Transforming Treasury Teams with Tech-led Agility

To stay competitive and relevant amid shifting business and operational models, large corporates must leverage digitalisation and automation to be nimbler and more responsive, says Joseph Lee, Group Head, Treasury and Working Capital Advisory & Solutioning at DBS.

Transforming Treasury Teams with Tech-led Agility

The persistence and intensity of geopolitical, macro and market headwinds in recent years have forced larger and more global corporates to re-assess how and where they operate.

Among the more telling impacts for the treasury function, in particular, is the accelerating shift towards localising business models and supply chains. With many multilateral regional and international trade agreements becoming bilateral instead, various operational changes are needed to reflect the focus on local markets.

For example, says Lee, companies need to design – or re-design – processes, workflows, trade flows and systems to be more agile. “This includes further digitalisation and automation, utilising the increasing role of technology.”

This will come via a greater emphasis on data and predictive analytics, to identify risks sooner rather than later. Further, alternatives to SWIFT connectivity are becoming more commonplace. Lee pinpoints bank application programming interfaces (APIs) as likely to gain more traction among larger corporates.

In short, he explains, the goal for treasury teams is to ensure they remain fit-for-purpose as business transformations are defined and implemented.

Re-aligning for resilience

As with all changes to strategy and operations, success depends on a smooth integration of new solutions and innovations within existing systems and processes.

 Joseph Lee, Group Head, Treasury and Working Capital Advisory & Solutioning at DBS

In the case of efforts to stem supply chain issues via approaches such as ‘near-shoring’ or ‘friend-shoring’, Lee believes treasury teams should start with an end-to-end review – from outcomes to process to controls, supported by policy, people and platforms. “That provides for what needs to be changed and updated, across areas such as business entities, accounts and banks.”

A case in point is just-in-case production – one of the notable consequences from the uncertainty experienced due to the breakdown in global supply chains.

For the treasury function, Lee says this requires new ways to enhance forecasting of demand and supply conditions across markets, customers and partners, as well as to improve financing to meet working capital needs for competitive market positioning. New banking services and solutions are also needed to help accelerate fulfilment from production to sale, to minimise unplanned surpluses.

“Operational and financial resilience can come from improving cash forecasting and liquidity, reducing working capital, enhancing data-driven insights and reporting by investing in analytics, and increasing operational efficiency for both partners and companies within the ecosystems, by leveraging off agility and the use of technology,” Lee adds.

Three new treasury norms to look out for

As treasury teams consider their options, Lee identifies three best practices for transformation.

Firstly, they need to debunk the one-size-fits-all “myth”, since it is no longer viable nor effective for one global banking partner to provide best-in-class solutions across all markets. The regional bank solution offers the dual benefits of de-risking from being overweight on a single banking counterparty, while also increasing relevant market support for the business, especially as operations localise to adapt to new supply chain dynamics.

Secondly, treasury teams should only look to use best-of-breed technology and platforms to attain holistic, scalable and agnostic operations. For example, explains Lee, rather than the baggage of outdated solutions and systems, they can attain results by using the cloud rather than an onsite network. In addition, they can look to APIs for more effective and reliable connectivity in transaction execution, reporting and reconciliation.

And thirdly, treasury teams need to embed the goals and considerations of the business and its ecosystem in their solutions. This kind of collaboration demands a new mindset, to bring finance and commercial functions closer in terms of understanding and working with each other. "Treasury should have a seat at the table to find solutions that consider and meet business needs," explains Lee.

A recent report by DBS on digital transformation, entitled "Key Change", highlights the extent to which treasury teams can make specific and valuable contributions to digital transformation. For example, more than half (52%) of respondents said the profile of the finance/treasury function has increased in managing the business response to Covid-19, such as ensuring liquidity.

Transformation leaders are also more likely to operate without blame, according to the findings; 34% of them discuss their mistakes and failures without blame, compared with 25% which fall into the transformation "laggards" camp.

To facilitate this type of change, banks and service providers need to adapt their offerings to the evolving needs and expectations of treasury teams. Investing in blockchain, as a way to connect with multiple platforms and ecosystems, is another key part of this.

“Service providers, including banks, have to work towards improving the end-to-end connectivity for improving the user experience, including the use of artificial intelligence and machine learning to increase the ability for corporate treasury teams to make better decisions, and more quickly,” says Lee

This article was first published by Global Finance in February 2022