How new-age corporate treasuries can achieve more by doing less

Amid rising numbers of Covid-19 cases and fears of a fourth wave, the pandemic continues to pose new challenges for businesses and businesses. Modern business strategy goes far beyond day-to-day strategic management. It delivers better results with fewer resources, while meeting the demands of verticals and operations, and eventually the boardroom.

With volatile market dynamics, due to the pandemic, the Russian-Ukrainian conflict and inflation, many companies have been forced to transfer their financial and other processes to digital platforms. Others are just beginning their digital adoption journey. The goal is to build a digital ecosystem that is equipped to mitigate risk emanating from external influences and that can effectively manage ongoing liquidity, cash forecasts, funding requirements and liquidity data to significantly reduce risk overall financial and operational.

It’s clear that corporate treasuries need to take advantage of the vast potential of automation, analytics tools, and cutting-edge financial technology for corporate treasuries to deliver more with less. The primary role of corporate treasury has shifted to a strategic position that needs to be powered by cutting-edge technology.

Given the lingering shadows of the Covid-19 outbreak, vaccine-sponsoring corporations and large-scale remote working, it’s reasonably difficult to streamline strategies and maximize Treasury profits. Moreover, treasury operations are high-risk segments and hence even a slight mistake can cost companies tons of money.

To combat these changes, many chief financial officers (CFOs) have shifted their focus from long-term profit and loss to short-term gains, emphasizing immediate business continuity risk and the cash position – finding ways to get more by doing less. Here’s how they do it:

Bringing businesses together with a truly connected ecosystem

Treasury teams control liquidity and cash flow within the business. The corporate treasury team’s responsibility is to maximize cash and liquidity through cash flow forecasting and maintain short to medium term funding, thereby increasing shareholder profit. While operating from different locations, having a centralized TMS facilitates zero moments of truth for CFOs and allows them to make critical decisions based on real-time information.-For example, a connected ecosystem driven by the TMS, derives cash flow exposure from ERP and current cash position of multiple bank accounts and represents a real-time liquidity position for CFOs to make funding decisions. Additionally, with connectivity to market data and trading solutions, executed trades and their accounting impact flow back seamlessly into the system and ERP. Thus enabling a truly connected ecosystem.

fintech collaboration

Banks are bringing aggressive innovation to their technology initiatives by having in-house digital teams or partnering with major fintech players to enable an API hub to support the vision of this truly connected ecosystem. These hubs enable banking processes via a platform. These solutions facilitate faster time to market for banks with pre-packaged API flows, identity and permissions management, and consent-based interactions.

Banks can easily create and release new API versions.

  • API Gateway, the core part of API Services, can manage security and facilitate information exchange during API calls, while maintaining low latency
  • Authorization and authentication of customers and partners can be managed more efficiently through these platforms
  • Monitor technical metrics and assess API usage for better business analysis

Open bank

Banks are looking to find new products to capture additional revenue and provide intriguing value propositions to lock in their business customers as payments become more commoditized and margins shrink. It stands to reason that the proliferation of open banking will make it easier and (considerably) cheaper to set up such constructions and allow external account balances to be even more up-to-date. Open banking refers to various APIs of banks, which are available for end use. Corporate, commercial and treasury banking APIs facilitate corporate hedging transactions and confirmations, Letters of Credit (LC), Buyer Credit (BC), Supplier Credit (SC), Bank Guarantees (BG) and invoice discounting, and integrating all of these with the cash management system (TMS). Corporate Treasury handles centralized payment initiation and reporting for multiple banks.

Governance oversight

Governance is a major focus of the Risk Management and Corporate Policy Committee. This is done according to the director of the Treasury, who reports to the director of finance and is therefore indirectly part of this decision maker. Parameters related to these policies are determined by the Director of Treasury, such as sovereign rules and central government procedures related to treasury and liquidity. In addition, regular updates are published in central bank policy, which must be adapted to corporate governance. Therefore, follow-up is essential.

Cash and liquidity forecasts

Many CFOs have shifted their focus from the long-term income statement to business continuity risk and the short-term cash position in response to the pandemic. The challenge of predicting the future market is compounded without historical data. Algorithmic forecasting can improve forecasting and advanced scenario modeling can free up the finance team to focus on higher value activities. Forecasting models offer increased value when they can account for bias, handle events and deviations in data, and independently correct course. This is where machine learning comes in. Over time, working capital optimization improves as the algorithms “learn” from previous cycles.

In situations that require extreme volatility, treasuries should be monitored to mitigate potential risks. Today, corporate treasuries can take full advantage of many tools to automate and standardize cash flow management and strategy. While most of these futuristic tools can effectively merge with pre-existing software, it is vital for businesses to seamlessly integrate fintech into their core business and ensure that economic and market unpredictability does not occur. not affect their long-term operations.



The opinions expressed above are those of the author.


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