Digital Innovation: The Changing Face of the Corporate Treasury
For the first time in years, the finance space is changing.
Factors including evolving customer behavior, rapid innovation in digital technology, burgeoning regulatory requirements and the macroeconomic environment are reshaping not only the banking industry but also, in a micro-context, the role of the CFO and finance departments across different sectors. One of the key drivers of this change is and will continue to be digital innovation and automation – the linking of disparate systems and software in such a way that they become self-acting or self-regulating.
Let us take the corporate treasurer, for example. The role of the corporate treasurer has typically been to manage an enterprise’s holdings with the overall goal of efficiently managing cash flow and mitigating operational and financial risk. However, the past few years has seen this role advance. Today, the treasurer has become an enterprise stakeholder with a far greater remit, involving the establishing of a strategy and the implementation of various procedures to guide the organisation to minimal risk and/or risk-free outcomes. Internal digital innovation in this function has in part made the advancement of this role possible and enabled positive business outcomes such as increased ROI and reduced costs.
So, what are the core drivers behind the internal innovation process and how are they taking effect?
Eliminating the need for manual intervention
Automating treasury functions by using a treasury management system (TMS) alongside industry standard gateways provide scope for greater efficiency in data exchange. Removing a corporate treasurer’s need to carry out basic functions such as data exchange and financial transactions between the enterprise and banks frees up their time to concentrate elsewhere in the business, perhaps on more strategic activities. When we take into account the heavily regulated macro-environment in which the treasurer operates, this freed up time becomes very beneficial, primarily so that the treasurer does not lose sight of strict regulations and has time to carry out effective forecasting. Use of APIs has also opened the door to further innovation by allowing treasurers to pull in real time data from multiple sources to enhance decision making, by increasing accuracy.
Not only does the corporate treasurer want to access data and information in real-time, they also want to be able to access this data from anywhere and everywhere. Thus, data mobility is a key driver behind increased business agility and competitive advantage. If mobile-enabled, treasurers have the ability to complete transactions, access reports and make decisions whilst on-the-go. Payments come in faster and time-sensitive transactions can be prioritised. And, despite the risks associated with mobile technology, developments in encryption technologies mean that security concerns are becoming increasingly abstract.
Unlocking the power of data
At a time when many companies are looking to reduce cost, data analytics can offer clear benefits in terms of reduced IT spend and improved decision-making for critical treasury functions. One area in particular where use of data analytics can be used to the benefit of the treasurer is cash flow forecasting. Data from banking partners, wider market trends and customer behavior can be combined in order to build up an accurate forecasting picture. Analysis of data can also be crucial to leverage negotiating power during meetings with banks. At a time when the face of the corporate treasurer is changing, making use of efficiency gains from data analytics can make the difference between “managing the business” (traditional treasurer responsibilities) and “running the business” as a key stakeholder.