’ to complement that vision; it needs to be able to benchmark new technologies against it, questioning each time if it is fit for future purpose.

Business context

In developing treasury’s digital future, the key is to frame it within the wider context of the enterprise, says Karin Flinspach, Regional Head of Transaction Banking, Europe, Standard Chartered.

The precise nature of the vision and roadmap is dependent on the business model and the degree to which treasury sees itself as an enabler within that model, she says. A consumer-led business, may decide to digitise its sales channels, for example selling directly to consumers online. As a result treasurers then need to decide how treasury evolves to support the rest of the business and its customers.

It should be understood that whilst there are many treasury-specific processes that can be aided by automation – from managing FX trading and cross-currency flows, to handling payment factory processes – there are many more beyond treasury that can also benefit.

The huge growth in B2B e-commerce and its supporting channels and infrastructure, is a case in point. “The reality here is that business is forging ahead of treasury, changing the way it operates with customers and its own supply chains to a more direct model,” notes Penna.

Becoming an enabler

For treasury to become a true business enabler, it requires a broad understanding of market activities and trends to value add in these discussions. Treasury needs a firm grasp of the evolving operational models and financial support processes deployed by the wider business, such as online instant payments for example, to respond to these scenarios.

“If treasury is trying to help the business change, it means not only re-working its own platforms and processes, but also its skills and capabilities need to change,” says Penna. “It’s now about process re-engineering, understanding different real-time systems and platforms and how they operate, and how these shifts impact core elements such as working capital, payments, funding and liquidity.”

For most treasuries to grasp the possibilities of tools such as APIs, AI and blockchain, it is important to invest in the development of existing staff or bring in new people with different skills sets. The hiring of a software engineer or data scientist within treasury is not unheard of. “You don’t have to commit to a complete change overnight,” says Penna, “you just have to commit to investing in some new capabilities and knowledge, evolving as you go along”.

Experiment to progress

Indeed, where treasury feels it is perhaps too soon to invest in the future state vision now, experimentation is the key, says Penna. “The cost of technology is falling so companies don’t necessarily need to make a huge investment to learn about tools such as robotic process automation, data analytics and visualisation or artificial intelligence.”

Experiments can start by applying some of the basic offerings to select treasury processes; there is no need to reconfigure the entire operation. “Just start the journey and keep building those capabilities and skillsets,” he adds.

Consider relatively simple software to manage bank account mandate reviews, for example. By enabling comparison between the latest HR records and the bank account signatory database, such a system can detect leavers, and then generate and send necessary instructions to banks on signatory changes, removing manual effort altogether.

Slightly more involved is the automation of low-value FX deals. This uses a portal enabling different entities to enter their requests which are subsequently automatically aggregated at the treasury level, pushed through to the dealing platform and executed at best price, within the limits or risk tolerances set in the risk management policy.

Wider vision

“The challenge for treasurers is to manage the enormous amount of change which is happening in the market,” notes Flinspach. Payment systems in particular are undergoing a huge revision, with new channels and real-time options a reality for many, notably in the consumer space.

But as payments channels are restructured and businesses begin experimenting with new ways of collecting – through virtual accounts, instant payments, or mobile wallets, for example – treasury thoughts should also be turning to leveraging complementary mechanisms being developed by banks, such as payment gateways.

Of course, the impact on sales of new payments and collections technologies, and concepts such as big data and behavioural analytics, is only half of the story. The same progress imperative exists on the supply chain side, notes Flinspach.

She believes that companies, under the guidance of treasury, should at least be exploring the range of technologies on this side, from bank and third-party trade platforms to front-line supply chain tools such as location-emitting chips capable of tracking goods and automating working capital financing at different points of the supply chain.

Supercharging treasury

Nothing will change without action and, says Penna, “if you do nothing else you must understand what’s going on in the market”. He warns that if the treasurer does not understand the need for progress, “business units will approach banks and technology vendors directly and will structure their own solutions; they can’t wait”.

Within ten years, traditional treasurers won’t necessarily exist; they will need to have a broader skillset, cautions Penna. His notion of the “supercharged treasury”, where backgrounds in technology and consulting are becoming additional requirements, should be taken seriously if the role is to remain relevant.

To help treasurers attain the status of being a value-adding partner to the whole business, ‘The future of the digital treasury’ workshops have been developed by Standard Chartered. If necessary, these can lead to further engagement where the bank – which, like all progressive institutions, is on its own process of digital discovery and development – helps define and build a client’s unique vision. Of course, the treasurer needs to take that first step sometime; now seems like a good time to start.

The digital treasurer

We believe the following mega trends will transform the way treasury operates:

How to start building a vision

To help build a digital roadmap, stay flexible but in your approach consider the following:

  • Identify four to five key areas for improvement or to support new business development.
  • Develop human skillsets and capabilities required to deliver these.
  • Identify potential technology needed to support the above.
  • Develop rough timelines and deliverables.
  • Experiment and deliver.

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