Not just tools: why treasury evolution needs innovation

As treasury shifts from reactive cash management to proactive strategy, skip the "innovation theatre" and evolve by solving real problems through business-wide collaboration, says Amit Kahana
 

Does your organisation know what your treasury function does? Like a lot of business finance, there are some common misconceptions that bury its true value. Colleagues might say: “It’s only relevant for bigger companies," or: “Treasury only moves cash around,” or: “It’s a fancy name for accounting,” the list goes on.

But as we know, the treasury function plays a more significant role than people think. It is an all-important function where cash flow intersects with risk management and strategic planning. And right now, it’s also in a transition phase.

A rapidly evolving landscape has added new complexities to spend management, putting treasury under pressure to evolve. And while innovation and advancing technology have ensured finance leaders aren’t short of options, this transition isn’t about shiny new tools – it’s about innovation.

FOMO isn’t a strategy

‘Innovation theatre’ is everywhere. Someone high up in the decision-making chain reads about AI, automation or blockchain, and suddenly there's a push to “do something with it”. Why? Because everyone else is. Plus, it looks good.

 ... by going big and implementing new systems – not just new tools – you’re opening the door wider to innovation  

Teams are put under pressure to use tools simply because they’re out there – with little consideration of strategy or even need.

But successful treasury transformations begin with solving problems, not the fear of missing out. Starting instead with the challenge might sound simple, but this approach ensures you find a solution that fits the problem - and you’re not trying to fit a square peg into a round hole.

So, here are some helpful starters when analysing where your treasury function struggles:

• What are the time-intensive manual processes pulling your team away from high-impact, strategic work?
• Where is real-time visibility missing – and where is it really needed?
• Are your current tools enabling foresight or are they restricted by hindsight?
• Are you making effective decisions with reliable, real-time data?
• How would you rate your risk management and scenario planning across the business’s finances?
• When it comes to your financial agility, are you leading the race or catching your breath?

The answers to these questions can help determine what you truly need from your treasury function. And the impact of this is that you’re liberating your team, not ticking off no- to low-impact issues in isolation. Plus, by going big and implementing new systems – not just new tools – you’re opening the door wider to innovation.

 This level of collaboration standard evolves treasury from something people don’t quite understand to something people interact with and have a stake in  

Collaboration sits at the heart of innovation

Historically, the treasury role was predominantly transactional meaning treasurers were more removed from the rest of the business. But today, they are very much a part of maintaining day-to-day financial health. This is why a collaborative approach is so vital: it brings them more into the fold, and across major deals, expansion plans and potential risks.

But there is another benefit too: it creates faster, context-rich feedback loops. This means that those teams touched by the changes that treasury makes can quickly share what's working and what’s not. 

This level of collaboration standard evolves treasury from something people don’t quite understand to something people interact with and have a stake in.

Principles to follow as you innovate

To further explore the need to evolve the treasury function, I spoke to David McHenry, head of product advisory and implementation, HSBC Innovation Banking UK. McHenry notes: “From mitigating security and counterparty risk to enhancing operational efficiency, the treasury function is in the midst of a major transition.”

He also believes this evolution should be defined by opportunity rather than challenge – driven by innovation and technology. As McHenry puts it: “Evolving the treasury function means transforming from being reactive cash managers into strategic, proactive business managers.”

With this in mind, below are some pointers from HSBC Innovation Banking to guide financial leaders as they innovate:

• Look to solve business problems. A solution looking for a problem is not innovation
• Work across your business to collaborate, deploy new solutions or enhancements, and receive feedback
• Keep risk management as a core deliverable in every project
• Develop metrics that quantify problem statements, but also highlight solution impacts. The former helps you gain investment and resources, and the latter highlights success and supports continued innovation.

Get your innovation story started

‘What gets measured gets managed’ still rings true today. Establishing clear metrics for success remains one of the most important parts of innovation – and it can deliver huge benefits to your treasury function.

But remember McHenry’s advice, especially about risk management. The whole function exists to manage risk, but innovation itself introduces new risks. Therefore, be careful to ensure that however you innovate, the treasury function continues to protect the business.

Innovate sooner rather than later, and your treasury function will be in prime position to convert rapidly approaching challenges into opportunities.

This is how, in a world where financial agility increasingly separates the winners from everyone else, an innovative treasury function stops being a nice-to-have and becomes essential for growing an ambitious and sustainable company.

About the author

Amit Kahana is senior VP of credit and cash management at Pleo