Episode 2
Digitisation in a Post-COVID environment
Digitisation has been a theme for treasurers and finance managers for many years, but it became a higher priority during the pandemic, as the risks and limitations of manual processes and interactions between systems and counterparties became clear. Over recent months, we have seen an acceleration in treasurers’ digital adoption. Initially, the focus was to plug automation gaps. Today, however, treasurers and their systems vendors and banks, are taking a longer term, more strategic approach to digitisation, automation and data.
For the second episode of the Journeys to Treasury podcast, Helen Sanders, Director, Asymmetric Solutions speaks with (below, left to right):
Jan Dirk van Beusekom, Head of Strategic Marketing BNP Paribas Cash Management & Trade Finance;
Christian Mnich, VP, Head of Solution Management, Treasury and Working Capital Management, SAP; and
Damien McMahon, Partner, PwC.
Digitisation and automation
Digitisation and automation are often used interchangeably, but automation is just one element of digitisation, as Christian Mnich, SAP explains,
“Digitisation is often used as a synonym for automation: the transfer of manual processes onto systems. However, digitisation denotes the wider strategic orientation of the business, and how it is embraces digital transformation and disruptive technology to support new business models.”
Although treasury functions are different stages in their digital journeys, automation and wider digitisation objectives are key priorities, and treasurers are keen to build digital skills within their teams. The experiences of remote working during COVID-19 emphasised the value of digitisation and automation: while in many cases, they were a ‘nice to have’, digital, automated processes and data-driven decision support are now considered essential.
Currently, most treasury functions are at the automation stage of their digital journey, and have not yet reached the full digital transformation stage. Even so, treasurers have demonstrated considerable agility in leveraging new technologies to meet immediate priorities, such as payments processing, working capital and controls in line with C-level priorities. Damien McMahon, PwC comments,
“During the early stages of pandemic, bigger treasury management system projects were put on hold as treasurers focused on the immediate liquidity and operational demands of the business. A year ahead, processes and controls have been adapted to support remote working, so treasurers are now able to look ahead. In particular, they are keen to address the limitations of their treasury technology that became apparent during the pandemic – the patches, workarounds and outright holes – and are embarking on replacement, upgrade or reimplementation projects.”
Technology project priorities
As treasurers look ahead, they are using the lessons learned during the pandemic to help shape their digital priorities. Company boards demanded access to real-time visibility of liquidity and risk when economic and market volatility was at its height, which is now an essential requirement. Remote working and the heightened fraud and cybersecurity risks emphasised the importance of end-to-end automation and digitisation, as opposed to focusing on automation of individual processes. And as remote working becomes a more permanent part of future working models, a more strategic approach to business continuity planning is taking shape, with a focus on globally accessible systems, follow-the-sun treasury management and consistent processes and controls across treasury and finance centres.
Addressing the gaps
There remain areas of treasury digitisation and automation that are hard to achieve, but solutions and approaches are emerging to help overcome obstacles, including:
Digitisation of multi-stakeholder processes
Achieving a truly end-to-end digital workflow where collaboration between departments and counterparties is complex, particularly in a remote working environment. Opening a bank account, which should be straightforward task, is an example of this. Multiple departments are involved, including treasury, tax, legal, IT, accounting, accounts payable and accounts receivable, with processes and document verification and signature often taking place in parallel. Increasingly we are seeing new tools emerge to allow parallel processing and track interdependencies, accelerating complex, multi-stakeholder processes whilst maintaining control.
Systems integration
Taking an end-to-end view of liquidity and risk requires not just real-time access to treasury information, but also the ability to integrate this with banking data, and information from across the order-to-cash and purchase-to-pay cycles. Achieving this degree of connectivity can be challenging in practice, particularly between internal systems, which may hold different detail and format of data. Treasurers are increasingly using robotic process automation (RPA) as an alternative to manual rekeying between systems, and is therefore a useful ‘fix’ in advance of a more integrated technology strategy.
Cashflow forecasting
Cash flow forecasting has been a perennial challenge for treasurers, but timely, accurate data on which to base analysis of future cash flow was essential during the pandemic. In some cases, treasurers have found that a “top down” centrally managed approach to forecasting, using machine learning and data analytics is a valuable complement or even alternative to the conventional “bottom up” approach, i.e. collating forecast data from across the business. By adopting a ‘top down’ approach, it can be easier to model different liquidity management scenarios, and stress test potential strategies.
The role of banks
Treasurers and their system vendors cannot overcome these challenges alone, nor achieve their wider digitisation objectives. Banks also play a significant role, not least in the way that transactions and data are integrated with treasurers’ own systems. Exceptional connectivity, whether through web-based, host-to-host, SWIFT or increasingly API-based solutions are therefore essential. However, a bank’s role in treasurers’ digital strategy extends further than the point-to-point exchange of transactional data. Jan Dirk van Beusekom, Head of Strategic Marketing BNP Paribas Cash Management & Trade Finance comments,
“Looking at cash management, for example, we can use the wealth of cash flow information that we hold to deliver data-driven services, such as benchmarking of working capital KPIs. In addition, there is significant potential for banks to act as aggregators and co-ordinators of co-creation communities in areas such as payment services, KYC, onboarding, and cash flow forecasting.”
Evolving trends in treasury digitisation
Co-operation and co-creation to bring together the complementary assets, expertise and data of different players in the treasury community is likely to set the tone for future digital innovation. Christian Mnich, SAP notes,
“With the use of APIs, for example, there is significant potential to develop a platform-based model that brings together complementary service providers, such as banks, trading platforms, payment services providers and market data. Data-as-a-service will also become a reality in the near future.”
The success of these initiatives will depend also on the availability of data, and how this is extracted and transferred between systems. Damien McMahon, PwC emphasises,
“Data is key, and we are seeing an increased focus on building data lakes to hold large volumes of unstructured data. The challenge then is to how to you extract learnings from the data, such as using machine learning (ML) and artificial intelligence (AI).”
RPA will continue to play a role in this initially, but solutions based on rule-based automation, machine learning and artificial intelligence are also likely to become more important. These technologies are not a panacea, and some treasurers prefer rule-based automation over machine learning for some tasks to maintain visibility and auditability.
Treasurers are increasingly relying on digital solutions not only to automate processes and information gathering, but also to accelerate them. As we saw above with cash flow forecasting, one of the most common challenges today is that reports built from ‘bottom up’ are already outdated by the time they are produced. Consequently, we are likely to see more proactivity in reporting, such as use of real-time data with predictive analytics to build timely, actionable insights that enable treasurers to support the business more effectively.
In the next episode…
What does the past year show us about the future of treasury?
Given the growing role of digitisation, and treasurers’ increasing role in facilitating new business models, what might the future treasury look like? What skills will be required? And with more flexible working practices, what opportunities does remote working offer to access a global talent pool?