The potential is enormous. The possibilities are endless.
Digital technologies are reshaping the world in which we live and work – sometimes so rapidly and so radically that it can be challenging to keep up with what is possible before we can even start thinking about how these developments could benefit corporate treasury.
Treasurers now sit at the heart of a digital ecosystem that is already enabling some corporate treasuries to take smarter, more data-driven approaches to core processes and better support the commercial side of the business.
As the digital ecosystem becomes more automated, connected and integrated, it will bring treasurers closer together with suppliers and service providers, customers and peers. The combined effects could be transformational.
Treasury professionals are already feeling the pull of this digital ecosystem. In The Association of Corporate Treasurers’ (ACT’s) The Business of Treasury 2019 survey, nearly 75% of treasurers said that their organisations were automating treasury functions.
“Technology has helped us eliminate low-value and inefficient processes that we had to run manually in the past and has allowed us to focus on more value-added processes, advising the business and getting more involved in the commercial side,” says Royston Da Costa, assistant group treasurer at Ferguson plc – a multinational plumbing and heating products distributor.
Some emerging technologies have the potential to benefit treasury across traditional core areas
Da Costa, who has spent decades in the space where treasury and technology meet, says: “Technology has and will continue to play a huge part in the treasury environment.”
Some emerging technologies have the potential to benefit treasury across traditional core areas and key functions (see ‘The appliance of science’, below) and as its role expands, as long as they stock up on the fuel that is powering these technologies and the automation and improved decision-making they enable.
“Reliable, high-quality data is essential to the success of any treasury automation project,” says Laura Worboyes, who has been involved in automating various aspects of treasury at MS Amlin Investment Management Ltd (part of global insurance group MS&AD), where she is head of investment operations.
Given the significance of data, it is perhaps unsurprising that four in five of the treasurers the ACT surveyed expressed concerns about the quality of internal financial and business data.
Treasurers’ concerns about data will grow. Digital technologies are becoming more interconnected; sharing and unlocking the potential of the associated data can enable treasurers to add value and make faster, smarter decisions – and they are under pressure to do so.
“Treasury functions are now tasked with building digital ecosystems where new technology can help solve old and new problems alike,” says Sebastian di Paola, the partner in charge of PwC’s global corporate treasury solutions practice.
Treasurers tell PwC that they see most potential over the next two to three years in artificial intelligence (AI), data analytics and robotic process automation (RPA); although some treasurers have high hopes of blockchain, too.
These technologies are becoming more accessible to treasurers (financially, practically and technically), as they enhance existing software and services, and power new ones – and treasurers are approaching them more proactively.
“Treasurers are not just engaged with technology, but advancing its use,” says Da Costa.
There seems to be more widespread use of high-level programming languages such as Python, and smart software tools such as Alteryx that allow treasurers to extract data from incumbent systems and enhance their functionality without doing any coding.
Spreadsheets are no longer the only solution within the reach of treasurers with legacy systems that don’t quite meet their needs. Worboyes says: “A lot of our automation has progressed through Alteryx for treasury processes.
“We are looking to automate more of what we currently do with spreadsheets, but we still have some manual workarounds and spreadsheets outside our systems, where they don’t meet our bespoke requirements.”
Until recently, cash-flow forecasts were done using spreadsheets, because MS Amlin’s treasury management system (TMS) couldn’t output the data and views that it needs; now cash flow has been automated using a self-service data analytics platform, Alteryx, an AI-assisted system that makes data science techniques and analytics accessible (without coding).
“We extract the data from our SunGard TMS and Alteryx processes it into the cash-flow reporting we need,” says Worboyes.
London-based global education and learning company Pearson plc has also extended the capabilities of its TMS with an AI-enabled cash forecasting and working capital analytics tool, Cashforce.
Integrating it with Pearson’s systems has enabled treasury to more easily embrace and exploit emerging technologies, for example, by replacing manual data entry with RPA. Using smart analytics has improved treasury insights into cash flow – and factors that may potentially affect this.
Pearson’s legacy TMS made it difficult to see the impact of drivers such as its seasonal cash cycle, a business model shift towards providing education services digitally, and the transition to financial shared services.
As James Kelly, group treasurer at Pearson, noted during his presentation at the ACT’s 2019 Annual Conference, treasurers have a good track record for using technology to solve problems and deliver business benefits by overcoming perennial treasury challenges.
Adopting AI-enabled cash-flow forecasting and working capital analytics has improved cash management (and the profile of treasury) at Pearson.
In addition to freeing up significant amounts of cash that was (previously) trapped overseas and reducing balances by over £100m, treasury has made more cash available for investment in the business in situations where it might otherwise have needed to draw on credit facilities.
Of course, no two digital treasury ecosystems are alike; not least because they have evolved in unique circumstances over a number of years.
Da Costa, Kelly and Worboyes are aware that, although many treasurers are exploring new technologies and what they make possible, their readiness to adopt them is dependent on a great many factors – which is highlighted in some of the findings of the ACT’s latest The Business of Treasury survey.
The expectation that automation will impact on their working lives was highest among treasurers in the Middle East and Africa, where organisations are less likely to be held back by legacy systems, and ways of doing things are less likely to have become entrenched.
This may (or may not) be reflected in the uptake of one particular emerging technology: distributed ledger systems such as blockchain.
Either way, if we look to the East, we can see how its adoption can benefit banks, corporates and their treasuries by speeding up (and simplifying) complex processes and access to cash. Abu Dhabi Commercial Bank (ADCB) recently completed its first live end-to-end trade using a Singapore-based blockchain platform (with full document automation) from dltledgers.
“This private network allows ADCB to service corporate customers in real time, increasing transparency and building cross-border connectivity,” says Krishnakumar Duraiswamy, the bank’s group head of trade finance.
The trade moved goods worth $6.5m for Western Red Spring Canadian Wheat, from Canada to Bangladesh. The network provided end-to-end trade visibility across the entire life cycle of the transaction with authenticated and consented digitised documents at every step.
This transaction involved several trade partners, including Agrocorp International, a Singapore-based trading house. Nitin Jain, its head of treasury and capital markets, sees big benefits on the horizon.
“We could potentially reduce our financing costs by at least 15-20% through dltledgers technology, saving significantly on the costs of physically moving documents,” he says. “We are also able to access earlier financing from banks as the documentation flow is much closer to real time.”
As global trades evolve and become more intertwined, demand will increase for more collaborative models that can streamline and automate complex processes – like many aspects of treasury.
However, there are no guarantees that automation will automatically deliver benefits. RPA is a good example: it may be faster and easier to implement (or access) than more traditional automation, but it requires the same discipline.
“The fundamental thing you always have to understand before automating a process or putting in a robot is whether the process is fit for purpose,” says Worboyes, who is investigating the treasury potential of RPA at MS Amlin. “You need to do your process and data work first or you are not going to get any benefits.”
When automation does deliver benefits, they can be substantial.
“Enabled by emerging technologies, treasury is moving to a workforce of the future, defined by its ability to drive transformation, minimise manual efforts and maximise business insight,” says di Paola, and treasury is evolving to reflect this.
The prospect of being replaced by smart systems and data-driven decision-making does worry some treasurers: around a fifth of respondents in the ACT’s The Business of Treasury 2019 survey. Less experienced treasurers seem more concerned than senior professionals, who may be less likely to feel threatened, personally, by increasing levels of automation.
Da Costa thinks it will be some time before many people in and around treasury are sufficiently comfortable with the total automation that technology can make possible.
“At the moment, for FX dealing, we have a semi-automated system. We can automatically initiate a request, but at any point we have the ability to interact, pick up a phone and talk to a person. Users know that when they request a deal, somebody is looking and questioning whether it’s correct,” he says.
Human interaction remains valuable, particularly as the role of treasury expands to take Da Costa and other seasoned professionals into the more commercial side of the business.
Although he expects technology to play an increasingly large role in treasury, Da Costa does not foresee the extinction of corporate treasurers any time soon. “My role in the past year has involved looking at merchant card fees, credit cards being issued and how car leasing can be optimised,” he says.
It has also taken Da Costa into other areas where treasury has not traditionally got involved or been invited. “Now other parts of the business are looking to treasury because they can see the value we can add and the contacts we have built up through our relationships with banks and their relationships with fintechs,” he explains.
Even in the era of digital treasury ecosystems and data-driven decision-making, relationships matter.
Treasury-related areas with potential use cases for emerging technologies such as AI, analytics, distributed ledgers and RPA range far and wide. They include:
Specialist analytics tools include:
Treasury and risk management systems such as from Kyriba and from SunGard also offer some built-in analytics.
AI-enabled systems include:
Distributed ledger examples include:
RPA tools are available for in-house use (without coding) from providers such as Nintex or in partnership with organisations such as Automation Anywhere.
RPA-based services can be accessed on demand ‘as a service’ or from outsourcers and integrated with existing systems.
Examples of ‘intelligent’ RPA that apply tech such as AI, computer vision and cognitive automation include Kryon, SAP and UiPath.
Lesley Meall is a freelance business and technology journalist